Pioneer Pulling Out of the Plasma Industry

SefacHotRodder · Feb 13, 2009

From today's WSJ

Pioneer Unplugs Its TV Business
Electronics Maker to Close Division, Shed Another 10,000 Jobs as It Grapples With a Sharp Decline in Sales

By DAISUKE WAKABAYASHI

TOKYO -- Pioneer Corp. said it plans to exit its money-losing television business and cut thousands of jobs, the latest example of Japan's flagship electronics manufacturers trying to cope with stagnant consumer demand and the strong yen.

Crippled by a sharp decline in sales and intense price competition with larger rivals, Pioneer said Thursday that it would withdraw from the plasma-display business by March 2010. Pioneer already has cut nearly 10,000 full-time and temporary jobs and said it plans to reduce its staff by an additional 10,000 workers.
[Pioneer and tv sector] European Pressphoto Agency

Pioneerwent after the high end of the market for plasma-display TVs, amove that has backfired in the recession.

Pioneer warned that its net loss for the year will be bigger than previously expected. It now sees a loss of 130 billion yen ($1.44 billion) for its fiscal year ending March, compared with an earlier projection for a loss of 78 billion yen. The company also expects to post a loss in the coming fiscal year because of restructuring charges.

After burning through about 40% of its cash and tripling its net borrowings in the October-December quarter, Pioneer said it is considering financial "partnerships."

Pioneer joins a long list of Japanese manufacturers, particularly in the electronics and auto industries, to slash earnings forecasts and announce layoffs and restructuring measures. Japanese exporters are also grappling with a strong yen that eats into overseas sales.

The news from Pioneer comes before Japan is set to announce gross-domestic-product figures for the October-December quarter Monday. Economists expect Japan's GDP to have shrunk by more than 10%, a sharper rate of decline than is expected from other major economies.

While Japan has largely avoided the housing bubble and credit losses weighing on the U.S. and Europe, its economy is paying the price for its reliance on its manufacturing industry.

Japan is especially exposed to a global economic slowdown, according to Dresdner Kleinwort strategist Peter Tasker, because it specializes in making high-end products such as expensive flat-panel televisions and luxury automobiles -- nonessential purchases that can be postponed.

High-end goods like luxury cars and pricey televisions tend to generate fat profit margins, while mass-market products deliver more modest returns.

Furthermore, demand for advanced capital equipment used in factories, another staple of Japanese manufacturers, isn't needed at a time when companies are slashing production.

Earlier this week, Nissan Motor Co. announced plans to cut 20,000 jobs and forecast an annual net loss of 265 billion yen in the year ending March, the company's first loss since Chief Executive Carlos Ghosn took the helm in 1999 and led Nissan's revival from the brink of collapse.

Pioneer's problems have been exacerbated because it decided to go after the high end of the television market in recent years after failing to keep pace with relentless price cuts from competitors.

It limited its plasma-display televisions to 50-inch and 60-inch models and charged a premium compared with other manufacturers. Meanwhile, it tried to cut costs by not making its own plasma-display panels and opting to buy panels from Panasonic Corp.

The company expects plasma-TV shipments to fall to 290,000 units in its current fiscal year, down from 460,000 units last year. In addition, it is shelving a plan to start making LCD televisions using panels procured from Sharp Corp.

"Even now, we would like to continue in the plasma-display business if we could," said Pioneer President Susumu Kotani at a news conference. "We looked into many options, but sadly this is the outcome."

Pioneer said it is in talks with Sharp, which owns 15% of Pioneer, to create a joint venture for its DVD businesses. It plans to close about 30% of its production companies and will sell idle assets and curb capital spending.

For the third quarter ended Dec. 31, Pioneer swung to a net loss of 26.1 billion yen from a profit of 1.7 billion yen a year earlier. Revenue dropped 38% to 131.2 billion yen.
—John Murphy and Yuka Hayashi contributed to this article.
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I had no idea Pioneer sourced their panels from Panasonic. Makes me feel good about my Panasonic plasma

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