Among all the issues related to business operations and accounting noted in the securities report, the business risks that could affect the G-TEKT Group's financial condition and management results are outlined here. We recognize that these risks could have a significant influence on investment decisions.
This section contains forward-looking statements, and these statements are based on our judgments as of the filing date of the securities report. (June 25, 2025)
Business Environment
Changes in the automotive market
The G-TEKT Group has business operations in countries around the world, including Japan, China, and other parts of Asia, as well as North America, South America, and Europe. We supply products to local automakers and related auto parts manufacturers in those locations. Slow personal consumption due to an economic downturn or the reluctance of consumers to make purchases due to the tax system change in these markets could result in fewer automobile sales, which could affect the business performance of the Group.
Risk Countermeasures
The G-TEKT Group is closely monitoring market trends in the countries where we operate, and we are working hard to respond swiftly and carefully to those trends in the aspects of capital investment decisions, appropriate personnel assignment, expense management, etc.
Response to climate change and environmental regulations
Global warming due to greenhouse gas emissions and other factors is having a serious impact and global environmental conservation needs to be tackled as an urgent issue.
If we are unable to appropriately respond to strengthening environmental regulations in each country and stakeholders’ requests to contribute to decarbonization through our business, the loss of opportunities due to a downturn in our social reputation could affect the business performance of the G-TEKT Group.
Risk Countermeasures
We are aiming to achieve carbon neutrality by FY 2050 for the G-TEKT Group and we are working to reduce CO2 emissions generated during production (Scope 1 + 2) by implementing measures to reduce greenhouse gas emissions and by switching to renewable energy.
A large portion of the emissions generated over the lifecycles of our products (Scope 1-3) are attributed to the sheet steel we procure, so we are considering a switch to using sheet steel that has been produced through more environmentally friendly methods for our products, as well as developing products and establishing production techniques that use aluminum, which offers greater recyclability.
Shift to electric vehicles
In order to realize decarbonization, the auto industry is rapidly shifting from vehicles with internal combustion engines to electric vehicles (EVs).
EV differ from conventional vehicles in terms of structure, such as drive systems, and as they become widespread, although it will create opportunities to expand business by entering new markets, it may also lead to significant changes in demand for conventional parts and the way plants operate.
If we are unable to respond appropriately due to delays and setbacks in R&D and plant innovation, it will lead to a loss of orders that could affect the business performance of the G-TEKT Group.
Furthermore, the pace of the transition to EVs may fall short of expectations. Consequently, shifts in the domestic and overseas production and sales mix by powertrain type could affect the Group’s business performance.
Risk Countermeasures
Establishing an EV-related business is one of our new management strategies. Over the next 10 years starting in 2022, we plan to spend ¥70.0 billion for research and development and capital investment. Also, we are advancing R&D and sales activities with the aim of achieving net sales of over ¥100.0 billion and an operating profit margin of at least 8% in the EV-related business.
We are advancing factory automation across not only our manufacturing processes but also our in‑plant logistics, with the aim of realizing smart factories that deliver unprecedented levels of productivity and reliability.
Furthermore, strong demand is expected for the time being not only for EVs but also for vehicles with a variety of power sources, including hybrid vehicles. In anticipation that our products will continue to be used across multiple powertrain types, we are leveraging the whole‑vehicle analysis and production technologies we have accumulated over the years. We are also establishing new alliances with external partners tailored to specific regions and product domains, while utilizing outsourced production where appropriate. Through these initiatives, we aim to evolve our business model into that of a Tier 0.5 system supplier, capable of managing complete vehicle orders from development through production.
Business Operations
Technological development based on market needs
Understanding market needs is a crucial factor in determining the allocation of technological development resources. If we are unable to predict changes in customer requirements or to develop new and appealing products or to supply them quickly enough, or if demand does not increase as expected, these factors could negatively affect growth and profitability in the future, and this, as well as any additional investments, could affect the financial condition and business performance of the G-TEKT Group.
Risk Countermeasures
Our Group operates the G‑TECT TOKYO LAB as its core domestic center for research and development as well as intellectual property management. We have also established integrated sales, engineering, and development offices in North America (Detroit) and Europe (Munich). By strengthening collaboration among these locations, we aim to deepen our understanding of market needs and advance new technology R&D through partnerships with European Engineering Service Providers (ESPs).
Spread of new materials and new engineering methods
If the adoption of new materials spreads in the fields where the G-TEKT Group is active, these new materials could compete with existing Group products, and could, in turn, affect the business performance of the G-TEKT Group.
Furthermore, the growing adoption of Gigacast technology indicates the potential for significant changes in manufacturing methods for automotive underbody components. Going forward, the wider use of this technology or an expansion of its application areas could have an impact on the Group’s performance.
