! Case Study 6 Foreign exchange hedging strategies at General Motors: Transactional and translational exposures ! General Motors (GM) was the largest automaker in the world‚ and the unit sales in 2001 was 8.5 million vehicles which occupied 15.1% of the total vehicle market. With the expansion through the world‚ GM faced more risk in the foreign exchange (FX). In other world‚ it would create gains or losses due to the changes in FX rate. According to the exhibit 2 and exhibit 3‚ Latin
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1.0 Introduction GM was the world’s largest automaker and‚ since 1931‚ the worlds sales leader. In 2001‚ GM had unit sales of 8.5 million vehicles and a 15.1% worldwide market share. Founded in 1908‚ GM had manufacturing operations in more than 30 countries‚ and its vehicles were sold in approximately 200 countries. In 2000‚ it generated earnings of $4.4 billion on sales of $184.6 billion. Table 1:GM Consolidated Income Statement GM’s global operations gave rise to significant currency risk
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EXECUTIVE SUMMARY This case shows us that apart from transaction‚ translation and economic exposure to currency risk‚ firms also have the very real strategic impact on their competitive position from competitive exposure. Apart from GM’s exposure to the yen which is reflected in their financial statements‚ their competitive position vis-à-vis Japanese manufacturers is affected by a potentially declining yen. This is because a declining yen reduces the Japanese manufacturers’ $ cost‚ enabling
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Strategies at GM − Competitive Exposures 1. Why is GM worried about the yen? GM’s concern about fluctuations in the Yen is due not only to the impact on GM’s costs‚ but the fact that Japanese competitors face reduced costs when the Yen is depreciating. Also‚ with increasing profit margins‚ end-price to consumer can be lowered and lead to gain in market share for Japanese competitors. Research had shown that a 10 Yen appreciation to the dollar reduces operating profit by $4 billion 2. How important
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What is GM’s foreign exchange hedging policy? GM’s foreign exchange hedging policy has three primary objectives. Its first objective is to reduce cash flow and earnings volatility. Specifically‚ management hedges the company’s transaction exposures and consciously ignores any balance sheet exposures (translation exposures). Second‚ GM aims to minimize the management time and costs dedicated to global FX management. The company employs a passive FX management strategy since an internal study
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Profile & History 1 2.2 GM Corporation’s values 2 2.3 GM’s value at Work 2 3.1 Key elements of the organisation’s HR policies and practices 3 3.2 Analysis of HR Strategies at General Motors 3 3.2.1 Corporate Social Responsibility 5 3.2.2. Diversity and Equal Opportunity 5 3.2.3 Recruitment & Selection 7 4. Identify the key issues need to be monitor by the HR Manager who appoint for GM India 8 4.1 Identify an
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------------------------------------------------- FE Hedging Strategies at GM Should MNCs hedge foreign exchange rate risk? Multinational firms hedge foreign exchange risk in order to ensure operational and financial functionality. A MNC should hedge foreign exchange risk so it can prevent cash flow effects of the foreign firm and the decline in value of the equity holder because of the movements in exchange rates. It will also help them to reduce transaction costs when obligated to make payments
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Market in General 3 1.2 Situation of GM China 4 2. Defining the Problem 5 2.1 Technology “Shakedown” 5 2.2 Going down-market vs. Securing Quality-Image 5 2.3 Problems in Home Market 5 2.4 Increasing Competition 5 2.5 Possible Take-Over of GM China by Chinese 5 3. Problem Causes 6 3.1 Technology “Shakedown” 6 3.2 Going down-market vs. Securing Quality-Image 6 3.3 Problems in Home Market 6 3.4 Increasing Competition 6 3.5 Possible Take-Over of GM China by Chinese 6 4. Alternative Solutions
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sustainable‚ environment friendly‚ protects the biodiversity and enhances human well being. Policymakers around the world are considering the option of transgenic or genetically modified (GM) crops to solve this problem. GM crops contain a gene or genes which have not been inserted into them through pollination but artificially. The gene which is inserted may come from the same species or different species and are resistant to insects and diseases (Bhat et al‚ 2005). But the debate on the potential worth
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Introduction GM and Avto VAZ were sitting down to finally negotiate a deal that they had originally committed to in 1999‚ to jointly build and sell Chevrolets in the Russian market. This car market was expected to account for a significant share of global growth over the next decade. GM felt pressure to jump on board or miss the opportunity. Other auto makers were already on the move. Ford‚ Fiat and Daewoo were already exploring their own opportunities in Russian and GM did not want to be left
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