Gm Hedging Strategies Yen

GM can examine the sensitivity of its stock return to fluctuations in the Yen-US Dollar exchange rate (and adjusting for market returns), assuming that market efficiency will account for Dollar-Yen fluctuations.

3) Align foreign exchange management in a manner consistent how GM Corporation operates its automotive business

General Motors Corporation (NYE: GM) is the leading American automaker in the world with its operations spanning in 157 countries. The car manufacturer was established in 1908 in Michigan and today it is headquartered in Detroit, the United States of America. Besides the domestic industry of the United States of America, General Motors manufactures cars and trucks in other 30 countries around the world. Among its brand products are Cadillac, Buick, Chevrolet, GMC, GM Daewoo, Hummer, Holden, Opel, Saab, Pontiac, Vauxhall, and Saturn. Besides these brands that are owned by the automaker, GMC also operates joint ventures in China and Japan. That is, Shanghai GM and SAIC-GM-Wuling

dollars. Having appreciating USD in their assets column, with depreciating yen in their liabilities column, this has lowered cost structure and expanded profit margins for firms such as Nissan, Honda and Toyota. Now, these automakers are able to pass on their reduced costs to consumers via sticker price reductions between 15-45% of cost savings, or through added incentives. According to Exhibit 6, as of 2000, per-vehicle incentives of GM ($1,969) far exceeds those of Toyota and Honda, at $725 and 664, respectively; this competitive advantage GM currently holds, as well as its relative market share in the U.S., are endangered if Japanese firms choose to move their incentive values closer to the industry average.

General Motors Corporation (General Motors or GM) was incorporated on August 11, 2009. Also known as GM, the company designs, builds and sells cars, trucks and automobiles parts globally and headquartered in Detroit, Michigan. The company also provides automotive financing services through General Motors Financial Company, Inc. (GM Financial).

Given the nature of its business, Jaguar is faced with three types of exchange rate exposure (1) Transaction, (2) Translation and (3) Economic . Transaction exposures arise whenever the firm commits (or is contractually obligated) to make or receive a payment at a future date denominated in a foreign currency. Translation exposures arise from accounting based changes in consolidated financial statements caused by a change in exchange rates. In this case we primarily focus on the Economic exposure -also known as Operating exposure or Competitive exposure- of Jaguar.

General Motors has set an unimaginable goal of making $10 billion within a year after being bailed out by the federal government in just in three years. According to people who have already seen the figures, GM is likely to report 2011 net income of about $8 billion. This is GM highest net income ever. By the federal government bailing them out and helping them to regenerate their business; GM was able to shed $40 billion in obligations and most of all become debt free. “Now we are targeting our best in-class peers,” said GM’s Mr. Ammann, (Kinicki, A.,& William B., 2003) referring to South Korea’s Hyundai Motor company and Germany’s BMW AG, both of which are estimated to have had a return sake of 10% in 2011.

Exhibit 7 from the case study describes the currency development in medium term of the GBP and EURO against the dollar. We can observe that the currencies are exposed to high volatility, which means the company may register greater risk

Three car manufactures also lost U.S market share during this same period. Ford fell from 24.1% to

Aspen has become a public company with more risk adverse investors who want to invest in the core business of the firm and not assume any foreign exchange risk. Foreign exchange risk is a core risk to Aspen’s business because they have many customers outside of the United States. We believe that transferring this risk to the customers would limit Aspen’s growth on the foreign markets: Aspen should keep its current marketing strategy, which includes credit installment payments and payments in local currencies for Japan, the UK and Germany. The current risk management program hurts the company because it doesnot consider Aspen’s expenses abroad that balance sales exposures to currency fluctuations. We then recommend that

The reason of the increasing sales is increasing sales of Buick, Chevrolet, and Cadillac. The target of 2 million car sales is achieved according to GM website as of November 2010. (GM fact sheet, GM website 2010)

Finally, Japanese auto companies had to increase their prices by 40%. Indeed, even though the yen appreciation already led to a small price increase for Japanese cars sold in the US (10% in 1986), this was not enough to preserve decent margins, and led instead to income drops.

Nissan products and services are produced in 19 countries all over the world and sees sales from more than 170 countries and regions. As a result, Nissan has various forex exposures from different countries and currency both from procurement and sales activities.

General Motors Company, one of the world’s largest automakers, estimated in 1908. With its global headquarters in Detroit, Michigan, USA.GM employs 209,000 people in every major region of the world and does business in more than 120 countries. GM and its strategic partners produce cars and trucks in 31 countries, and sell and service these vehicles through the following brands:  Buick, Cadillac, Chevrolet, GMC, Daewoo, Holden, Isuzu, Jiefang, Opel, Vauxhall and Wuling. (Elizabeth, GM, 2009). GM was the largest automaker for 77 consecutive years from 1931 through 2007. It is longer than any other company in the world. In 2008, it was surpassed by Toyota (Elizabeth, GM, 2009).

General Motors is a multinational corporation engaged in operations, worldwide. GM strives to be the world leader in transportation products and associated services. Over the years, General Motors has suffered tremendous losses. In efforts to deal with those losses, GM impacted various stakeholder groups. This placed an emphasis upon the impact of foreign automakers within the industry, especially Toyota. The role of the UAW and what U.S. automakers need to do to regain competitiveness was also thoroughly explored. This report analyzes the underlying cause, stakeholder’s perspective, the difficulty of remaining a strong contender in a highly competitive industry, what GM did in response, and the significance of effective strategic planning.