93776791 Toyota Ppt.pdf.Neehaa 2

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Financial Risk Management a Case Study on Toyota Motors Corp.

Module leader: Ajay Yadav

Submitted by: Avinash Agarwal Aashish Garg Nitin Yadav Rajesh Ch. Sumit Garg

History of Toyota



Sakichi Toyoda founded Toyota.



Kiichiro opened auto department.

He faced competition from Ford and GM. •



Estb of company Ltd took place in 1937.



Second World war 



Suffered a lot and financial problems.

Company had to be bailed out by consortium of banks. •



Downsized and restructured.

Cntd… • By 1952, Toyota’s financial health

restored coz of the Korean war. • Showed interest in TQM . • Launch of Corolla and more than 71,000

cars. • Joint Venture with GM . • Had a major achievement in US market

when it successfully launched the Lexus and even Celica. • Appreciation of yen and restrictions put

on imports of Japanese cars by western counties, Toyota stepped up its efforts to set up plants abroad.

Toyota had increase in operating income and vehicle sales. • Made plans to buy 5% stake in Yamaha. • By early 2000s, Analysts considered Toyota to be the

strongest of Global auto manufacturers.

Problems faced by Toyota & the solutions Expensive vehiclesUndercoated prices Govt. help After effects of World War-II Banks helped Downsizing and segregating business. Korean war Higher Cost of Production Tracing problm to its roots Dies Market Expansion Joint ventures with GM, Tianjin Automobile in China Buying/Increasing stakes in Daihatsu, Hino motors. Opening plants in Britain, France Re-positioning Corona

Strategies used by Toyota to overcome risks: Financial risks are those due to which the company might get affected in its cash flows thus unable to meet its financial obligations. Risks that are involved in Toyota are:

Credit Risk:

Market Risk: Derivative Type

Amount Invested (Yen)

Amount Invested ($)

Foreign Exchange Forward Contracts

(2464)

(21)

Interest

103038

857

5935

49

Option contracts written

(3581)

(30)

TOTAL

115018

957

rate

and

currency

swap

agreements Option contracts purchased

Currency Risk: Translation Risk :

Transaction Risk 

Particulars

Revenues

Operating Income

2001

2002

2003

12955237 14190308 15501553

790729

1093632

1271646

% Change to 2002-

% change 2003-

2001

2002

8.70%

8.46%

27.70%

14.00%

Interest Rate Risk:Commodity Price Risk:-

Equity Price Risk S.No.

Particulars

Amount ($ millions)

1.

Time deposits

461

2.

Total Receivables

39,308

3.

Short term Borrowings

15,438

4.

Long Term Debts

44,969

TOTAL

100,176

Derivatives Financial Instruments •

Adopted in 2001 By Toyota



Classifies Derivatives in 4 Types (FAS 133)  –

 –

No Hedge Fair Value Hedge- loss 2002 $5.12 million, 2003 $4 million

 –

Cash Flow Hedge

 –

Foreign Currency Hedge



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