solution - GM Motors - GM's Foreign Exchange Hedging Strategy 1 Foreign Exchange Hedging Strategies at General Motors Transactional and Translational

solution - GM Motors - GM's Foreign Exchange Hedging...

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GM’s Foreign Exchange Hedging StrategyForeign Exchange HedgingForeign Exchange HedgingStrategies at GeneralStrategies at GeneralMotors: Transactional andMotors: Transactional andTranslational ExposuresTranslational ExposuresCompetitive ExposureCompetitive Exposure1
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GM’s Foreign Exchange Hedging StrategyAbout General Motors (GM) and its Foreign Exchange PolicySince the early 1930, General Motors has enjoyed the status of being one of the largest card manufacturers in the world. As per the financial statements of 2000, GM earned a net profit of $4.4 billion on sales of $184.6 billion. Though the company enjoyed selling majority of its production in USA, it is fast getting its foothold in the international market and it has also reached to the level of 18% of the total sales.Following are the objectives of the GM’s foreign exchange risk management policy:a)Reduction in cash flow and earnings volatilityb)To save the valuable management timec)Reduce the costs directly associated with FX managementAs of now, the company has only been managing the cash flow exposure (which is transaction exposure) and not the balance sheet exposure (which is translation exposure). The company had adopted the policy of hedging the 50% of all the significant foreign exchange exposure arising out of receivables and payables. For the exposures arising with in the six months, the company has adopted to hedge through forward contracts and in respect of the
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  • Spring '10
  • Ravikant
  • Exchange Rate, japan, Foreign exchange market, United States dollar, japanese yen

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