Application Report 1: Prepare a 1-2 page report, single spaced, that compares th

Question

Application Report 1: Prepare a 1-2 page report, single spaced, that compares the finances of Honda Motors (HMC) to the finances of General Motors (GM). Why has HMC been so successful, and why has GM been lagging ?

   You report should include topics we have discussed in the course, such as financial statements, financial ratios, financial management decision-making, and time value of money concepts.

   You can find this information in the following sources: "Wall Street Journal," "New York Times," Yahoo Finance, Bloomberg, and company web sites. The company web site will often provide you with the latest fiscal reports in the "investor relations" section.

   Structure your compositon to include a summary of the recent earnings report. Cite financial numbers, such as those that appear on the earnings statements, balance sheets, and statement of cash flow. Relay financial ratios that we discussed in the previous unit, such as profit margin, dividend yield, and debt/equity ratio . Describe the significance of these numbers- what do they indicate ? Explain your report relates to our course and to practicing managers.

Explanation / Answer

Honda Motors v General Motors: A Financial Comparison The past few years have been some of the most voltile in the global automobile industry and market, for a variety of reasons, The spate of safety recalls experienced by Toyota (and over a longer period by other manufacturers, though to a lesser degree) and the massive financial failure of the United States Big Three auto manufacturers (Ford, Chrysler, and General Motors) has, in the eyes of many analysts, fundamentally changed the face of the industry and the capabilities of all of the players involved. It is clear that General Motors met with a high degree of failure, alongside its primary competitors, but the global financial meltdown is not the sole or whole explanation for this companys poor performance. An examination of the current financial statements of this company now that it has begun its recovery might yield some clues as to why its performance lagged in the manner it did, and these reasons become even clearer hen compared to a company that has remained strong and successful throughout these years of industry turmoil and change: Honda Motors. If General Motors Corp. (GM) were any other company, its problems would have sorted themselves out a long time ago. Logic says that when your cash holdings exceed your entire valuation in the stock market, some Wall Street shark is going to swoop in, snap up the good parts, and toss the rest. Companies with bloated factories and workforces got religion the hard way 20 years ago, in the days of "Neutron Jack" Welch. And with today's more active boards, CEOs who consistently lose ground to the competition usually don't need Donald Trump to tell them they're fired. But GM, of course, is no ordinary company. With sales of $193 billion, it stands as an icon of fading American industrial might. Size and symbolism dictate that its fate has sweeping implications. After all, GM's payroll pumps $8.7 billion a year into its assembly workers' pockets. Directly or indirectly, it supports nearly 900,000 jobs -- everyone from auto-parts workers to advertising writers, car salespeople, and office-supply vendors. When GM shut down for 54 days during a 1998 labor action, it knocked a full percentage point off the U.S. economic growth rate that quarter. So what's bad for General Motors is still, undeniably, bad for America. And make no mistake, GM is in a horrible bind. That $1.1 billion loss in the first quarter doesn't begin to tell the whole story. The carmaker is saddled with a $1,600-per-vehicle handicap in so-called legacy costs, mostly retiree health and pension benefits. Any day now, GM is likely to get slapped with a junk-bond rating. GM has lost a breathtaking 74% of its market value -- some $43 billion -- since spring of 2000, giving it a valuation of $15 billion. What really scares investors is that GM keeps losing ground in its core business of selling cars.

Related Questions

Navigate

• Browse (All)
• Browse A
• Subjects

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.