Toyota 2014 Annual Report Download - page 43

ANNUAL REPORT 2014
President’s MessagePresident’s Message
Overview of
Four Business Units
Overview of
Four Business Units
Special FeatureSpecial Feature
Review of OperationsReview of Operations
Consolidated Performance
Highlights
Consolidated Performance
Highlights
Management and
Corporate Information
Management and
Corporate Information
Investor InformationInvestor Information
Financial SectionFinancial Section
Page 43
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Risk Factors
metals, non-ferrous alloys including aluminum, and
plastic parts, may lead to higher production costs for
parts and components. This could, in turn, negatively
impact Toyota’s future profitability because Toyota may
not be able to pass all those costs on to its customers
or require its suppliers to absorb such costs.
The downturn in the financial markets could
adversely affect Toyota’s ability to raise capital.
Should the world economy suddenly deteriorate, a
number of financial institutions and investors will face
difficulties in providing capital to the financial markets at
levels corresponding to their own financial capacity,
and, as a result, there is a risk that companies may not
be able to raise capital under terms that they would
expect to receive with their creditworthiness. If Toyota is
unable to raise the necessary capital under appropriate
conditions on a timely basis, Toyota’s financial condition
and results of operations may be adversely affected.
N Political, Regulatory, Legal and Other Risks
The automotive industry is subject to various
governmental regulations.
The worldwide automotive industry is subject to vari-
ous laws and governmental regulations including
those related to vehicle safety and environmental
matters such as emission levels, fuel economy, noise
and pollution. In particular, automotive manufacturers
and the euro and, to a lesser extent, the Australian
dollar, the Russian ruble, the Canadian dollar and the
British pound. Toyota’s consolidated financial state-
ments, which are presented in Japanese yen, are
affected by foreign currency exchange fluctuations
through translation risk, and changes in foreign
currency exchange rates may also affect the price of
products sold and materials purchased by Toyota in
foreign currencies through transaction risk. In particu-
lar, strengthening of the Japanese yen against the U.S.
dollar can have an adverse effect on Toyota’s operat-
ing results.
Toyota believes that its use of certain derivative finan-
cial instruments including foreign exchange forward
contracts and interest rate swaps and increased local-
ized production of its products have reduced, but not
eliminated, the effects of interest rate and foreign
currency exchange rate fluctuations. Nonetheless, a
negative impact resulting from fluctuations in foreign
currency exchange rates and changes in interest rates
may adversely affect Toyota’s financial condition and
results of operations
High prices of raw materials and strong pressure
on Toyota’s suppliers could negatively impact
Toyota’s profitability.
Increases in prices for raw materials that Toyota and
Toyota’s suppliers use in manufacturing their products
or parts and components such as steel, precious
such as Toyota are required to implement safety
measures such as recalls for vehicles that do not or
may not comply with the safety standards of laws and
governmental regulations. In addition, Toyota may, in
order to reassure its customers of the safety of
Toyota’s vehicles, decide to voluntarily implement
recalls or other safety measures even if the vehicle
complies with the safety standards of relevant laws
and governmental regulations. Many governments
also impose tariffs and other trade barriers, taxes and
levies, or enact price or exchange controls. Toyota has
incurred, and expects to incur in the future, significant
costs in complying with these regulations. If Toyota
launches products that result in safety measures such
as recalls, Toyota may incur various costs including
significant costs for free repairs. Furthermore, new
legislation or changes in existing legislation may also
subject Toyota to additional expenses in the future. If
Toyota incurs significant costs related to implementing
safety measures or meeting laws and governmental
regulations, Toyota’s financial condition and results of
operations may be adversely affected.
Toyota may become subject to various legal
proceedings.
As an automotive manufacturer, Toyota may become
subject to legal proceedings in respect of various
issues, including product liability and infringement of
intellectual property. Toyota may also be subject to
legal proceedings brought by its shareholders and
governmental proceedings and investigations. Toyota
is in fact currently subject to a number of pending legal
proceedings and government investigations. A nega-
tive outcome in one or more of these pending legal
proceedings could adversely affect Toyota’s financial
condition and results of operations.
Toyota may be adversely affected by natural
calamities, political and economic instability, fuel
shortages or interruptions in social infrastructure,
wars, terrorism and labor strikes.
Toyota is subject to various risks associated with
conducting business worldwide. These risks include
natural calamities; political and economic instability;
fuel shortages; interruption in social infrastructure
including energy supply, transportation systems, gas,
water, or communication systems resulting from natu-
ral hazards or technological hazards; wars; terrorism;
labor strikes and work stoppages. Should the major
markets in which Toyota purchases materials, parts
and components and supplies for the manufacture of
Toyota products or in which Toyota’s products are
produced, distributed or sold be affected by any of
these events, it may result in disruptions and delays in
the operations of Toyota’s business. Should significant
or prolonged disruptions or delays related to Toyota’s
business operations occur, it may adversely affect
Toyota’s financial condition and results of operations.
R&D and Intellectual Property Corporate Philosophy Corporate Governance Management Team Risk Factors [3 of 3]