March 6 (Bloomberg) -- General Motors Corp., the world's largest automaker, may take a charge of almost $1 billion to cover bad mortgage loans made by its former home-lending unit, according to a Lehman Brothers Holdings Inc. analyst.

Residential Capital LLC relies on loans to people with poor or limited credit records or high debt burdens, for more than three-quarters, or $57 billion, of its loan portfolio, Lehman analyst Brian Johnson wrote in a research report. Delinquency rates on such subprime loans made last year are at a record high.

Detroit-based GM, struggling to reverse more than $13 billion in losses over the last seven quarters through Sept. 30, delayed filing its fourth-quarter and full-year earnings to as late as March 16 in order to restate results. The company in November sold a 51 percent stake in General Motors Acceptance Corp. for $14.4 billion to a group led by Cerberus Capital Management LP. Residential Capital, or ResCap, is part of GMAC.

The subprime market is ``a key factor to see what the earnings power of GM's remaining interest in GMAC is going to be,'' Johnson said in an interview.

GM may have to spend as much as $950 million to make up the difference between the original value of the finance unit and any losses for subprime loans made by ResCap, he said last month.

Rising Delinquencies

About 13 percent of the subprime loans backing bonds issued in 2006 and rated by S&P are delinquent, with 6.65 percent of the loans behind in payments by 90 days or more, according to Standard & Poor's. More than 20 lenders have closed or are seeking buyers since the beginning of 2006. Subprime mortgages typically have rates at least two or three percentage points above safer prime loans.

``Some traders are expressing their view that we're a pure mortgage market play, whether that's appropriate or not,'' Louise Herrle, ResCap's treasurer, said in an interview last week.

ResCap may have lost $160 million to $520 million in the fourth quarter because of subprime mortgages, Citigroup Inc. analyst Jon Rogers in New York said on Feb. 28.

GM spokeswoman Renee Rashid-Merem and GMAC spokeswoman Toni Simonetti both declined to comment on analysts' estimates for the automaker's subprime mortgage exposure. Cerberus spokesman Peter Duda said in an interview he couldn't immediately comment.

``The entire sector has been experiencing a downturn in subprime mortgages,'' Simonetti said in an interview. ``GMAC does have a diversified earnings base and at a time like this, diversification really proves its value.''

Credit Quality

Confidence in the creditworthiness of GM, ResCap and GMAC, while improving today, has dropped this year. Credit-default swap contracts based on $10 million in GM bonds fell 10.2 percent today to $412,895, according to CMA Datavision. They've gained 25 percent in the past month.

Credit-default swaps for ResCap fell 11.5 percent to $194,135 today and have more than doubled this year. GMAC credit- default swaps declined 8.9 percent today to $186,420 and have gained 86 percent this year.

The contracts are designed to protect bondholders against default. A rise in the price indicates a decline in the perception of a borrower's credit quality.

The extra yield investors demand to hold ResCap's $1.75 billion of 6.5 percent notes due in 2013 over government debt has widened more than 0.60 percentage point since Feb. 20 to about 2.20 percentage points, according to Trace, the bond-price reporting system of the NASD.

The notes today fell 0.15 cent to 99.27 cents on the dollar, to yield 6.65 percent. Yesterday was the first time they traded below 100 cents since August.

Drag on Earnings

GM's $3 billion of 8.375 percent bonds due July 2033 fell to 91.5 cents on the dollar from 96.25 cents on Feb. 15, pushing the yield to 9.24 percent from 8.74 percent, according to Trace. GMAC's 8 percent bond due November 2031 rose 1.13 cents to 109.13 cents on the dollar, to yield 7.2 percent. They traded at 114 cents on dollar on Feb. 15.

Shares of GM gained 68 cents, or 2.2 percent, to $31.12 at 4:22 p.m. in New York Stock Exchange composite trading. They have risen 1.3 percent this year.

Continued late payments from subprime borrowers may be a drag on GM's future earnings as the automaker ``will lose money in both 2007 and 2008'' on its primary business of making and selling cars and light trucks, New York-based Bear Stearns Cos. analyst Peter Nesvold said in a Feb. 27 note.

GM Sales

GM's U.S. sales have dropped 6.4 percent this year and Asian rivals, such as Toyota Motor Corp., continue to chip away at its market share. The automaker's share of its home turf fell to an 81-year low of 24.6 percent in 2006.

The automaker may be in negotiations to purchase the money- losing Chrysler unit of DaimlerChrysler AG, according to people with knowledge of the talks. GM Chief Executive Officer Rick Wagoner said today that his company is still discussing a stake in Malaysian carmaker Proton Holdings Bhd.

The possibility of subprime mortgage delinquencies in the fourth-quarter doesn't have an immediate effect on GM's or ResCap's credit ratings, S&P analysts Robert Schulz said March 2 and Jack Bartko said yesterday, though both said they could factor into future credit analysis.

GM is rated B, or five levels below investment grade, by S&P. ResCap is rated BBB, or investment grade.

GM blamed its delayed filing on adjustments to accounting for hedges from 2002 through 2006's third quarter, overstatement of tax liabilities and a delay in filings from its former finance unit. The restatements may increase retained earnings by about $700 million, GM said on Feb. 16.

To contact the reporter on this story: Greg Bensinger in New York at gbensinger1@bloomberg.net

Last Updated: March 6, 2007 17:34 EST