Bridgestone 2004 Annual Report Download - page 24

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Bridgestone Annual Report 2004
The operating and accounting status of the Companies, as described in this document, is
subject to diverse risk. Below is a summary of the principal categories of risk that may have a bearing
on investors’ decisions. Management at the Companies is alert to these and other kinds of risk, and
the Companies work systematically to minimize risk and the effect of any adverse events on their
operations. However, events associated with the potential risk factors described below or with other
kinds of risk, difficult or impossible to predict, could adversely affect the Companies’ operations,
their business results, and their financial condition. All references to possible future developments
in the following text are as of March 30, 2005.
The Companies conduct research and development, purchasing, manufacturing, logistics, market-
ing, sales, and other activities globally. Their operating results and financial position are therefore
subject to trends in demand, interest rates, currency exchange rates, equity share prices, and other
economic variables in different regions. Operations in the Americas accounted for 42% of the
Companies’ sales (for outside customers only) in the fiscal year under review, operations in Japan
for 34%, and operations in Europe for 13%; so, an economic downturn in any of those regions
could exert a significant adverse effect on the Companies’ operating results and financial condition.
While the tire business accounts for 80% of the Companies’ net sales, the Companies’ diversified
products operations also include a large volume of business in automotive products. The
Companies’ operating results and financial position are therefore subject to business conditions in
the global automobile industry.
Demand for replacement tires in each nation where the Companies do business is also subject to
local trends in consumer spending, automotive fuel prices, and other market variables. Any combi-
nation of trends that might cause demand for replacement tires to decline or to grow more slowly
than expected could adversely affect the Companies’ operating results and financial position. In
addition, the Companies sell large volumes of winter tires in Japan, Europe, and North America,
and less-than-average snowfall in any of those regions could adversely affect the Companies’ operat-
ing results and financial position to some extent.
The Companies’ operations in each nation are subject to diverse laws and regulations that govern
investment, trade, currency exchange, competitive practices, environmental protection, and other
aspects of business activity. New or revised laws and regulations could limit the scope of the
Companies’ business activity, raise operating costs, or otherwise adversely affect the Companies’
operating results and financial condition.
Examples of legal and regulatory changes that have had an effect on the Companies’ tire opera-
tions in the past include the prohibition of spiked tires in Japan and the passage of the TREAD Act
in the United States. Legal and regulatory developments have also affected the Companies’ diversi-
fied products operations, such as prohibitions on the use of chlorofluorocarbons in urethane foam.
In addition, the Companies are rapidly expanding their investment in growing economies in
Asia—including China—and Latin America, and unpredictable legal and regulatory changes in
those nations could force modifications in the Companies’ investment programs and business plans.
These types of legal and regulatory changes could adversely affect the Companies’ operating results
and financial condition.
Natural disasters, war, terrorist action, civil strife, and social and political unrest
The Companies conduct research and development, manufacturing, logistics, marketing, sales,
and other activities globally, and they therefore may encounter the risk of earthquakes, floods, and
other kinds of natural disasters; of war, terrorist action, civil strife, and social and political unrest
in numerous nations; and other force majeures. Any of those possible events could interrupt the
Companies’ operations, which could adversely affect the Companies’ operating results and financial
position.
Operational Risk
Economic environment
and demand
Laws and regulations
Interruption of
operations