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Pioneer Revamp Involves Honda, Cuts, Layoffs

5/04/2009 02:00:00 AM Eastern

Honda Motor Company is buying a stake in Pioneer Corp. as part of the CE maker's reorganization plan, which also involves agreements with Sharp Corp. and Mitsubishi Electric, corporate consolidation and layoffs.

The $25.8 million investment from Honda is through what Pioneer called a third-party allotment of shares to the Japanese car maker.

As part of its review of its operation, Pioneer plans to lay off around 5,800 regular employees and about 4,000 temporary and contract employees. It will also cut the number of directors/executive officers from 25 to 19 after the annual general meeting of shareholders to be held in June 2009.

Pioneer announced that it is projecting a net loss of $1.3 billion for its fiscal year, ended March 31, slightly lower than earlier projections on sales of $5.8 billion. The company will issue its fiscal year report in mid-May.

Pioneer said it will combine sales divisions with five sales subsidiaries in the car electronics business. In the home electronics business, it will proceed with restructuring, while combining sales divisions, including those at subsidiaries, into a sales subsidiary and overseas organizations will be overhauled.

The speed of the changes is critical because Pioneer projected another loss of $858.2 million in fiscal year 2010, but net profits of $82.7 million in fiscal 2011 and $165.4 million in fiscal 2012.

As part of its plan Pioneer said it needs to raise $413.6 million “promptly and steadily” to implement its medium-term management plan.

The result of the changes at Pioneer should mean in its current fiscal year, 2010, Pioneer's restructuring expenses will be $485.9 million. Combined with the cost savings from restructuring underway since 2009, total fixed cost reductions are projected at $517 million in fiscal 2010 and $878.9 million in fiscal 2011, respectively, compared with fiscal 2009, the company said.

On the product side, Pioneer will form a joint venture in the optical disc business with Sharp with “the aim of restoring this business to profitability and by taking advantage of the strengths of both companies.” Details are forthcoming, but they plan to establish the venture by October 1.

With its departure at the end of this fiscal year from TVs, Pioneer's home electronics business will center on home A/V products, DJ equipment and cable TV set-top boxes.

In the car electronics area, Pioneer and Mitsubishi Electric have agreed to jointly develop technology for car navigation systems and car A/V products. The two companies have mutually used certain car navigation software technologies since 2002.

Pioneer has also signed an agreement with Shanghai Automotive Industry to establish a joint venture specializing in the development and sale of intelligent transport systems and provision related services as well as the development and sales of car A/V products and car navigation systems.

By fiscal 2012, when Pioneer is projecting it will be in a second year of profitability, it said car electronics sales should be $3.2 billion and operating income should be $155 million, with 45 percent of sales on the OEM side.

Pioneer projected home electronics sales for fiscal 2012 at $754.8 million, with operating income to be $31 million.