TOKYO -- Pioneer has staved off a repayment crisis by securing fresh capital from a Hong Kong-based private-equity firm, but the 80-year-old Japanese electronics maker faces a race against time to turn itself around after years of overinvestment.
Pioneer said Wednesday that it signed a memorandum of understanding with Hong Kong-based Baring Private Equity Asia to sell up to 60 billion yen ($538 million) in shares to the investor. The official agreement will be executed in October.
"Pioneer has a lot of interesting businesses that are set to grow over the next five to 10 years," Shane Predeek, Baring's managing director in Tokyo, said Wednesday.
Baring looks to invest in Pioneer for at least five years. The investment firm was in talks with Pioneer when the company sold its DJ audio business in 2015.
The electronics maker and investment fund agree on seeking growth in autonomous driving, Pioneer CEO Koichi Moriya said. He expects to benefit from Baring's network, as "one company alone cannot build new technology models including autonomous driving."
Predeek said "the digital mapping space is particularly interesting," as it will become more important in the world of autonomous driving. "We want to speed up the development and growth of the Asia mapping business," he said.
The former audio manufacturer's digital mapping space, developed by its wholly owned subsidiary Increment P, now represents the company's "future pillar," Moriya said.
Pioneer should adopt new values by "moving to a new stage from manufacturing to providing solutions for customers, using data and artificial intelligence," Moriya said, though he emphasized that manufacturing remains important.
The Japanese company had struggled to repay a bank loan of 13.3 billion yen by the late September deadline. Pioneer's share price deteriorated to the low 100 yen range after its April-June quarterly earnings report showed a "going concern" warning.
"The root cause" of Pioneer's current struggles involves the large loss in its plasma displays business after the bankruptcy of Lehman Brothers back in 2008, Moriya said. The company has since invested in expanding car navigation systems, but the global trend for connected cars induced unexpectedly high costs.
Serving as an original equipment manufacturer for automakers in particular harmed the company's finances, as OEM requires about seven years for a return on investment, far longer than the two years for commercial sales. "Our forecast for the technological trend and estimate on cash were inaccurate," Moriya said.
Pioneer said last month that it is examining "revision measures in the OEM business" and is "discussing them with some companies including Calsonic Kansei," a Japanese automotive company.
The company declined to disclose information regarding Calsonic Kansei. Moriya said he seeks collaborations with businesses, making decisions "based on what leads to the highest company value for stakeholders."
With little more time allowed for reconstruction with Baring's investment, the company is considering partnerships in wide areas not confined to OEM, Moriya said.
Though selling some of its businesses could have kept Pioneer from being under the investment fund, Moriya insisted that "we need to be patient and move on while protecting what is important to the company." Asked whether the company could lose its brand name amid future partnerships, he replied that "there are many ways" to protecting Pioneer's name.