Risk Countermeasures
In addition to conventional sheet steel, the G-TEKT Group is advancing R&D into new materials such as carbon fiber and aluminum, which is currently becoming used mainly in luxury vehicles in Europe.We have also established mass production technology for the aluminum pressing process, and this is already being used in production in Europe.
In addition, as the most practical alternative to Gigacast technology currently available, we are advancing the development of large integrated components produced using aluminum die‑casting and hot‑stamping technologies through collaboration and joint development with other companies, while also actively proposing these solutions to our customers.
Intellectual property rights
If we lag behind in acquiring the rights to technology, such as when another company acquires intellectual property rights ahead of us for a technology that we are currently developing, we may be unable to commercialize this technology and lose opportunities or additional costs could be incurred, which could affect the business performance of the G-TEKT Group.
Risk Countermeasures
We have established a department that specializes in managing IP, and investigates, acquires, and manages IP rights in accordance with the G-TEKT Group’s IP strategy.
We thoroughly examine the acquisition status of IP in our new business areas and actively strive to acquire IP rights that anticipate future business trends.
Securing human resources
We recruit personnel and carry out business activities in locations around the world, but there are concerns that factors such as the contraction of labor markets due to various reasons, such as changes in business conditions or low birth rates, or failure to establish and maintain personnel systems will make it difficult to secure talented human resources.
Difficulty of securing human resources or an outflow of personnel would result in the loss of opportunities to cultivate employees and enhance their capabilities, and a labor shortage could potentially impede all business activities, affecting the business performance of the G-TEKT Group.
Risk Countermeasures
In order to retain talent, we are improving employee benefits and conditions for employees by reviewing and enhancing personnel systems and actively developing and implementing measures aimed at reducing employee workloads through the automation of tasks that require physical strength and concentration. Additionally, by conducting workplace assessments and similar initiatives, we visualize the current state of the workplace and use this to develop measures for creating a more comfortable working environment.
We are striving to create an environment and foster a corporate culture that supports the self-learning, thinking, and growth of a diverse range of human resources from Japan and overseas.
Risk management systems
We are ramping up business operations outside of Japan. Each country and region is subject to various risks which are different to other countries and regions. If these risks are not handled appropriately, it could affect the business performance of the G-TEKT Group.
Risk Countermeasures
Aware of the importance of risk management to the entire G-TEKT Group, we have created a risk map for each country where we operate. Based on these maps, our overseas subsidiaries are identifying priority issues and effective countermeasures. Our head office in Japan regularly monitors the status of these countermeasures and shares information on risk and countermeasures throughout the G-TEKT Group.
High dependency on specific customers
Honda Motor Co., Ltd. owns more than 30% of the voting rights of the G-TEKT Group and qualifies as one of G-TEKT's other affiliates. Honda and associated Honda Group companies account for over 50% of G-TEKT's consolidated sales. The production and sales trends of the Honda Group, in and outside Japan, along with their business strategy and purchasing policy, could affect the business performance of the G-TEKT Group.
Risk Countermeasures
Our Group shares future outlooks on production and sales forecasts, business strategies, and purchasing policies with Honda Motor Co., Ltd. through our long‑standing and close business relationship. We use this information to support investment decisions and the formulation of our own business strategies.
Furthermore, to expand transactions with new business partners, we are implementing sales strategies based on competitively priced development proposals. This approach aims to mitigate the risk of dependence on specific customers.
Quality
If an unforeseen issue with quality emerges for a G-TEKT Group product, the Group may incur costs or suffer a serious impact to our business reputation, which could affect the financial condition and business performance of the Group.
Risk Countermeasures
The G-TEKT Group’s design and manufacturing comply with all applicable laws and regulations, and we follow international standards for quality control. We strive to improve quality by maintaining a rigorous system of quality assurance. We are also working to improve quality and resulting reliability through camera imaging and image analysis technologies and by carefully inspecting precision and quality on our manufacturing lines.
We will monitor and visualize the quality information of the Group on a global level through the DX (Digital Transformation) project, with the aim of managing through prediction and prevention. Furthermore, we are working to establish suitable quality assurance systems in the new business area of EV-related products business.
Supply chain
The G-TEKT Group relies on specific suppliers inside and outside the Group for purchasing mainstay components and other products. If these materials cannot be purchased because of a shutdown of operations at these suppliers due to the spread of an infectious disease or a natural disaster such as a flood, the G-TEKT Group's business performance could be affected as a result.
Risk Countermeasures
We are countering the risk of a shutdown of operations at our main suppliers by investigating the disaster recovery systems of each company through a survey based on hazard maps and by securing alternative suppliers in readiness for any shutdown of supplier operations due to a disaster or infectious disease.
Within the die manufacturers to which we outsource die production, there are some companies for which it is difficult to secure an alternative supplier, so we are working to reduce the risk of supply chain disruptions and ensure that a quick recovery can be realized through efforts such as shortening die production lead times, dispersing processes, and ensuring distribution can be maintained in times of disaster.
