Due to changes in government regulations, information on risks
involved in business operations has been disclosed in the
Yukashoken-Houkokusho for the year ended March 31,2005
as follows:
Economic Factors
The demand for products manufactured by Nissan is affected by the
economic conditions in each country or market in which they are offered
for sale. Nissan conducts its operations all over the world and, in particular,
in the major markets of North America, Europe, and Asia, to say nothing of
Japan. While Nissan strives to develop a comprehensive and integrated
projection of the global economic outlook, any greater-than-anticipated
downturn in one of these markets may have a significant effect on Nissan
financial position and results of operations.
International Activities and Overseas Expansion
Nissan’s manufacturing and marketing activities outside Japan are
conducted in the United States, in Europe, and in the developing and
emerging markets of Asia. Nissan forecasts and evaluates a wide variety of
risks inherent in doing business in such overseas markets including the
following factors, each of which entails a greater-than-anticipated level of
risk:
• Unfavorable political or economic factors
• Legal or regulatory changes
• Potentially adverse tax consequences
• Labor disputes including strikes
• Difficulties in recruiting and retaining personnel
•Social, political or economic turmoil due to terrorism, war, or other
destabilizing factors.
Research and Development
Nissan’s technology must be “real world”—useful, pragmatic and easy to
use. Nissan anticipates the nature and scope of the market demand, and
then prioritizes and invests in new technologies. Nonetheless, any sudden
and greater-than-anticipated changes in its business environment or in
customer preferences may impact negatively on customer satisfaction with
these new technologies.
Product Defects
Nissan places a high priority on safety and does its best to enhance safety
from the standpoint of research and development, manufacturing and
sales. Although Nissan takes out insurance policies to cover product
liability, this does not necessarily mean that all potential defects and the
related liabilities are fully covered. If Nissan were to implement strict
product recalls for its customers, Nissan would incur significant additional
expenses which could adversely affect its financial position and results of
operations.
Fluctuation in Foreign Currency Exchange Rates
Nissan’s Japanese operations export vehicles to various countries around
the world. In general, the appreciation of the yen against other currencies
adversely affects Nissan’s financial results of operations and, on the
contrary, the depreciation of the yen against other currencies favorably
affects Nissan’s financial results of operations. Any sharp appreciation of
the currencies of those countries against the yen could lead to increases in
both procurement and production costs which would adversely affect
Nissan’s competitiveness.
Derivatives
Nissan utilizes derivatives transactions for the purpose of hedging its
exposure to fluctuation in foreign exchange rates, interest rates and
commodity prices. While Nissan can hedge against these risks by using
derivatives transactions, Nissan, by so doing, may miss the potential gains
which could result from seizing the market opportunities to profit from such
fluctuation in exchange rates and interest rates.
In addition, Nissan manages its exposure to credit risk by limiting its
counterparties to financial institutions with high credit ratings. However, a
default by any one of these counterparties could have an adverse effect on
Nissan’s financial position and operating results.
Lawsuits and Claims
With respect to various lawsuits and claims which Nissan encounters, the
possibility exists that the position defended by Nissan will not be accepted
and that the outcome may be significantly different from that anticipated.