Suzuki 2009 Annual Report Download - page 26

SUZUKI MOTOR CORPORATION 25
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 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 68% 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 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 Group.
(6) Alliance with other businesses
We conduct various alliance activities with other companies, including General Motors Corporation (GM) and other
domestic and foreign automobile manufacturers, for research and development, manufacturing, sales and finance, but
factors that may not be controlled by the Suzuki Group such as situations inherent to the alliance partners could adversely
affect the operating results and financial conditions of the Group.
In addition, GM filed for Chapter 11 bankruptcy-court protection of the U.S. Bankruptcy Code, and we will pay close
attention to the reorganization proceedings of GM and deal appropriately.
(7) 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 Group.
Other various risks not mentioned above also remain - not all the risks for the Group are listed here.
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