Pioneer Gets Last Minute Bailout

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Pioneer booth at CES

Pioneer Corp. received a bailout of about $540 million from Baring Private Equity Asia, just in time to help it pay back loans due this month.

The deal is not yet legally binding, although Pioneer hopes to finalize it by October, reported Bloomberg late Tuesday.

“Today is the first step toward a Pioneer reborn,” Chief Executive Officer Koichi Moriya said at a conference in Tokyo, reported Bloomberg.

“We are working as one to clinch the official contract by the end of October and come up with a restructuring plan. In five to seven years we can be growing again,” added Moriya.

Reuters quoted market analyst Masayuki Otani of Securities Japan as stating, “Pioneer’s fate depends on whether it can expand in next-generation car navigation systems for self-driving cars, and the Hong Kong fund is apparently seeing the potential there.”

But he cautioned there is a lot of competition in that space with leading automotive component suppliers.

The cost of developing new technology has climbed as competitors such as Panasonic and Bosch have “poured money into next generation cockpits for cars that make driving safer and luxurious, edging out cash-strapped companies like Pioneer,” said Reuters.

Also, Samsung’s purchase of Harman has beefed up Harman’s competitive edge.

Pioneer bet large on car navigation in the last few years, selling off its other consumer electronics businesses to focus on the automotive space, mainly OEM car navigation.

Last month, Pioneer admitted it was having trouble remaining a “going concern,” able to operate profitably.  It has a September 26 deadline to repay debt of 13.3 billion yen [about $120 million].

Under the deal with Baring, Pioneer will receive a bridge loan to pay down the debt.  Pioneer will make Baring a leading shareholder, issuing around 50 billion to 60 billion yen worth of shares to Baring by the end of December.  Mitsubishi and NTT Docomo are also major shareholders in Pioneer.

Baring is one of Asia’s largest independent investment firms.  Back in 2014, it tried to buy Pioneer’s home electronics business jointly with Onkyo, but the deal fell through.

Pioneer is also betting large on the development of 3D Lidar and digital maps for self-driving cars.

“Self-driving needs maps and we want to be the first in the world to come up with a business model based on our map technology,” Moriya said, according to Bloomberg.

Pioneer Electronics USA did not immediately respond to our request for a comment on the deal.

The company reported a loss last month of $60 million for the April-June quarter, which followed a loss of about $60 million for its fiscal year 2018 that ended in April.

Sources: Bloomberg, Reuters

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5 Comments

  1. so with the new “business partner” they will get rid of people and raise prices. no increase in
    volume in current product is possible. another nakamichi?

  2. Pioneer has probably hurt themselves due to their attitude towards product pricing, allowing uncontrolled sales of their product on the internet. They have overstock of inventory and nobody to sell it too. They should stop trying to flood the market, prevent unauthorized online sales and make their product a more protected which would make it more attractive to retailers to sell with higher profit margins. Looks like Sony and Kenwood will win with a better grasp and control on the industry.

    1. @ Cyrus Ghaznavi: Couldn’t have said it better myself. I carry Sony and Kenwood and would like to carry pioneer, as they make good head-units. When their products are for sale online sometimes cheaper than I can purchase them, it makes no sense economically. As you said, overstock is always a problem too. Last years model is always on amazon cheaper than cost and usually has the same features as the new one. Maybe this will finally end the race to the bottom.

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