Honda 2014 Annual Report Download - page 25

Legal and Regulatory Risks
1. The automobile, motorcycle and power
product industries are subject to extensive
environmental and other governmental
regulations, including with respect to global
climate changes
Regulations regarding vehicle emission levels, fuel
economy, noise and safety and noxious substances, as
well as levels of pollutants from production plants, are
extensive within the automobile, motorcycle and power
product industries. These regulations are subject to
change, and are often made more restrictive, particu-
larly in recent years, due to an increasing concern with
respect to possible global climate changes. 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 man-
ufactures, 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 con-
tinue 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 property generally,
or the illegal infringement of some or a large group of
Honda’s intellectual property rights, would have an
adverse effect on Honda’s operations.
3. Honda is subject to legal proceedings
Honda is and could be subject to suits, investigations
and proceedings under relevant laws and regulations of
various jurisdictions. A negative outcome in any of the
legal proceedings pending against Honda could
adversely affect Honda’s business, financial condition or
results of 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 various
financing plans to its customers designed to increase
the opportunity for sales of its products and to generate
financing income. However, customers can also obtain
financing for the lease or purchase of Honda’s products
through a variety of other sources that compete with
our financing services, including commercial banks and
finance and leasing companies. The financial services
offered by us also involve credit risk as well as risks
relating to lease residual values, cost of capital and
access to funding. Competition for customers and/or
these risks may affect Honda’s results of operations in
the future.
2. Honda relies on external suppliers for the
provision of certain raw materials and parts
Honda purchases raw materials and parts from numer-
ous external suppliers, and relies on certain suppliers
for some of the raw materials and parts which it uses in
the manufacture of its products. Honda’s ability to con-
tinue 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 raw materials and parts 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 sev-
eral countries, Honda conducts businesses through
joint ventures with local entities, in part due to the legal
and other requirements of those countries. These busi-
nesses are subject to various regulations, including the
legal and other requirements of each country. If these
regulations 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.
Honda Motor Co., Ltd. Annual Report 2014 24
5 Corporate Governance
1 The Power of Dreams
2 Financial Highlights
3 To Our Shareholders
4 Review of Operations
6 Financial Section
7
Investor Relations
Information
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