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General motors

General motors. Module 4: Simple Analysis & Parsimonious Forecasting. Enterprise operations. General Motors. Client Strategy Template: General Motors . Strategies.

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General motors

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  1. General motors Module 4: Simple Analysis & Parsimonious Forecasting

  2. Enterprise operations General Motors

  3. Client Strategy Template: General Motors Strategies Growth Strategy:Focus on “alternative propulsion strategies” (hybrid, electric, FlexFuel, hydrogen fuel cell) in an attempt to create environmental diversity and fuel efficiency throughout product line Financial Goals & Operating Priorities:Aim to be the industry leader in fuel efficiency, pursue top market share in both domestic and global market Characteristics of the Business Major Business Units: GMNA, GME, GMIO, GMSA, GM Financial Markets: Automotive assembly and manufacturing, financial services (leases, contracts), automotive safety technology Products: Chevrolet, GMC, Buick, Cadillac, OnStar technology, GM Financial services Customers: Auto wholesalers, Rental car agencies, Authorized dealerships Competitors:Toyota, Ford, Nissan Strategic Alliances/Joint Ventures: Mostly concentrated in China Potential Adverse Influences: Constant technology innovation, oil prices, raw material prices, government regulation, dependence on suppliers, product recalls (safety issues)

  4. Markets & products • Auto brands • Chevrolet • GMC • Buick • Cadillac • OnStar (wholly owned sub) • GM Financial • Formerly AmeriCredit Corp • Strategic Alliances • Concentrated in China • JV with SAIC Motor

  5. Reformulation General Motors

  6. EPAT

  7. NFL

  8. NEA

  9. Parsimonious Forecasting General Motors

  10. Why Forecast? • Value common stock • Evaluate credit worthiness • Evaluate strategic investment decisions • Capture expectations of future performance

  11. Step 1: Consider RNEA • RNEA = EPAT/Avg(NEA) • 2012: 13.56% • 2011: -9.01% • 2012  Highest RNEA in peer group (average of 3.52%)

  12. Step 2: Break down RNEA Enterprise Profit Margin (EPM) Enterprise Asset Turnover (EATO) Measure of profitability: How much operating profit does the firm earn from each sales dollar? Measure of efficiency: What level of sales does the firm realize from each dollar invested in enterprise assets?

  13. Cross sectional & Time-Series Comparison • 2012 • Highest EPM in peer group • Highest EATO in peer group • 2011 • Lowest EPM in peer group • Negative EPAT in 2011 • Highest EATO in peer group

  14. Parsimonious: Revenues • Extremely volatile • Bankruptcy restructuring in 2009 • Average: 3.00% • IBIS Industry Average Prediction: 2.40% • Assumption  2.70%

  15. Parsimonious: EPM (from Sales) • EPM  3.86% • EPM (from Sales)  7.53% • Closer to industry average • Removed effect of large goodwill impairment in 2012 • Assumption  5.70%

  16. Parsimonious: EATO • EATO average  9.83 • 2012 Peer Group Average  3.2 • Competition all below 2.0 • Assumption  6.50 • Reasonable given 2.27 decrease in 2012

  17. Parsimonious assumptions

  18. Parsimonious forecasts • Sales Growth Rate  2.7% • Enterprise Profit Margin  5.7% • Enterprise Asset Turnover  6.5

  19. Questions?

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