Case | HBS Case Collection | March 2005 (Revised March 2006)

Foreign Exchange Hedging Strategies at General Motors: Competitive Exposures

by Mihir A. Desai and Mark Veblen

Abstract

How can a multinational firm analyze and manage currency risks that arise from competitive exposures? General Motors has a substantial competitive exposure to the Japanese yen. Although the risks GM faces from the depreciating yen are widely acknowledged, the company's corporate hedging policy does not provide any guidelines on managing such competitive exposures. Eric Feldstein, treasurer and vice-president of finance, has to quantify GM's yen exposure and recommend a way for GM to manage the risks that arise from its competitive exposure. Students must analyze the impact of a yen depreciation on GM sales and profits. A rewritten version of an earlier case.

Keywords: Multinational Firms and Management; Currency Exchange Rate; Competition; Credit Derivatives and Swaps; International Finance; Financial Management; Investment Funds; Risk and Uncertainty; Auto Industry;

Citation:

Desai, Mihir A., and Mark Veblen. "Foreign Exchange Hedging Strategies at General Motors: Competitive Exposures." Harvard Business School Case 205-096, March 2005. (Revised March 2006.)