Case study: Foreign Exchange Hedging Strategies at General Motors
Needless to say that youare encouraged to refer to your personal experiences and other relevant sources inanswering the assignment questions. All borrowings from other sources should be
put in quotations and the academic citation rules should be observed. Such
borrowings should not be extensive.
- i) Word limit is 2,000 words – excluding numerical support and references.
Essays which go beyond the set limit will be penalised.
- ii) You should mark your estimated word count in the cover sheet.
iii) Numerical support should appear as tables in the body text of a Word or
pdf document. Appendices should be used only when absolutely
necessary. Under no circumstances send Excel or other spreadsheets.
- Discuss which one of the three foreign exchange exposures (transaction,
translation and economic) of General Motors is likely to have the biggest
impact on its cash flows over the next twelve months. You are expected to
support your arguments by analysing data and information from the case
study, and by referencing to the Study Guide and the text-book in defining and
managing foreign exchange transaction exposure.
- Explain critically what the foreign exchange hedging strategies of General
Motors are and why General Motors chose these strategies. Your answer to
the question should be supported by data and information from the case, and
by references to the text-book and the study guide.
- Discuss critically whether General Motors’ “passive” hedging strategy is in the
interests of shareholders or in the interest of its managers or in the interests of
both shareholders and managers. Should shareholder perspective be
relevant in hedging decisions by managers? Discuss the views for and
against hedging foreign exchange exposure and why shareholder value
influences management decisions in general .