Suzuki 2007 Annual Report Download - page 26

SUZUKI MOTOR CORPORATION
4. Risks in operations
Risks which may possibly affect on the operating results, stock price and financial situation of the Suzuki group are
as follows:
(1) Macro-economic changes
It is possible that prolonged sluggish economy and the reduced purchasing will of consumers could drastically
decrease demand for products, such as motorcycles, automobiles and outboard motors and adversely affect the
business performances of the Suzuki Group.
The Suzuki Group has business operations all over the world and our dependence on overseas manufacturing
plants, especially in developing countries in the Asian region, has been increasing year by year. Sudden changes in
the economic situation and unexpected events could possibly have an impact on the business performances of the
Suzuki Group. Furthermore, it is possible that unexpected changes in and adoptions of different tax systems in each
country also could affect our operating results.
(2) Price and purchasing cost fluctuation
It is possible that drastic fluctuation of the prices and purchasing cost of our products are brought on by the
various factors, such as sudden changes in demand, supply shortages and price-up of parts and materials, unstable
economic situations, revisions of import restrictions, and intensified price competition. There is no guarantee that
these fluctuations will not be prolonged nor that these fluctuations will never occur in markets where they have never
occurred before. It is possible that drastic price and cost fluctuations could damage our operating results in any
market where the Suzuki Group is operating.
(3) Foreign exchange fluctuation
The Company exports motorcycles, automobiles, outboard motors and their parts from Japan to many countries in
the world and our overseas manufacturing bases also export products and parts to a number of countries. Foreign
exchange fluctuations affect our business operations and our financial situation as well as our competitiveness.
Furthermore, foreign exchange fluctuations affect the pricing of products sold in foreign currencies and the
purchasing price of materials. Overseas sales accounted for approximately 2/3 of our consolidated net sales in the
current fiscal year and a large proportion of our transactions are denominated in foreign currencies, such as the US
dollar and the Euro. To reduce the risk of foreign exchange fluctuations, we utilize hedging instruments such as
forward exchange contracts. However, it is impossible to hedge all risks. The appreciation of the Yen against other
currencies could possibly adversely affect our operating results.
(4) Environmental restrictions
The manufacturing of motorcycles, automobiles and outboard motors are subject to various laws and regulations
regarding exhaust emissions levels, fuel consumption, noise, safety and the amount of the output of contaminated
materials from plants. We can reasonably expect such regulations to be revised, and in many cases, strengthened.
Expenses for complying with such regulations could possibly impact the operating results of the Suzuki Group.
(5) Quality assurance
The Suzuki Group recognizes safety of products as a matter of the highest priority. We strive to maintain the
globally same level of quality, keeping a strict quality assurance system through product development to sales.
Regarding product liability, although the Suzuki Group is purchasing product liability insurance, there is a risk that all
liabilities are not covered fully. If a large-scale recall was made for our customers’ safety and incurred major
expenses, it could adversely affect the operating results of the Suzuki Group.
(6) Disasters, wars, terrorism and labor strikes
Our main manufacturing bases in Japan are located chiefly in the Tokai region in the mid-eastern part of Japan,
and other facilities, such as the Company’s head office, are also concentrated in the same region. In the event of
disasters, such as earthquakes in the Tokai region or off the southeast coast of Japan, our operating results could
possibly be affected. Various preventive measures are put in place, including earthquake-proofing and fire-proofing
our buildings and facilities, making plan of operation recovery and carrying earthquake insurance.
Overseas, the Suzuki Group operates in many countries and occurrences of unexpected events, such as natural
disasters, diseases, wars, terrorism and labor strikes, etc., could possibly cause delays and bring a halt to the
purchasing of materials and parts, manufacturing, sales and distribution of products, and provision of services. If
these delays or interruptions occur and if they are prolonged, they may adversely affect the operating results of the
Suzuki Group.
Other various risks not mentioned above also remain - not all the risks for the Suzuki Group are listed here.
FINANCIAL REVIEW
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