Financial Management & Corporate Finance Case Study

Currency Risk Management: Automobile Industry

OR

Abstract:
Volkswagen (VW) is a frontrunner in managing currency risk, as its risk management activities date back to the 1950s. But since 2002, VW had neglected currency risk hedging and as a result its profits began to fall. Chrysler and BMW are also known for currency risk management. But these companies follow different strategies in managing their currency risk, as the strategy choices depend on many factors.

Pedagogical Objectives:

• To discuss the evolution and the importance of currency risk management within the automobile industry.

Keywords : Currency risk management, Automobile industry, Exchange rate, Foreign exchange, Futures contract, Dollar, euro, yen, Operational hedging, Financial on-off balance hedging, Finance Case Study, Bretton Woods system, Plaza agreements, Louvre Accord, International money market, Hedging strategies, Financial Accounting Standards Board, Derivatives, Smithsonian