ARCHION株式会社

In the "Integrated Platform Strategy" arising from the business integration of Hino Motors and Mitsubishi Fuso, there is a risk that the revenue and cost benefits of the integration may not be realized early or sufficiently, due to product development delays, differences in corporate culture, difficulty in securing human resources, and lack of holding company management know-how. In addition, with independence from the Toyota Group and Daimler Truck Group, the Company may no longer receive the credit strength, procurement capability, and R&D support it previously enjoyed, and substantial integration costs have already been incurred with additional costs expected going forward. The Company is promoting optimal resource allocation through the Integrated Platform Strategy, but if these efforts do not succeed, there is a risk of material adverse effects on the business, results of operations, and financial condition.

Regarding Hino Motors' engine certification misconduct issue for the Japanese and U.S. markets, a series of settlements have been reached, including a criminal settlement with the U.S. Department of Justice (criminal penalties totaling US$521.76 million), a civil settlement with U.S. federal and California authorities (totaling US$679 million), a settlement of Canadian litigation (CAD 55 million), a settlement of Australian litigation (AUD 87 million), and a settlement of New Zealand litigation (NZD 10.9 million). In FY2026 (ending March 2026), an additional extraordinary loss of ¥36,907 million was recorded as a North American certification-related loss, and further litigation may be filed and additional costs may arise in other jurisdictions going forward. Under the special indemnification provisions of the business integration agreement, if latent liabilities materialize, the Company and Hino Motors may be obligated to provide certain monetary compensation until March 31, 2041.

Domestic truck and bus demand may decline due to economic conditions, demographic trends, and the progress of logistics reform, while overseas, additional tariff measures on commercial vehicles by the U.S. government and deterioration of political, social, and economic conditions in emerging markets may affect demand. The commercial vehicle delivery contract with the Indonesian government (expected in FY2027, ending March 2027) also carries a risk of delay or cancellation due to political and social conditions. The Group is promoting accurate understanding of demand trends as well as strengthening product competitiveness and cost improvement, but if these risks materialize, they may affect the business, results of operations, and financial condition.

The commercial vehicle industry is undergoing rapid changes such as autonomous driving, zero-emission technology, EV technology, digital innovation, and stricter emission regulations, and whether the Group can respond to these appropriately and swiftly will significantly affect its future growth. The Group is building a technology portfolio through collaboration with Toyota and Daimler Truck, but there is a risk that, due to the business integration, R&D support from these parent group companies may no longer be received as before. If the response to technological innovation and social demands is insufficient, the Group may lose its competitive advantage, which could adversely affect the business, results of operations, and financial condition.

With the business integration, there is a risk that fundraising support from the Toyota Group and Daimler Truck Group may no longer be received as before. The Company has entered into a convertible bond agreement with Toyota with a maximum outstanding balance of ¥200,000 million and a straight bond agreement with Daimler Truck with a maximum outstanding balance of ¥20,000 million, but these may not be sufficient to meet the Group's funding needs. In addition, discussions are underway toward entering into a commitment line agreement with the Company's banks, but there is no guarantee that such an agreement will be concluded, and there is also a risk that a sharp rise in market interest rates could increase the burden of interest payments. The Company addresses foreign exchange fluctuations through natural hedging and derivative transactions, but if these fluctuations cannot be fully mitigated, they may adversely affect the results of operations and financial condition.

As of April 1, 2026, Daimler Truck holds 44.26% of voting rights and Toyota holds 37.46%, and both companies have the right to be involved in the Company's management. Toyota holds 175,512,774 shares of Class A shares and has the right to request conversion into common shares, and there is also a risk of share dilution due to the allotment of convertible bonds. There is a possibility that the two major shareholders may exercise influence that is inconsistent with the interests of other shareholders, which could also affect the liquidity of the shares and share price formation.

Domestic production bases are planned to be consolidated into three sites: the Furukawa Plant, the Nitta Plant, and the Kawasaki Plant. The Hamura Plant has already been transferred to Toyota, the Nakatsu Plant is planned to be consolidated into the Kawasaki Plant, and the Toyama Plant is planned to be transferred to a joint venture (a joint venture with Foxconn). If the consolidation does not proceed as planned or if supply is interrupted after the transfer, this may disrupt product supply. There is also a risk of production shutdowns due to natural disasters such as fires and earthquakes, or due to technical or regulatory issues, and concerns exist that concentrating production at three sites in the Kanto region increases geopolitical concentration risk.

Fierce competition is unfolding in the automotive markets in which the Group operates, and external factors such as each country's EV subsidy policies and tariff policies affect the competitive environment in addition to product performance, safety, fuel efficiency, price, and after-sales service. There is a risk that the Group's competitive advantage may be lost due to industry restructuring and intensifying competition in emerging markets. The Group is promoting strengthening of competitiveness through the Integrated Platform Strategy, but if it fails to reach the technological level required by the market, this may adversely affect the business, results of operations, and financial condition.

The Group holds a large amount of confidential information, including personal information and technical information, and relies heavily on computer systems and communication networks for business operations, but the risk of unauthorized access is increasing due to the global rise in cybercrime. If system failures or leaks of confidential information occur due to natural disasters, human error, computer viruses, or sabotage by third parties, this could cause significant disruption to business operations as well as result in liability for damages or sanctions from authorities. Security risks also exist across the entire supply chain, and these may affect the Group's social credibility, business, results of operations, and financial condition.

In the medium-term management plan formulated in May 2026, covering the seven-year period from FY2027 (ending March 2027) to FY2033 (ending March 2033), there is a risk that the plan's targets may not be achieved within the initially intended period due to factors such as failure of global collaboration, delays in expanding market share, failure to achieve production base consolidation and fixed cost reductions, and unexpected fluctuations in exchange rates, inflation, and the competitive environment. In addition, a gain on negative goodwill is expected to be recorded in FY2027 (ending March 2027), but the financial results information, including the amount of its impact, has not yet been finalized and may differ from expectations. If these risks materialize, the Group's efforts to expand revenue and improve capital efficiency may not proceed as planned, which could adversely affect the business, results of operations, and financial condition.