Mitsubishi 2014 Annual Report Download - page 34

Any rise in the manufacturing cost of MMC’s products
due to changes in demand and other market conditions
may seriously impact the operating results and/or finan-
cial standing of the MMC Group.
Foreign exchange rate fluctuations
Overseas sales accounted for around 80 percent of the
MMC Group’s consolidated net sales for the term under
consideration. MMC endeavors to hedge risks involved
in foreign currency receivables and payables through the
prudent use of derivative contracts and other instruments
but fluctuations in foreign exchange rates may still seri-
ously impact the operating results and/or financial stand-
ing of the MMC Group.
Funding interest rates
As at the end of March 2014, the balance of MMC’s
consolidated interest-bearing debt (short-term borrowings
and long-term borrowings) was ¥222.4 billion. At that
time, the balance of the Company’s consolidated savings
was ¥450.1 billion and so any impact due to the interest-
bearing debt may be partially mitigated but changes in
interest rates on borrowings resulting from changes in
financial market conditions may seriously impact the oper-
ating results and/or financial standing of the MMC Group.
Failure to achieve mid-term business plan targets
The MMC Group has drawn up a mid-term business
plan setting out operational strategy for the mid-term.
However, in the event that differences arise between the
premises on which the plan was drawn up and real-
world conditions, or should risks other than those de-
scribed in this section become prominent, the operating
results and/or financial standing of the MMC Group may
be seriously impacted.
Product quality and safety
MMC endeavors to improve the quality and assure the
safety of MMC Group products. However, in the event
that MMC has to issue a recall or implement countermea-
sures on a large scale due to product defects or failures,
or in the event that MMC is pursued in a large-scale prod-
uct liability action, the large costs incurred and the dam-
age to the company’s reputation and consequent drop in
demand for its products may seriously impact the operat-
ing results and/or financial standing of the MMC Group.
Lawsuits
Any lawsuit brought against MMC by customers, trading
partners or other third parties in the course of the MMC
Group conducting its business operations may seriously
impact the operating results and/or financial standing of
the MMC Group.
In addition, in the event that a decision in a legal
action currently under dispute goes against the MMC
Group’s claims or predictions, this may seriously impact
the operating results and/or financial standing of the
MMC Group.
In February 20, 2010, MASRIA CO., Ltd. (hereafter
“Plaintiff”), a former MMC distributor in Egypt, filed
a lawsuit against MMC for dissolution of a distributor
agreement between MMC and the Plaintiff including a
900 million USD claim for damages. The judgments in
both the courts of first and second instance found in
favor of MMC on October 26, 2010 and July 3, 2012
respectively. The case is now before the final appellate
court after the Plaintiff appealed on July 21, 2012 against
the judgment of the court of second instance.
MMC’s notice to terminate the distributor agree-
ment with the Plaintiff followed due legal process and
the terms of the agreement, thus making the Plaintiff’s
claim irrational. For this reason, at present MMC does not
consider this legal case will result in any serious impact
on the operating results and/or financial standing of the
MMC Group.
MITSUBISHI MOTORS CORPORATION
Annual Report 2014
32