Foreign Exchange Policy at Gm Essay - 723 Words

Your write-up should be eight to ten pages (double-spaced). If you provide information outside the case or the textbook, use a footnote to indicate the source. You can use pictures, but no more than four, and each figure should be no more than half a page in size. 1. Hedging Policies at GM. Describe GM’s corporate hedging policies. What are the objectives of GM’s FX risk management policies? What are GM’s passive policies to hedge operating exposures? Use the numbers provided in the case on Canadian dollars to illustrate (you have to change the numbers on pages 4 and 5 from euro to Canadian dollar and follow the same logic). 2. Transaction Exposures vs. Translation Exposures. Define transaction exposures and translation exposures. What†¦show more content†¦On the other hand, the cost of hedging was very high (see Exhibit 13). For example, the estimated cost of hedging a $300m exposure using 12-month forward contracts was $40.3m. Based on the cost/benefit analysis, do you think GM should hedge its ARS exposure? Why or why not? What are other ways GM can mitigate the impact of a likely ARS devaluation (you should probably rule out using other ARS derivatives other than forward contracts because those derivatives may not exist)? Hint: look for answers in the lecture notes and the textbook for other ways to mitigate exposure. For case 3 writeup and presentation, you need to quantify everything and the following serves as a check list. A: What is the net amount of transactional exposure in CAD for GM? B: On the date of the memo, the value of CAD is 1.578CAD/US$, what is the amount GM has to pay in part A in terms of US$? C: After twelve months, assume that CAD appreciates to 1.529CAD/US$, what is the amount GM has to pay in part A in terms of US$ if GM does not hedge at all? What is the loss for GM (HINT: compare the numbers in parts B and C)? D: After twelve months, assume that CAD appreciates to 1.529CAD/US$, what is the amount GM has to pay in part A in terms of US$ if GM uses the passive 50% hedging policy? What is the loss for GM (HINT: compare the numbers in parts B and D)? E: After twelve months, assume that CAD appreciates to 1.529CAD/US$, what is the amount GM has toShow MoreRelatedGm Hedging Strategies Yen1166 Words   |  5 Pages| Foreign exchange hedging strategies at General Motors | Competitive exposures | Project on International FinanceMar 2011 | ------------------------------------------------- Overview of General Motors and its corporate hedging policy General Motors was the world’s largest automaker and since 1931, the world’s sales leader. In 2000, it had a net income of $4.4 billion on revenues of $184.6 billion. North America represented the majority of sales to end customers but international operationsRead MoreCase Study : Problem And Key Issues1367 Words   |  6 PagesAnthony Rivard. case. MBA 676 Problem / Key Issues. What is the main problem to be solved? How should GM develop their strategy in China to respond to the uncertainties in the business environment? What are the key issues (sub-problems) that need to be analyzed in order to solve the main problem? 1. How competition is expanding and strategizing both foreign and domestically. 2. How will potential Gov’t restrictions affect the auto market in China? 3. How do other regional and strategic opportunitiesRead MoreEssay about General Motors Risk Management Policy975 Words   |  4 PagesWhat was the stated objective of General Motors Risk Management policy? Three primary objectives: 1) Reduce cash flow and earnings volatility – this means management hedges the company’s transaction exposures and deliberately pays no attention to any balance sheet exposures or translation exposures. 2) Minimize the management time and costs dedicated to global FX management – this is as a result of an internal study that determined that the investment of resources in active FX managementRead MoreForeign Exchange Hedging Strategy at General Motors Transactional and Translational Exposures2041 Words   |  9 PagesForeign Exchange Hedging Strategies at General Motors: Transactional and Translational Exposure Problem Statement In September of 2001 General Motors (GM) was faced with a billion dollar exposure to the Canadian dollar. At the time, North America represented approximately three-quarters of GM’s total sales and this large exposure to the CAD could significantly affect GM’s financial results. GM had a passive strategy of hedging 50% of its exposure; this paper explores the impact of hedgingRead MoreHedging at General Motors Essay3612 Words   |  15 PagesMotors (GM) undertakes its manufacturing operations in over 30 countries with vehicles being sold in over 200 countries. Through undertaking its international operations it also subjects itself to various types of foreign exchange exposures due to fluctuations in the values of currencies; to manage this problem it has adopted a passive hedging policy and aims to reduce the impact of foreign exchange exposures on the business. The first part of this report outlines the various types of foreign exchangeRead MoreForeign Exchange Hedging Strategy at General Motors Transactional and Translational Exposures2047 Words   |  9 PagesForeign Exchange Hedging Strategies at General Motors: Transactional and Translational Exposure Problem Statement In September of 2001 General Motors (GM) was faced with a billion dollar exposure to the Canadian dollar. At the time, North America represented approximately three-quarters of GM’s total sales and this large exposure to the CAD could significantly affect GM’s financial results. GM had a passive strategy of hedging 50% of its exposure; this paper explores the impact ofRead MoreEssay about Thailand ´s International Trade Policy1368 Words   |  6 Pagesis the primary goal of Thailand’s international trade policy. The Association of Southeast Asian Nations (ASEAN) Economic Community (AEC) was established as an effective cooperative strategy for gaining market advantages through regional market integration. Thailand aims to capitalize on trade agreements by networking and entering partnership with neighboring countries. Currently, Thailand’s cross-border trade in the Greater Mekong Subregion (GMS) plays a crucial role in globalization, because it facil itatesRead MoreForeign Exchange Hedging Strategies at General Motors: Transactional and Translational Exposures2336 Words   |  10 PagesIntroduction General Motors was the world’s largest automaker and, since 1931, the world’s 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. The company is trying to accurately calculate the risk of a potential devaluation to the ARS. InRead MoreAccounting Reporting Criteria (Gm and Toyota) Essay examples1273 Words   |  6 PagesAccounting Reporting Criteria (GM and Toyota) Team B Megan Wooliver September 7, 2010 Accounting Reporting Criteria In order to keep up with the times most organizations of today are finding themselves consistently coming up with different ways to keep accounting information personal as well as accurate. Providing good accounting information not only leads to better decisions but also increase in profit. Even two different organizations that provide a similar product or service haveRead MorePest Analysis Of General Motors In China1287 Words   |  6 PagesGeneral Motors (GM) has been participating in the Chinese automotive industry for over nine decades. In ensuring, that General Motor’s operations in China remains competitive as well as achieving their vision to be the most valued car marker in the Chinese auto market, as such a PEST analysis is to analyse the automotive market environment in China. The analyses will assist General Motor in understanding current and future implication on the business and automotive market environment in China that