Johnson Controls to spin off auto parts business
11 Jun 2015
Johnson Controls Inc, among the largest US auto suppliers and a major force in Michigan, is spinning off its auto business, indicating that the auto parts business might be going through a consolidation.
The company, which is based in Milawaukee, remains a major parts source to Detroit's Big Three auto companies and has a huge presence in the state. The company's automotive division is a big employer in Michigan - with facilities in Detroit, Lansing, Monroe, Battle Creek, Port Huron, Warren, Holland and Highland Park and a tech center in Plymouth.
''I'd love to stay in the automotive business,'' Alex Molinaroli, chairman and CEO of Johnson Controls, told CNBC. However, he added the company would add other businesses, including energy storage and building trades that he thought were undervalued. Johnson Controls is the maker of York airconditioners.
Molinaroli added, that by selling the auto business, it would be able to get enough investment to thrive. He added it would also allow for a higher valuation for its business, especially its batteries business. Another issue was the cyclical nature of the auto business - even though auto sales had risen for six consecutive years.
The company's auto business contributed just over a half of its revenue.
On an investor call, Johnson Controls said, it could opt to sell its automotive business in pieces, spin off the business as separate company, sell a majority stake as a joint venture, or divest the business as a whole. The company's was inclined to not sell the business in pieces.
Company officials said there was no specific timetable for the completion of a possible sale or spinoff.
The company's stock, which traded on the New York Stock Exchange as JCI, shot 3.9 per cent in heavy trading yesterday, closing at $53.57.
Johnson Controls' auto business operated 240 plants worldwide and plants in automotive seating, overhead systems, floor consoles, door panels and instrument panels.
Over the years, it had acquired Michigan suppliers or plants, buying Holland's Prince Automotive in 1996, in a $1.35 billion cash deal, with which it emerged as the world's largest automotive interior parts supplier. It also bought Visteon's Highland Park plant.