Mazda 2010 Annual Report Download - page 48

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Significant risks that could affect the Mazda Group’s
business results and financial position include those listed
below. This, however, does not represent a comprehensive
list of all the risks faced by the Mazda Group.
1. Economic Conditions Impacting the Mazda Group
The Mazda Group sells products in Japan and around the
world, including in North America, Europe, and Asia. An
economic downturn or declining demand in any one of
these markets could adversely affect the Mazda Group’s
business results and financial position. Demand has
recently been improving in some major markets as a result
of scrapping incentives* and other government measures to
spur demand. Nevertheless, it is difficult to anticipate what
effect the end of these measures will have on demand, and
a sudden change in the trend in demand could adversely
affect the Mazda Group’s business results and financial
position.
* A system of subsidies for the purchase of a new car to replace an older car.
2. Exchange Rates, Especially the Dollar-Yen
and Euro-Yen Rates
The Mazda Group exports products from Japan to the rest
of the world and consequently its business results and
financial position are exposed to the effects of fluctuations
in exchange rates. An appreciation of the yen, particularly
against the U.S. dollar and euro, could lower the Mazda
Group’s profitability and ability to compete on price.
Mazda uses forward exchange contracts and other instru-
ments in some of its transactions to minimize the impact of
short-term exchange rate risk. However, a weakening of the
yen could result in opportunity losses.
3. Alliances and Mergers
The Mazda Group is involved in joint activities with other
companies under technology alliances, joint ventures, and
in other forms with respect to the development, production,
and sales of products. These joint activities are designed to
optimize resources, facilitate their prioritization, and generate
synergies. However, a disagreement over management,
financial, or other matters between the parties involved could
mean that the joint activities fail to deliver the results
expected. This could adversely affect the Mazda Group’s
business results and financial position.
4. Environmental Regulations
The Mazda Group operates under a variety of legal regula-
tions in the countries in which it conducts business,
including regulations related to fuel economy, exhaust
gases, vehicle safety, and levels of pollutants emitted at its
manufacturing plants. The tightening of these legal regula-
tions in the future could lead to increased costs, which could
adversely affect the Mazda Group’s business results and
financial position.
5. Market Competitiveness
The Mazda Group competes with a large number of
companies in the global automobile market. Maintaining and
enhancing the Group’s ability to compete in this envi-
ronment is crucial to ensuring growth. Consequently, the
Mazda Group is implementing a range of initiatives to boost
its competitiveness in product development, manufacturing,
sales, and other areas. However, the Mazda Group’s
business results and financial position could be affected,
including declines in market share or product prices, in the
event it fails to launch appealing products at appropriate
times because of a failure to accurately ascertain market
trends or as a result of issues related to technological capa-
bilities and manufacturing. The same holds true if the
Mazda Group fails to take effective steps to address or
respond to changes in customers’ sense of value through its
dealership network or sales methods.
6. Procurement of Materials and Parts
The Mazda Group relies on numerous suppliers outside the
Group for the procurement of materials and parts. However,
due to tight supply–demand balances, constraints at
suppliers, or changes to and/or breaches of supply
contracts, the Mazda Group may face difficulties in
procuring the necessary level of materials and parts for
volume production, leading to a rapid increase in the price
of materials procured. Any failure to cover the cost of these
increases through internal efforts to boost productivity,
passing on price rises to customers, or other measures,
may lead to a deterioration in output or higher costs, which
could adversely affect the Mazda Group’s business results
and financial position.
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