Financials

Johnson Controls announces plan to spin off automotive business

Johnson Controls Inc. will break up into two separate publicly traded companies, announcing plans to spin off its automotive business. The automotive business reported USD 22 billion in revenue in 2014 or more than half the company’s total sales.

The company, based in suburban Milwaukee, Wisc., U.S.A., announced last month that it was considering a sale or spinoff of the automotive seating business, as part of a move to help it focus on growth prospects for its building and battery businesses.

The move was announced as Johnson Controls reported quarterly earnings last week that met analysts’ forecasts. The announcement came soon after the company announced a strategic review of its automotive business. Chairman Alex Molinaroli said Johnson Controls needed to provide certainty to its customers and its partners, particularly its customers and joint venture partners in the world’s largest car market, China.

It’s still possible the automotive piece could be sold, but the company had discussions in recent weeks with potential buyers before deciding to move forward with the spinoff, Molinaroli said.

Johnson’s automotive business is the world’s largest maker of car seats, with a leading market share in China. The battery business is the global leader in the production of lead acid batteries, and is seeing strong demand for its advanced lead acid batteries that are used to help cars increase their gas mileage and meet global fuel economy and climate change mandates.

No decisions have been made yet on where the new company, still to be named, will be headquartered. Johnson Controls’ current headquarters has some corporate staff members that focus on the automotive business, but the automotive business’ North America divisional headquarters is in Plymouth, Mich, U.S.A. The automotive business’ European headquarters is based in Burscheid, Germany. Beda Bolzenius, the automotive division’s president-to-be, is based in Shanghai, which could be another possible location.

Johnson Controls is currently building what it calls a “second corporate headquarters” in Shanghai, to symbolize the importance of the rapidly developing economy in the company’s strategic growth plans.

In preparation for the move that will be completed in about a year, the company is launching “a comprehensive cost savings program” that will encompass both sides of the corporation.

According to the company, the new supplier “will benefit from strong existing relationships with customers, well established positions in growth markets including China, and will generate strong cash flow.”

The remaining Johnson Controls will be in a position to make acquisitions to expand its offerings in both the energy storage business and the building business, Molinaroli said.

Molinaroli will continue to lead Johnson Controls, while vice chairman Bruce McDonald has been named chairman and chief executive of the new company. Bolzenius, a Johnson Controls vice chairman who currently runs the automotive business from Shanghai, will become president and chief operating officer of the automotive business.

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