Pioneer Cuts Production of Plasma Panels
Pioneer Corporation, in an effort to turn around its rapidly declining business in the midst of some major competition, will stop making 42″ plasma display panels. The company announced recently that they will be outsourcing production of plasma panels that size and smaller for television sets. At a recent press conference, Tamihiko Sudo, the company’s president said, “The move was regrettable but we had no choice but to do so for the sake of the company’s future.”
This decision came about after Pioneer cut its sales projection for the current fiscal year in half. The fiscal year ends this month, and Pioneer’s sales projection has dropped from 720,000 units to 480,000.
The company has struggled against its rivals such as LG Electronics Inc., Samsung Electronics Co. and Matsushita all year and has accumulated a $145.6 million dollar loss for charges for restructuring its PDP TV business. The previous forecast had been a $58 million dollar profit ““ light years away from the actual results. Despite the prior outlook, the company is in its fourth year of reporting a net loss.
Pioneer now plans to obtain the panels through its rival Matsushita Electric Industrial Company, which makes Panasonic products. The decision to pull out of the business will create a cost for Pioneer of $184.5 million; however, this is a one-time cost and Pioneer should return to profit by March 2010.
Pioneer currently manufactures panels for televisions that are 42 to 60 inches at plants in Yamanashi, Shizouka and Kagoshima, but those plants will soon be restructured. The company was the first to introduce the 50 inch plasma in 1997 and until 2000, held the largest market share.
In 2004, the company bought the PDP manufacturing operations of NEC Corp, and problems began. Due to the fact that NEC was a supplier to Sony Corp, Pioneer was saddled with overcapacity among declining prices. Due to the company’s new decision, the focus of Pioneer will be to make panels larger than 50 inches at other plants. For the company, it is a smart step further away from vertical integration.
The reason Pioneer’s approach to the industry failed seems to be that consumers were not willing to pay a premium for these high-priced projects. Sudo says that he regrets his delay in setting company strategy as well as his failure to manage the company more quickly. Pioneer may have had to learn the hard way, but the faster the company removes itself from the business, the less of a financial burden they have.
With an agreement with Matsushita, Pioneer will be able to cut research and development costs and seek higher volume sales. This arrangement will benefit both companies.
—
On the Net: