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July 24, 2015 02:00 AM

JCI plans spin-off of auto seating, interiors units

David Sedgwick
AUTOMOTIVE NEWS
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    Johnson Controls Inc.
    Bruce McDonald, now vice chairman and executive vice president of JCI, will become chairman and CEO of the auto unit that will be spun off by the company.

    Johnson Controls Inc. plans to spin off its automotive seating and interiors units, which will operate as an independent, publicly traded company.

    Bruce McDonald, Johnson Controls' vice chairman and executive vice president, will become chairman and CEO of the new supplier. Beda Bolzenius, a vice president, will become president and chief operating officer.

    The transaction, creating a new publicly traded company whose parts had $22 billion in sales last year, is expected to close in about 12 months, the Glendale, Wis.-based company said July 24.

    Johnson Controls is the world's largest automotive seat maker, but CEO Alex Molinaroli is trying to refocus the company on its other product lines — namely batteries and energy management for buildings.

    The bulk of the company's plastics operations are in the Automotive Experience division. JCI does not provide details on its molding, but in 2008, when it took over manufacturing from former bankrupt supplier Plastech Engineered Products Inc., it had an estimated $1.2 billion plastics business, most of it in injection molding.

    The company first disclosed plans to “explore strategic options” for the auto businesses last month. In a June 10 interview, Molinaroli told Automotive News that he had two reasons for doing so.

    The auto industry is susceptible to booms and busts, he noted.

    “The cyclicality is not something that we particularly like, and it drives some of our decisions,” Molinaroli said.

    The seating business, which had $17.5 billion in 2014 sales, also requires major capital investments, and Johnson Controls preferred to invest in other product lines.

    The seating unit “competes well and does well,” Molinaroli said at the time. “To continue to be a leader, they will need a source of capital.”

    To prepare for the spinoff, the seating operation will launch a cost-cutting campaign.

    Evolving business

    Johnson Controls Inc.
    Johnson Controls Inc. debuted this concept interior at the North American International Auto Show in January, showing its capabilities in seating and trim.

    The company already had solved some of the automotive unit's knottiest problems.

    The biggest headache was the interior trim operation, which produces door panels, instrument panels and consoles. Johnson Controls struggled to make money in this segment, which was notorious for thin profit margins and price wars.

    Last year, Johnson Controls combined its interior trim unit into a venture with Yanfeng Automotive Trim Systems Co. of Shanghai. JCI holds a 30 percent stake in the partnership, called Yanfeng Automotive Interiors, which generated $4.5 billion in revenue for JCI last year.

    Johnson Controls' remaining seating operation has some strengths to build upon. The company dominates China's automotive seat market with a 43 percent share, and it announced plans in May to open six new plants.

    By 2017, the company expects to have 72 factories in China producing seats and interior trim.

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