EXEDY Corporation

Within the automotive transmission device business, which accounts for 86.8% of consolidated revenue, the AT (Automatic Transmission-related Business) in particular has a high probability of shrinking due to the progress of electrification. Since business performance is heavily influenced by the production and sales trends of automobile manufacturers, the company's main customers, delays in responding to electrification pose a risk directly linked to a decline in revenue. The company plans new businesses at the Business Development Department of the Strategic Business Division and is promoting product development for a decarbonized society through the reorganization of the Development Division.

The Group, which produces and sells products worldwide, is affected by exchange rate fluctuations when converting local currency-denominated revenue, expenses, and assets into yen. In particular, in businesses exporting from Japan, yen appreciation may reduce the price competitiveness of products and adversely affect business performance. In FY2026 (ending March 2026), revenue was ¥121,345 million in Japan, ¥46,899 million in the Americas, and ¥123,505 million in Asia/Oceania, reflecting a high overseas ratio and significant exchange rate sensitivity.

If new product development in response to the trend of automotive electrification is delayed, a gap may arise between customer/market needs and the company's offerings, adversely affecting business performance and financial condition. The same impact may occur if timely market launch is not achieved. As countermeasures, the company is promoting open innovation through the Strategic Business Division and reorganizing the Development Division.

In anticipation of the contraction of existing businesses accompanying the progress of electrification, the company is actively pursuing new business investments, including M&A and joint development involving investments in startups. However, if the business activities of investees do not proceed as planned or unforeseen problems arise, business performance may be adversely affected due to the occurrence of impairment losses, among other factors. As a risk mitigation measure, the company verifies whether to continue investments using a stage-gate method and monitors KPIs at the Board of Directors, Management Meeting, and Sustainability Committee.

If profitability declines due to a significant deterioration in the business environment caused by the rapid progress of electrification or other factors, there is a risk of recording impairment losses on fixed assets held by the company. The occurrence of impairment losses could have a material impact on the consolidated financial statements. The company continuously monitors changes in the business environment, but the risk of materialization increases under scenarios of electrification acceleration beyond expectations.

In the automotive parts business, which accounts for the majority of consolidated revenue, price competition is extremely severe. If the company is unable to maintain price competitiveness and its competitive advantage in the future, this may lead to customer attrition and lower product prices, adversely affecting business performance and financial condition. The company holds a world-leading share in clutch and torque converter products and counters competition with three strengths: "highest quality manufacturing," "technological development capability," and "customer network," but continuous response to changes in the competitive environment is required.

If a product defect leading to a large-scale recall or product liability compensation occurs, substantial response costs will be incurred, and reduced transactions due to a decline in quality control evaluation may adversely affect business performance and financial condition. The company implements quality control at factories worldwide, but there is no guarantee that all products are free of defects and that recalls will not occur in the future.

Since most raw materials and some parts are procured from outside the Group, if a shortage of raw materials or parts occurs due to price surges, supply-demand tightness, or unforeseen accidents at suppliers, business performance may be adversely affected. The company strives to maintain stable business relationships, but responding to such risks may become difficult during global supply chain disruptions.

Amid the growing threat of cyberattacks, if the company is subjected to cyberattacks far exceeding expectations, information system failures, external leakage of confidential or personal information, and temporary suspension of business activities, including the supply chain, may occur. Such stagnation of business activities and reputational decline pose a risk of adversely affecting financial position and business results. The company has established and disseminated information security policies and regulations and conducts regular employee training.

Environmental regulations in the countries and regions where the company operates, such as product safety, fuel efficiency, exhaust gas regulations, and pollutant emission restrictions, are expected to become even stricter in the future, and an increase in development costs and capital investment to comply with regulations is anticipated. There is also a risk that, if the company fails to comply with regulations, it will become impossible to sell products in the relevant markets. The company has set the creation of a decarbonized society as a long-term vision and is promoting the establishment of a production system aimed at achieving carbon neutrality.