Auto parts manufacturer Johnson Controls reports $608 million quarterly loss
17 Jan 2009
Auto parts manufacturer Johnson Controls saw its shares plummeting yesterday after reporting its first quarterly loss in 16 years.
The company reported a loss of $608 million, or $1.02 a share, in the three months ended 31 December, a reversal from net income of $235 million, or 39 cents a share, generated in the year-earlier first quarter. The Milwaukee-based company had initially warned of a loss on 16 December.
Johnson Controls, which makes car interiors, seating, batteries and building controls, said it is 30 percent complete in its plans to cut 9,300 jobs. In addition, it is freezing new hiring and salaries, eliminating annual bonuses for executives and considering four-day work week schedules, mostly in the automotive business.
Quarterly sales fell to $7.34 billion from the prior year's $9.48 billion, reflecting lower contributions for all three of its business segments - Automotive Experience, Building Efficiency and Power Solutions. It took $562 million in one-time charges against results for the most recent quarter - a $300 million tax-valuation allowance and $262 million in impairments.
"While we are disappointed to report a loss in the quarter, we are addressing the challenges by improving our cost structure and preserving our liquidity," the company said.
"It became more apparent and evident that the depth and duration of the US economic slowdown and recession was going to be greater than what we had initially expected," Johnson Controls Chief Executive Steve Roell said on a conference call. Chief Operating Officer Keith Wandell added, "Our customers, especially in North America, are almost inevitably going to do some downsizing. We'll have to respond accordingly."
Higher North America systems sales were more than offset by double-digit declines in its North American residential heating business and in business from Europe, Johnson Controls said. Looking ahead, it said it expects to report an overall loss for the second quarter similar in scale to the first quarter's operating loss of 14 cents a share. The company said it's experiencing some global softness in its new-construction markets. Its performance in building efficiency and power solutions is expected to improve, however.
Auto parts suppliers are reeling from tight credit, a housing market slump and a slowing economy, all of which have combined to drive down US auto sales to decade lows. Demand in Europe and Asia has also followed the US into a slump, dealing a further blow to the struggling supply base.
Shares of Johnson Controls fell 5 per cent to close at $16.21 on Friday.
Johnson Controls, Inc. is a company, based in Milwaukee, Wisconsin, USA. It was founded in 1885 by Professor Warren S Johnson, inventor of the first electric room thermostat.
It is a Fortune 500 diversified, multi-industrial company with 140,000 employees in 1,300 locations across six continents. It has achieved consistent growth that includes 61 consecutive years of increased sales, 17 consecutive years of increased earnings, and 33 consecutive years of dividends increases.
Last year, it reported a net income of $1.25 billion on $34.69 billion revenues.