Honda 2011 Annual Report Download - page 34

The Great East Japan Earthquake occurred on March 11, 2011 and the Fukushima’s nuclear
power plant disaster have caused and will continue to cause significant damage to the Japa-
nese economy. After March 11, 2011, Honda temporarily suspended or reduced production at
Honda’s automobile plants in and outside of Japan. However, the production in Japan has in
general returned to normal levels since late June, and production outside of Japan is expected
to be generally normalized from around August to September. In addition, although Honda’s
business sites, such as Honda’s R&D subsidiaries located in Tochigi Prefecture, were heavily dam-
aged, currently we expect them to be restored. Although prospects for restoration of business
activities have become clear, as mentioned above, Honda’s production activities may be affected
depending on the status of the future supply of certain parts for which supply is currently
restricted, and on the status of infrastructure, such as the supply of electricity and logistics
services. Furthermore, sales in domestic and international markets may decline. Depending on
the magnitude of these effects, Honda’s results of operations may be adversely affected.
Honda conducts its operations in Japan and throughout the world, including North America,
Europe and Asia. A sustained loss of consumer confidence in these markets, which may be
caused by continued economic slowdown, recession, changes in consumer preferences, rising
fuel prices, financial crisis or other factors could trigger a decline in demand for automobiles,
motorcycles and power products that may adversely affect Honda’s results of operations.
Prices for automobiles, motorcycles and power products in certain markets may experience
sharp changes over short periods of time. This volatility is caused by many factors, including
fierce competition, which is increasing, short-term fluctuations in demand from instability in
underlying economic conditions, changes in tariffs, import regulations and other taxes, short-
ages of certain materials and components, high material prices and sales incentives by Honda
or other manufacturers or dealers. There can be no assurance that such price volatility will
not continue or intensify or that price volatility will not occur in markets that to date have not
experienced such volatility.
Overcapacity within the industry has increased and will likely continue to increase if the
economic downturn continues in Honda’s major markets or worldwide, leading, potentially, to
further increased price pressure. Price volatility in any or all of Honda’s markets could adversely
affect Honda’s results of operations in a particular period.
Honda has manufacturing operations throughout the world, including Japan, and exports
products and components to various countries.
Honda purchases materials and components and sells its products and components in
foreign currencies. Therefore, currency fluctuations may affect Honda’s pricing of products sold
Honda may be
adversely affected
by market
conditions
Prices for
automobiles,
motorcycles and
power products can
be volatile
Risks Relating to Honda’s Industry
Risks Relating to the Great East Japan Earthquake and its Aftermath
Risks Relating to Honda’s Business Generally
Honda’s operations
are subject
to currency
fluctuations
1.
1.
2.
— Currency and Interest Rate Risks —
Risk Factors
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