Embattled Pioneer Corp. said Tuesday it will receive ¥2.5 billion from Honda Motor Co. to prop up its worsening capital base and help rebuild its car electronics business.

Under the agreement, Pioneer will raise the funds through a third-party allocation of new shares to the automaker by the end of June. This will give Honda a 6.54 percent stake, making it Pioneer’s second-largest shareholder.

Sharp Corp., its biggest stakeholder, had a 14.28 percent stake as of Sept. 30. The allocation to Honda will dilute that to 13.35 percent.

“We are going to make car electronics our core business because it has high technology, quality and brand power,” Pioneer President Susumu Kotani told a news conference.

Pioneer said it expected to log a ¥15 billion operating profit from car electronics in business 2011 because of sales growth in emerging markets. The company has forecast a ¥12.5 operating loss for business 2008.

The funds will be spent on research and development to reinforce its car electronics business, Pioneer said in a statement. Honda is one of Pioneer’s major business partners, along with Toyota Motor Corp., to which it supplies car audio and navigation systems.

Kotani, however, warned that the company still needs to raise another ¥40 billion in the next three years and that it is mulling new partnerships to that end, without elaborating.

Pioneer also said it is considering applying for the state-sponsored corporate revitalization program through the Development Bank of Japan.

“We are preparing the application,” Kotani said. Pioneer reportedly hopes to receive ¥30 billion.

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