General Motors Risk Management Policy Essay

Words: 977
Pages: 4
Open Document
What 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 management had not resulted in significant outperformance of passive benchmarks. An active approach was implemented.

3) Align FX management in a manner consistent with how GM operates its automotive business – this was an effort to plan to the …show more content…
GM could hedge to protect a future period against the possibility of the devaluation of the Argentinean Peso by selling it forward and buying it forward. Another hedging approach to take into account the ARS assets totaling 190 and liabilities totaling 60.9 that are at exchange rate risk would be to convert ARS assets to USD.

Similarly to mitigate some translation risk for the CAD GM could select a spot rate at which the value of the assets in ARS (190 per exhibit 11) could be sold.

Japanese Yen

GM was exposed to competitive risk as a result of competing against companies with different home currencies. The possibility of the Yen devaluing would result in an increase in the competitors’ gross margin, which was dominated in Yen. For every 1 Yen depreciation Japanese operating profit grew by $400MM.

The newly realized gross margins would allow for savings that would be passed along to the consumer in the form of lower prices, positioning GM as a competitor with higher prices.

The change in pricing structures would create a rippling affect in consumer purchasing decisions, which in the medium and long term would impact GM market share and value.

Other sources of exposure included investment exposure in the form of GM’s accounts receivables and payables in the amount of $900MM, financing exposure as a result of a Yen dominated loan; and Yen bond issue with $500M
Show More

Related Documents: General Motors Risk Management Policy Essay

Essay about Foreign Exchange Hedging Strategies at General Motors: Transactional and Translational Exposures

Introduction 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. In…

Words 2328 - Pages 10

Robert Bosch Case Study

Table of contents Introduction 3 Corporate Social Responsibility (CSR) 4 CSR Stakeholders 5 CSR Importance 6 CSR Policies adopted by Robert Bosch GmbH & General Motors Company 7 Robert Bosch GmbH……..……….……………………………………..…….…………7 General Motors Company LLC (GM)……………………….……………….….…..…8 CSR practices at Bosch…………..…………….…………………….……….……..…...8 CSR practices at GM…..………….…………………….…………………….………..9 Discussion…………………………………………..………………...…………..…...…10 Successful CSR Implementation and its potential benefits………

Words 3758 - Pages 16

Toyota and Its Mode of Entry Essay

1. Introduction Toyota Motor Corporation was established in 1937. The company operates both automotive, under the brand Toyota, Lexus, Hino and Daihatsu, and non-automotive and can be seen as one of the best known automobile manufacturers. According to Japan Corporate News network, in 2007, the firm sold over 8.5 million vehicles in more than 170 countries. Based on Toyota Motor Global site , the major Consolidated Subsidiaries of Toyota Corporation across the world mainly locates in North America…

Words 2868 - Pages 12

Essay Risk Management Within General Motors Company

Abstract This research looks at the General Motors Company and what led to company failure and filing of bankruptcy in 2009. The American automotive industry was poorly managed for years and was almost eliminated when the economy crashed in 2008. Without the help of the U.S. government, General Motors and Chrysler would not have been able to survive. How did GM, as the number one auto manufacturer and seller, go from being at the top to almost ceasing to exist? This kind of financial mess usually…

Words 3854 - Pages 16

Papers: Collective Bargaining and Ford Motor Company

at a general level (Cascio, 2010). The union works to secure relationships between organizations and the people who work for them. Unionization plays a critical role in protecting the rights of the employees within the workplace. In today’s economy, very few industries have union such as manufacturing, education, and health care. Ford Motor Company, an automobile industry has a large union mainly because of the size of the company. This paper will give a brief background on Ford Motor Company…

Words 1410 - Pages 6

Toyota, Ford and Gm Essay

of 1-2 million). Toyota does not disclose information regarding director and executive compensation, although it has disclosed that it has been offering stock options to directors since 2003 because of a change in Japanese regulations. General Motors has created a reputation as one of the big three automakers in the US, and continues to promote large vehicle lines. GM has been in the press frequently with the current issues regarding their pension plans, which are currently a large burden…

Words 4991 - Pages 20

Essay on LatoyaG wk5EmployeePrivacy

Employee Privacy Report Latoya Glover Com/285 April 4, 2011 Beatrice King Employee Privacy Report Working in the restaurant industry privacy policies is mandated. Employees do use the computer system to do such things as requesting days off, and email communication to the management staff. Computer usage per person is not all the time or on a daily basis, however, using the computer is only based on need. Employees within the company are not allowed to use the internet at all, in-fact the internet…

Words 1215 - Pages 5

Marketing and Entry Mode Essay

TITLE “Internationalization Process of Toyota in Europe from the Perspectives of Entry Mode and Network Structure” London School of Commerce (LSC) University of Wales Institute of Cardiff (UWIC) Student Name: Miss. Sajida Ramzan Student ID: 0089kkvl0409 Course: BABS 6 (HONS) Subject: Disertation Lecturer: Dr. Gerald Pollio Executive Summary Problem, Purpose and Method Decision-makers, like sailors, need to know how to ride out a potential storm and to understand how the…

Words 19468 - Pages 78

General Motors and Holden Essays

Situational analysis Holden is GM Holden Ltd commonly designated, is one of only seven fully integrated global General Motors operations that designs, builds and sells vehicles for Australia and the world. As one of the biggest automobile company in Australia, Holden always pursue the goal of producing the Australian car and even dominated the car industry in 1960s despite the Ford Falcon, Chrysler Valiant, and Japanese cars arrival. The 1980s were a challenge for Holden and other companies in Australian…

Words 1493 - Pages 6

Essay on Internationalization of General Motors

Internationalization of General Motors This paper examines the expansion of General Motors overseas in its various phases, as well as triggers for internationalization and the problems faced during the process. The paper also considers what benefits have been achieved through international growth, and how the company can be classified with regards to Bartlett and Ghosal’s 4 typologies. Finally, the paper discusses the concept of a “world car,” meeting the demands of customers across the globe. General Motors…

Words 2508 - Pages 11