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Last updated: November 21, 2005 5:35 pm

Pioneer chiefs pay price for woes

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The woes of Japan’s consumer electronics sector were highlighted on Monday as Pioneer said its president and chairman would resign over the group’s poor performance and Moody’s downgraded its struggling peer, Sanyo.

Pioneer said Kaneo Ito, its president, and Kanya Matsumoto, chairman, would step down to take responsibility for the group’s disappointing performance.

Tamihiko Sudo, company’s vice-president, credited with building up the profitable car electronics business, takes over as president in January.

The electronics group also said it would unveil a restructuring programme aimed at returning to profitability on December 8.

Pioneer denied it planned to slim down its struggling home electronics businesses and declined to confirm reports that it would cut its workforce by 10 per cent and consolidate manufacturing.

The plight of Pioneer, which reported a Y16bn (US$135m) operating loss in the first half and said it would report a record net loss of Y24bn for the year, highlights the speed of change in the electronics sector.

Last week, Sanyo said its full-year losses would be much larger than previously forecast and said it was seeking to raise Y200bn to Y300bn in new funds to boost its capital base.

Moody’s yesterday responded by cutting Sanyo’s long-term debt rating one level to Baa2, two levels above junk, and put it on review for further possible cuts. Standard & Poor’s downgraded Sanyo earlier this month.

Although Pioneer’s Mr Ito said the company planned to focus on car electronics, he damped expectations that the group was poised to pull out of loss-making electronics businesses.

“We have no intention of shrinking [the home electronics business],” he said.

Mr Ito admitted that Pioneer had not been quick enough to respond to the challenging market environment. But he said: “I am confident that our [strategic] direction was not mistaken.”

In particular, Mr Ito and Mr Sudo denied Pioneer planned to pull out of or shrink the PDP operations, which have been a major drain on the group.

He conceded that “NEC’s PDP business has become a burden because at this point we are not getting any OEM business [to supply third parties with panels] at all.”

But he said PDP technology still had tremendous potential.

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