Gm Exposure Essay

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WEEK 6 2014-02-20: Foreign exchange: competitive exposure Case summary: The GM treasure is concerned about the strength of Japanese Yen regard US dollar, because that would affect what Japanese Auto makers do in the U.S. a declining yen reduces the Japanese manufacturers’ $ cost, enabling them to pass on some of the benefit to US customers and thus taking some of GM’s market share. This will impact GM’s top and bottom line. 2.What competitive exposure affect? Competitive exposure is important for companies doing business internationally. Competitive exposure affect the company the ability to compete internationally. Frequently it 's do is to chase you to change foreign currency values. Why is GM worried about the yen? Answer 1: GM is worried about the level of the yen, because its Japanese competitors could gain a cost advantage in the event of a Yen depreciation. As these competitors derived roughly 50% of their revenues from the U.S. market, a depreciation of the Yen could allow for greater incentives and savings to be passed onto U.S. consumers. Already equity analysts had estimated that the yen appreciation in the first half of 2000 from 117 to 107 reduced operating profits by $4B, thus this would be true for the reverse in the case where a depreciation would lead to an increase in operating profits. Answer 2: In 2001 General motor’s turned their attention to how fluctuation in the Yen affected GM’s costs. A great part of GM’s competitors, had a great part of costs origin in the Yen and this worried GM. The exposure that GM faced regarding the Yen was not only from Japanese equity investments and commercial exposure as of a receivable; GM’s equity investment in Japanese companies totaled at $817 million, the estimated receivable was $900 million. They also had an outstanding bond debt of a principal amount of $500 million. Besides this, GM
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