GLENDALE, WIS. (Updated Dec. 19, 12:15 p.m. ET) — Johnson Controls Inc. will invest in another 10 auto seating plants in China as part of a long-term business strategy which continues to expect growth in China and slow expansion in the North American market to offset expected slowdown in Europe.
JCI will also expand its footprint for interiors and electronics in the southern
Speaking during a meeting with investors Dec. 19, JCI CEO Steve Roell said he and the company remain “bullish” on
“We think it will continue to prosper, though not as fast as it has been,” he said.
The Glendale, Wis.-based company does $5 billion in business in
Although the Chinese auto industry has slowed significantly, he said it is still the largest growth potential globally and JCI has plans to build another 10 facilities during the next five years. He did not discuss any details for those new sites.
That means that essentially JCI will be launching a new seating plant every 18 months in
“Ninety-nine percent of what we do in
Analysts with Baird Equity Research said in a written report on JCI's outlook that it sees Johnson Controls “outpacing the market due to meaningful
JCI has also invested in additional capacity to produce individual components for seating, including more capability for metal parts. Roell said that reflects changes within the auto industry in which automakers are now opting to sometimes award contracts for individual parts, rather than the complete seat.
“They're directing the trim, the foam the metal,” he said.
The company also developed a leadership team that could work with automakers to sell and source those individual parts in addition to complete programs.
“Now we can compete with foam, with cut-and-sew, with metals,” Roell said.
That ability to produce both complete seats and individual components will also expand into
In 2012, JCI developed a separate business unit for its electronics and auto interiors group – separating it from seating – to reflect the different dynamics of those two groups. Bill Jackson is president of electronics and interiors while Bolzenius, formerly president of the Automotive Experience unit, retains the seating group.
The change comes because interiors and electronics is more capital expenditure intensive than seating and interiors are more likely to see an overhaul during a mid-cycle upgrade to an existing vehicle line than seating is, Roell said.
JCI has an automotive backlog of $3.7 billion in business for 2013 to 2015, which is about even with its previous backlog for the 2012 to 2014 time period. For 2013, it expects its seating business to gain 2 percent over 2012, reflecting growth in North America and
“We could talk about Europe all day, but I think all of you know about
Roell said the company expects European production could decrease by up to double digit percentages in 2013. That will not only impact JCI's production, it will likely bring unexpected disruptions throughout the supply base as small suppliers shut down, leading to parts issues for others.
“Our thorn is Europe,”
European automakers are already discussing plans to shut down production, including General Motors Co.'s announcement earlier in December to halt production in
JCI will have to adjust its just-in-time operations in
“We need to be smart and selective about how [we cut] to avoid significant disruptions,” he said. “We will be a lot more careful on how to cut into operations and how to cut into our critical resources. We will not go for launch teams, for engineering capacities. We will protect these critical resources better than we did during the downturn in 2008 and 2009.”
The interiors and electronics group made money everywhere but Europe in 2012,
Johnson Controls is also in the process of restructuring where needed in