Johnson Controls wants to leave automotive seating business

Thursday, Jun 11, 2015

Johnson Controls Inc wants to exit the automotive seating and interiors businesses to focus on its higher-margin building efficiency and automotive battery operations, the company said on Wednesday.

Shares of Johnson Controls were up 4.4 percent at $53.84 in afternoon trading. The stock has risen about 11 percent since the start of the year.

JCI, whose customers include most major automakers, said its options included a spinoff, divestiture, joint venture or sale of its seating business in pieces.

Automotive seating at $17.53 billion and automotive interiors at $4.5 billion accounted for about 51 percent of JCI's $42.83 billion revenue in fiscal 2014. About $10.1 billion of combined seating and interiors revenue came from North America, $9.5 billion from Europe and $2.3 billion from Asia.

RBC Capital Markets analyst Joseph Spak estimated the value of the seating business at about $7.3 billion. It had a 5 percent profit margin in the last fiscal year, compared with 11.8 percent from the building efficiency business and 9 percent from automotive batteries.

JCI's automotive business reported 1 percent growth in revenue, excluding the impact of the strong dollar, in the quarter ended March 31.

On a call with Wall Street analysts, JCI Chief Executive Officer Alex Molinaroli said he preferred to sell the whole seating business to a single buyer, but if need be, it could be sold piecemeal.

JCI spokesman Fraser Engerman said the company had no particular buyer in mind.

The interiors business is to be part of a previously announced joint venture with China's SAIC Motor Corp unit Yanfeng Automotive Trim Systems Co that Engerman said he expected to close this summer.

However, JCI now is looking to sell its 30 percent stake in that venture, and the buyer might be different from the one for its seating business, Engerman said.

The building efficiency business, which includes heating, ventilating and air conditioning systems, contributed 33 percent to total sales last year, while automotive batteries accounted for 15 percent.

"Our battery business I see as a strong platform for us to continue to grow beyond what we do today," Molinaroli said on the call.