Foreign exchange
Our Group conducts business operations around the world, and as a result, fluctuations in foreign exchange rates impact the Group’s performance. Some 80% of the G-TEKT Group’s consolidated sales are accounted for by local production at overseas subsidiaries, so changes in exchange rates can affect our financial position and business results due to differences in converting to yen.
In addition, certain products and components are exported, including manufacturing equipment such as dies and jigs, to customers outside of Japan. Sudden or significant volatility in currency exchange rates could affect the business performance of the G-TEKT Group.
Risk Countermeasures
Our Group mitigates foreign exchange risk and reduces the impact of foreign currency fluctuations on exports of products and components in several ways, including forward exchange contracts.
Tax
Our Group operates in Japan, North America, China and other Asian regions, South America, Europe, and various other countries worldwide. Unexpected tax burdens or the need to address litigation resulting from changes in national tax systems, transfer pricing regulations, or tax compliance requirements could potentially affect the Group’s performance.
Risk Countermeasures
Our Group has established a comprehensive tax policy founded on strict compliance with the tax laws and regulations of all countries and regions where we operate. We seek to contribute to society through appropriate tax payments and to promote a strong culture of tax compliance across the organization. In addition, we have put in place a governance framework that enables our headquarters in Japan and local subsidiaries to work together promptly and constructively with tax authorities to resolve any issues that may arise.
Compliance
The G-TEKT Group, when conducting business, obeys all laws and regulations in Japan and overseas. If a law or a regulation is broken by an executive officer or employee, any settlement or legal action taken by regulatory authorities could affect the business performance of the G-TEKT Group.
Risk Countermeasures
In the G-TEKT Group, the Compliance Sub-Committee chaired by the Compliance Officer takes the lead in promoting self-inspections, compliance training, raising in-house awareness, and reviewing proposals to improve corporate ethics. For example, we created a system to ensure compliance with laws and internal regulations that includes formulating a basic policy for the Group for preventing both unfair competition and corruption, among other items, and we distributed this information to all employees.
Cybersecurity
Cyber-attacks are constantly becoming more sophisticated, and the increasing number and diversity of endpoints is broadening the scope that needs to be defended. As the attackers themselves are also changing, it is essential to adopt security measures based on the assumption that unauthorized access may occur. In the unlikely event that the G-TEKT Group becomes the target of an attack, the effects such as disruptions to important operations and leaks of confidential information could affect the business performance and our corporate reputation.
Risk Countermeasures
We are implementing efforts, led by the Information Security Division, to review rules related to cybersecurity and find potential issues at on site.
Furthermore, we have installed an endpoint detection and response (EDR) system at our head office in Japan and through the oversight provided by this system, we have established a framework in which even if there is a security breach, any illegal operations will be swiftly detected and blocked. The implementation of this system has also been completed for our overseas subsidiaries outside of Japan.
Infectious Diseases, Natural Disasters, Geopolitical Risks, etc.
Outbreak of infectious diseases
The global economy and the business activities of the Company or its customers and suppliers may stagnate due to requests for restrictions on activities by governments and other organizations in response to outbreaks or global spread of infectious diseases, which could have a significant impact on the business performance of the G-TEKT group.
Risk Countermeasures
Labor and other fixed costs continue to be incurred at sites even when we suspend operations due to the spread of infectious diseases. The head office in Japan etc. procure funds from financial institutions, the Group as a whole has secured adequate liquidity.
We are mitigating infection risks by promoting automation in production areas, redesigning factory and office layouts, expanding remote work, and leveraging online communication with business partners.
Natural disasters
Our Group operates manufacturing plants both in and outside Japan, hiring local employees and producing automotive components using press, welding, and other manufacturing equipment. These production and sales activities are exposed to the risk of natural disasters, including major earthquakes, floods, tsunamis, and tornadoes. Should such events occur, delays or stoppages in the procurement of raw materials and parts, as well as in production and sales activities, could negatively affect the Group’s business performance.
Risk Countermeasures
In the G-TEKT Group, the Risk Management Sub-Committee, chaired by the Risk Management Officer, is taking the lead in ensuring employee safety and takes the initiative for continually identifying risk, implementing countermeasures, and minimizing damage. Specifically, we are making projections of potential damage from natural disasters at each location and then preparing contingencies by establishing an initial response structure and considering recovery plans based on these projections.
Geopolitical risks
If geopolitical risk, such as political unrest, political tension, war, or conflict between countries, or terrorism were to manifest in or around a countries or regions where the G-TEKT Group is active, it could limit or impede the Group’s business activities, affecting the business performance of the G-TEKT Group.
Risk Countermeasures
Our group will strengthen mechanisms for sharing information on geopolitical risks across regions while advancing initiatives to enhance regional autonomy in areas such as procurement, thereby striving to maintain a balanced profitability.