Short Term & Long Term Financial Goals of Chrysler, GMC and Ford

Introduction

Every organization has some future financial goals that help it to achieve the business objectives. A financial plan is also supportive in achieving financial goals of the organization. The financial goals should be clear for the efficiency of the financial plans. Ford, GMC and Chrysler are the Multinational Corporations in the manufacturing of automobiles. The financial goals of the organization should be real and consensus based, so that business objectives can be achieved. Short term financial goals are set for the period of one year or less time period; while long term financial goals are set for more than five years.

The financial goals explain the mission and strategy of the organization. The financial goals are set by its long term planning system. The financial goals are set according to the priority of the organization. The change in the any financial goal of the organization is made according the effect on the other goals. Financial goals are changeable, and unstable, and therefore, managers find it difficult to understand and accept the financial goals system.

Short term Financial Goals of Chrysler

Chrysler is the automobile manufacturer company in the America that was established in year 1925. It is traded in the NYSE under the C symbol. The current name of the Chrysler is Daimler Chrysler as it sold its 80.1% stock to the other capital firm of America. It is the largest truck manufacturer company in the world. It also provides financial services to the people byits other businesses. The financial segment of the company provides financing services to the distributors for the inventory and property.

The most important short term financial goal of the Chrysler is to increase the operating profit by increasing the sales revenue. The increase in the operating profit will cause an increase in the working capital fund that will help in ongoing operations of the company. The current working capital of the company is not sufficient to business operations because of the economic downturn. It is also causing a decrease in the liquidity level of the company. To maintain an appropriate liquidity working capital position, the company requires a huge amount of money but the current available cash for the Chrysler is $2.5 billion only and it requires $7 billion loan more for the maintenance of the short term working capital liquidity (Chrysler’s 2008 Recovery Plan for Congress, 2009).

The income statement of the company shows that the company is planning to achieve its short term objectives by reducing the research and development expenses. The selling and general expenses of the organization are also decreasing that explains that the company’s liquidity position is decreasing. The other short term financial goal is to increase the sales volume to face the crisis in the economy. It is also related to the increase in the profitability of the company.

(Source: Yahoo Finance).

Long term Financial Goals of Chrysler

Generally the long term financial goals includes the following four financial goals as the most important goals of the organization –

To increase the value of shareholders.

Increase the growth rate and return on investment.

To ensure the availability of fund.

Increase the operating profit.

The important long term financial goal of the Chrysler is to create the value for the shareholders. To increase the shareholder’s value the management considers the improvement in the market value of the firm because it is directly related to the market value of the firm. The management of the company wants to convince to its shareholder’s with profitability.

This long term financial objective will also help to achieve the other long term objectives of the organization. The net income of the company is increasing that is also causing an increase in the market value and cash flow per share. The other long term financial goal is to increase the operating profit to assist the long term projects of the company. The other long term goals of the organization are to increase the innovation by ensuring the availability of the finance required (Daimler, 2007).

Short term Financial Goals of GMC

GMC is the one division of the General Motors (GM). It the most popular brand name in the manufacturing of trucks, vans and SUVs in the market of United States. The GM is the second largest automaker in the world. The company was founded in 1908 and now it operates in the 34 countries around the world. The profit of the company is decreasing because of the reduction in the sales of the SUV vehicles of the company.

The short term financial goal of the GMC is to decrease the operating expenses to decrease the total loss from the operation so that the cash flows can be increased by the operating activities of the business. In short term it wants to convert the operating cash flows in the positive cash flows for the company.

The improvement in the liquidity position is another important short term financial goal of the management of GMC. In the last two years the liquidity position of the company has improved by $27 billion from the $7billion (General Motor Corporation, 2007).

Long term Financial Goals of GMC

The long term financial goal of the organization is to maintain the financial position of the company in a significant manner. The management of the company is planning to reduce the structural cost by $9 billion in North America. It also wants to increase the growth rate in the global sales of vehicles by expanding its market in Asian regions (General Motor Corporation, 2007).

By expanding its business in the global market, the company wants back the positive returns. For it the management of the company is making the strategy for the cost reduction and sales revitalizing. It will also help to restructure the business. The cash requirement for the restructure of the business will be fulfilled by the loan from Government and TARP program of the Government. It will help to maximize the market value and operating profits of the organization.

Short term Financial Goals of Ford

Ford Motors is the world’s fourth largest automaker company, which is headquartered in Michigan, USA. It was established in the year 1903 by Henry Ford. It is a well known company because of its assembly line method of production. The company is currently facing the problem of decreasing production, as it has fallen from the second position to forth position among the auto manufacturing companies.

The short term financial objective of the company is to increase the net income. The current net income is not significant for the shareholders or the management of the company. As the information from the income statement shows that the net income for the year 2007 was -$2723 million that is causing a decrease in the value of the shareholders, as well as, it is also causing a reduction in the confidence of the investors.

he reduction in the net income is the result of an increase in the interest expenses that are continuously increasing. The decrease in the interest expenses will cause an increase in the net profit margin and it will help to improve the image of the company among the investors. The other short term financial goal of the organization is to move towards the profitability situation. In North America, it also wants to earn a significant growth by restructuring theorders in a profitable manner.

Long term Financial Goals

The long term financial goals of the organization include the restructuring process of the business to operate it profitably. The business will be restructured by establishing the marketing mix according the current demand of the products and services of the company. It will be done by reducing the capacity of the North America’s plant. The company also produces new and innovative products to meet the consumer’s want and values.

The other long term plan of the Ford Motors is to bring an improvement in the balance sheet position of the organization. To meet the future environmental challenges, the management of the company is also making the plan to invest in the fuel efficient technologies (Progress and Priorities, 2007).

Conclusion

The long term and short term financial plans helps to understand the overall strategy of an organization. Generally short term financial plan includes the maintenance of the liquidity position, as well as, increase in the profitability of the company. The long term financial goal includes the increase in the return or in the shareholders value.

References

Chrysler’s 2008 Recovery Plan for Congress. (2009). Retrieved February 11, 2009, from http://www.allpar.com/corporate/cerberus/congress.html

Daimler. (2007). “Annual Report 2007”. Retrieved February 11, 2009, from http://www.daimler.com/Projects/c2c/channel/documents/1488194_DAI_2007_Annual_Report.pdf

General Motor Corporation. (2007). “General Motor Corporation Annual Report2007”. Retrieved February 11, 2009, from http://www.gm.com/corporate/investor_information/docs/fin_data/gm07ar/download/gm07ar_full.pdf

Progress and Priorities. (2007). “Ford Motor Company 2007 Annual Report”. Retrieved February 11, 2009, from http://www.ford.com/doc/2007_ar.pdf

All data is taken from Yahoo Finance.

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Income Statement of Chrysler

20072006

Total revenue146404787200142957

Cost of Revenue111062552165926062

Gross profit3534223534216895

Operating Expenses –

Research & development46514187038519

Selling and general administration1911676924442714

Non Recurring-39768

Operating Income or loss116138162735662

Net income58695074260608

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