Pioneer Corp officially announced structural reform plans to improve its earnings, along with its financial results for the third quarter (October to December 2008) of fiscal 2008.
The company will strive to (1) realign its business portfolio, (2) streamline the business framework of the entire Pioneer Group and (3) improve its financial position.
"(The measures will) entail significant pain for Pioneer to escape this bleak situation, where we have posted a net loss for five quarters in a row, and to once again return to the light," said President Susumu Kotani, explaining the objectives of the structural reforms.
Withdrawal from PDP TV business
Regarding (1), Pioneer announced plans for each of its mainstay home electronics and car electronics businesses.
In the home electronics business, the company will withdraw from the display business including PDP TVs, which has continued to show increased losses, by the end of March 2010. And Pioneer will stop its in-house development of displays. But it will continue to offer after-sales services after the withdrawal.
"It is a heartbreaking decision to quit the business in which Pioneer has been the industry's trailblazer," Kotani said. "But we decided to withdraw from the business because the market is changing far more drastically than we expected and we cannot not expect to improve earnings."
Pioneer has been restructuring its display business since March 2008. And the company was planning to stop manufacturing PDPs and start procuring PDPs from Panasonic Corp and LCD panels from Sharp Corp. These joint business plans will be revoked in accordance with the structural reforms announced this time. Pioneer will continue to procure LCD panels for car navigation systems from Sharp, however.
Pioneer already cut about 5,900 regular employees and 4,000 temporary employees during the period between the end of March and the end of December 2008 in the course of its display business restructuring, the company said.
As for the optical disc business, Kotani said, "I cannot reveal any details about how we cooperate with other companies because they are currently being discussed. But we are now negotiating the establishment of a joint venture with Sharp. We have already reached a basic agreement and entered the final stage of negotiation."
Pioneer is planning to make an announcement regarding the joint venture in the near future, he said.
In accordance with the withdrawal from the display business and the establishment of an optical disc joint venture, the company will shift the focus of its home electronics business to audio equipment, professional audio equipment and CATV-related products from now on.
Reinforcing telematics business
Commenting on the car electronics business, Kotani said, "Pioneer will use the management resources of the display business and leverage its market position and technological expertise to embark on new businesses."
In the near future, Pioneer will enhance its new product lines such as Blu-ray Disc-compatible devices and network-ready products, while reinforcing its telematics business, he said. In the medium term, it aims to develop the telematics business into the core of its car electronics business.
Also, the company is considering compensating for the shrinkage of the markets in Japan, Europe and the US by expanding its consumer product business in BRICs and other emerging countries.
As for the OEM products, Pioneer will vigorously make suggestions to automakers so that they can create new values, introducing network-ready products and high value-added models, Kotani said.
Planning to cut another 10,000 jobs
To streamline the business framework of the entire Pioneer Group, the company will review its production facilities and sales structures. As for production facilities, it will withdraw from the display business and review its car electronics business. In addition, it will integrate production facilities in the speaker business and reduce its 30 production companies around the world by about 30%.
Regarding the sales structures, Pioneer is currently reviewing its sales structures inside and outside Japan and planning to merge or abolish sales bases so that they can match the smaller business scale resulting from the structural reforms to be implemented in the home electronics business. The company said it will also adjust its headquarters and R&D functions to a scale that matches the new business structure.
In addition to about 10,000 employees cut by the end of December 2008, the company is planning to cut about 6,000 regular employees and 4,000 temporary employees on a global basis from the end of December 2008.
To improve its financial position, Pioneer will reduce inventories, accelerate the collection of accounts receivable, curb capital expenditures, sell idle assets and cut the remuneration of directors and employee salaries. Director remuneration has been cut since July 2008. And the basic remuneration will be reduced by 20 to 50% from February 2009 to March 2011. The company will also stop bonuses for directors.