Pioneer Widens Loss Forecast on More Restructuring
Dec 8, 2005
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Electronics maker Pioneer Corp. more than tripled its loss forecast for this financial year as it withdraws from one of its flat-panel display businesses and cuts 600 jobs in Japan. Pioneer is headed for its biggest-ever net loss in the year to March as it is unable to keep up with larger rivals such as Matsushita Electric Industrial Co. and Samsung Electronics Co. in DVD recorders and flat TVs.

The Tokyo-based company had unveiled a restructuring plan in March that would see it cut 2,000 jobs out of its global workforce of about 33,000, and shutter a quarter of its factories. Most of the job cuts were to come from overseas. But its earnings have since worsened due to tumbling prices of DVD recorders and plasma TVs, forcing it to cut its earnings forecasts further, replace its president and take the culturally sensitive move of cutting 6 percent of its workforce in Japan.

Pioneer will try to revive its loss-making home electronics business by creating one group that handles development and production of its plasma display, DVD recorder and home audio business, aiming to eliminate overlap and lower costs.

The group will also focus on selling home theater systems that combine its video equipment, speakers and plasma TVs, and focus on selling high-end DVD recorders while outsourcing production of cheaper models to other firms.

Pioneer boosted its group net loss forecast for 2005 and 2006 to 87 billion yen (approx. U.S. $721.4 million) from 24 billion yen (approx. $199 million), reflecting impairment losses of 32 billion yen (approx. $265.1 million) for reducing production capacity of plasma display panels. The wider loss also reflects 23 billion yen (approx. $190.6 million) related to its decision to not mass-produce active-matrix organic light-emitting diode (OLED) screens, seen as a promising next-generation display, and 11 billion yen (approx. $91.1 million) for an early retirement scheme.

Pioneer recently shut down two of its six production lines for plasma displays, including one at its Kagoshima plant in southern Japan, which it purchased from NEC Corp. last year in its biggest acquisition ever.

Pioneer said those two lines would remain suspended through the next financial year and that it may halt more lines if demand does not recover. It plans to shrink its OEM business and concentrate on selling more of its own plasma TVs. (Reuters)

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