Toyota 2010 Annual Report Download - page 39

37
TOYOTA ANNUAL REPORT 2010
󱛠the effi cient use of production capacity, and
󱛠changes in the value of the Japanese yen and
other currencies in which Toyota does busi-
ness.
Changes in laws, regulations, policies and
other governmental actions can also materially
impact the profi tability of Toyotas automotive
operations. These laws, regulations and policies
include those attributed to environmental
matters and vehicle safety, fuel economy and
emissions that can add signifi cantly to the cost
of vehicles. The European Union has enforced
a directive that requires manufacturers to be
fi nancially responsible for taking back end-of-
life vehicles and to take measures to ensure
that adequate used vehicle disposal facilities are
established and those hazardous materials and
recyclable parts are removed from vehicles prior to
scrapping. Please see Legislation Regarding End-
of-Life Vehicles Information on the Company ̶
Business Overview ̶ Governmental Regulation,
Environmental and Safety Standards and note
23 to the consolidated fi nancial statements
for a more detailed discussion of these laws,
regulations and policies.
Many governments also regulate local content,
impose tariff s and other trade barriers, and
enact price or exchange controls that can limit
an automakers operations and can make the
repatriation of profi ts unpredictable. Changes
in these laws, regulations, policies and other
governmental actions may aff ect the production,
licensing, distribution or sale of Toyotas products,
cost of products or applicable tax rates. Toyota
is currently one of the defendants in purported
national class actions alleging violations of the
U.S. Sherman Antitrust Act. Toyota believes that
its actions have been lawful. In order to avoid a
protracted dispute, however, Toyota entered
into a settlement agreement with the plaintiff s
at the end of February 2006. The settlement
agreement is pending the approval of the federal
district court, and immediately upon approval
the plaintiff s will, in accordance with the terms
of the settlement agreement, withdraw all
pending actions against Toyota in the federal
district court as well as all state courts and all
related actions will be closed. From time-to-time,
Toyota issues vehicle recalls and takes other
safety measures including safety campaigns in its
vehicles. In November 2009, Toyota announced
a safety campaign in North America for certain
models of Toyota and Lexus vehicles related to
fl oor mat entrapment of accelerator pedals, and
later expanded it to include additional models.
In January 2010, Toyota announced a recall in
North America for certain models of Toyota
vehicles related to sticking and slow-to-return
accelerator pedals. Also in January 2010, Toyota
recalled in Europe and China certain models of
Toyota vehicles related to sticking accelerator
pedals. In February 2010, Toyota announced a
worldwide recall related to the software program
that controls the antilock braking system (ABS)
in certain vehicles models including the Prius.
The recalls and other safety measures described
above have led to a number of claims, lawsuits
and government investigations against Toyota in
the United States. For a more detailed description
of these claims, lawsuits and government
investigations, see note 23 to the consolidated
fi nancial statements.
The worldwide automotive industry is in a
period of global competition which may continue
for the foreseeable future, and in general the
competitive environment in which Toyota
operates is likely to intensify. Toyota believes it
has the resources, strategies and technologies
in place to compete eff ectively in the industry
as an independent company for the foreseeable
future.
Financial Services Operations
The worldwide automobile fi nancial services
industry has become highly competitive due
to the contraction of automotive markets. As
competition increases, margins on fi nancing
transactions may decrease and market share
may also decline as customers obtain fi nancing
for Toyota vehicles from alternative sources.
Toyotas fi nancial services operations mainly
include loans and leasing programs for
customers and dealers. Toyota believes that its
ability to provide fi nancing to its customers is
an important value added service. Therefore,
Toyota has expanded its network of fi nance
subsidiaries in order to off er fi nancial services in
many countries.
Toyotas competitors for retail fi nancing and
retail leasing include commercial banks, credit
unions and other fi nance companies. Meanwhile,
commercial banks and other captive automobile
fi nance companies also compete against Toyotas
wholesale fi nancing activities.
Toyota reasonably estimated and recorded
allowance for credit losses and residual value
losses. This estimation includes the unfavorable
impact of the recalls and other safety measures
announced in fi scal 2010.
Toyotas fi nancial assets decreased during fi scal
2010 primarily due to the impact of fl uctuations
in foreign currency translation rates.
Total Assets by Financial
Services Operations
0
4,000
8,000
12,000
16,000
（¥ Billion）
7080 0960FY 10
Financial Section
Financial Section Investor Information
Corporate Information Special Feature
Consolidated
Performance Highlights
Business Overview
Top Messages
Management's Discussion and Analysis of
Financial Condition and Results of Operations