Question

Explain the business activities and environment of Ford Motor Company from the perspective of foreign currency and identify three currencies that Ford Motor Company is exposed against. This can be due to its business structure (i.g. location of factories, customers and suppliers, and the currency that the products/services are quoted), and arising from the competition against its rivals. State the rationales of your selection and references. You need to make exchange rate forecasts, and show how sensitive the company’s value is against the change in the value of the foreign currencies that you have selected against the U.S. dollar.

Answer 1

Ford motor company is engaged into the manufacturing of cars all across the world and it is one of the largest vehicle maker all across the globe.

Ford is operating in Asian subcontinent and it has major markets like Indian markets and Chinese Markets and it is also getting to the European markets as well and its major market is American markets.

Three currency Ford motor is exposed against Euro, Yen along with rupees and dollars.

the exchange rate forecast from my side will be that dollar will be going to get stronger because there will be a recessionary phase which is coming along so people are going to shift towards dollar and dollar will be gaining strength against all the emerging market currencies and it will also be gaining strength against Euros because European markets are not doing that well as American market so dollar will be gaining strength and Ford motor has their domestic currency as dollars and their receivables in other currencies are going to shrink due to conversion factor associated with exchange rate and when dollar will be getting strong all these currencies are going to get weak so Ford motors are going to lose on the the profit margin.

The value of Ford motor is sensitive to the movement of the US dollar by a large extent because the highest possible exposure of the Ford motor is in American dollar but it also has a receivable in other currencies so when there will be a conversion factor associated with it then there will be high sensitivity of valuation of the company in respect to the dollar