Vehicle satellite navigation specialist Pioneer on Tuesday confirmed it would raise JPY2.5bn (US$26m) by issuing shares to Honda Motor to secure funds to turn around its business amid a severe sales slump due to the global economic downturn.
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The struggling electronics maker also said it needs around JPY40bn in additional funds to proceed with its revamp efforts, with president Susumu Kotani admitting that the company is ”preparing” to apply for a new government-backed capital-boosting programme, Kyodo News reported.
Sources last week told the news agency Pioneer was seeking the funding from Honda which was willing to help to ensure supply of navigators for its cars.
While the ministry of economy, trade and industry has yet to detail the programme fully, it is expected to enable large companies to receive investments from the just-privatised Development Bank of Japan, Kyodo said. The programme requires an applicant to submit a plan to improve its earnings in three years.
Pioneer is in the midst of a reform plan announced in February, including 10,000 job cuts in its global workforce and withdrawal from loss-making flat-panel televisions. It will boost cooperation with other companies, close nine of its 30 group manufacturing units and scale back another six in its restructuring efforts.
The company reportedly denied it is studying the possibility of business integration with rivals.
”Even with the enormous pain expected, we have an indomitable resolve to implement our reforms,” Kotani told Kyodo News.
He said Pioneer is shifting its management resources to the car electronics business, including sales of car navigation systems on its own as well as production of branded systems for other companies to sell.
Customer Honda plans further collaboration to develop highly functional navigation systems, the report added.
Honda executive vice president Koichi Kondo said the new investment in Pioneer would help the automaker ”make a strong showing.”
But Kondo told Reuters Honda was not considering further investment in Pioneer.
For fiscal 2008 ended in March, Pioneer now expects a group net loss of JPY129bn and an operating loss of JPY55bn, compared with earlier projected losses of JPY130bn and JPY69bn, respectively, Kyodo said.
