Honda 2007 Annual Report Download - page 44

42
subject to change, and are often made more restric-
tive. The costs to comply with these regulations can
be significant to Honda’s operations.
2. Honda is reliant on the protection and
preservation of its intellectual property
Honda owns or otherwise has rights in a number of
patents and trademarks relating to the products it
manufactures, which have been obtained over a
period of years. These patents and trademarks have
been of value in the growth of Honda’s business and
may continue to be of value in the future. Honda does
not regard any of its businesses as being dependent
upon any single patent or related group of patents.
However, an inability to protect this intellectual prop-
erty generally, or the illegal breach of some or a large
group of Honda’s intellectual property rights, would
have an adverse effect on Honda’s operations.
(Risks Relating to Honda’s Operations)
1. Honda’s financial services business
conducts business under highly
competitive conditions in an industry
with inherent risks
Honda’s financial services business offers customers
various financing plans designed to increase the
opportunity for sales of its products. However, cus-
tomers can also obtain financing for the lease or pur-
chase of Honda’s products through a variety of other
sources that compete with its financing services,
including commercial banks and finance and leasing
companies. The financial services offered by us also
involve risks relating to residual value, credit risk and
cost of capital. Competition for customers and/or
these risks that are specific to the financing business
may affect Honda’s results of operations in the future.
2. Honda relies on various suppliers for the
provision of certain raw materials and
components
Honda purchases raw materials, and certain compo-
nents and parts, from numerous external suppliers,
and relies on some key suppliers for some items and
the raw materials it uses in the manufacture of its
products. Honda’s ability to continue to obtain these
supplies in an efficient and cost-effective manner is
subject to a number of factors, some of which are not
within Honda’s control. These factors include the
ability of its suppliers to provide a continued source
of supply and Honda’s ability to compete with other
users in obtaining the supplies. Loss of a key supplier
in particular may affect our production and increase
our costs.
3. Honda conducts its operations in various
regions of the world
Honda conducts its businesses worldwide and in
several countries through joint ventures with local
entities, in part due to the legal and other require-
ments of those countries. These businesses are sub-
ject to various regulations, including the legal and
other requirements of each country. If these regula-
tions or the business conditions or policies of these
local entities change, it may have an adverse affect
on Honda’s business, financial condition or results
of operations.
4. Honda may be adversely affected by wars,
use of force by foreign countries, terrorism,
multinational conflicts, natural disasters,
epidemics and labor strikes
Honda conducts its businesses worldwide, and its
operations may variously be subject to wars, use of
force by foreign countries, terrorism, multinational
conflicts, natural disasters, epidemics, labor strikes
and other events beyond its control which may delay
or disrupt Honda’s local operations in the affected
regions, including the purchase of raw materials and
parts, the manufacture, sales and distribution of prod-
ucts and the provision of services. Delays or disrup-
tions in one region may in turn affect our global
operations. If such delay or disruption occurs and
continues for a long period of time, Honda’s business,
financial condition or results of operations may be
adversely affected.
Risk Factors