Johnson Controls to spin off $22-bn automotive business within a year

Johnson Controls Inc said yesterday that it planned to spin off its $22 billion automotive business in the next 12 months and reported quarterly earnings that roughly lined up with analysts' expectations.

Shares of the company slumped 4.5 per cent to $44.24.

Reuters quoted UBS analyst Colin Langan, "I think there is a little disappointment with the spin versus a sale. But personally, I don't think it is a big deal either way; only if they sell it, JCI would have gotten a lot of cash."

According to Johnson Controls, automotive income from continuing operations was up 19 per cent to $342 million in the third quarter ended 30 June from a year earlier. The segment's revenue was down 6 per cent to $5.4 billion as the stronger dollar eroded value of overseas sales.

The business included automotive seating, overhead systems, floor consoles, door panels and instrument panels.

"It is the largest seating supplier in the world," Langan said. "There are only a handful of people that could come up with that size of the financing to do the deal."

Johnson Controls said last month it was exploring options to exit the automotive seating and interiors business to focus on its higher-margin building efficiency and automotive battery operations.

The spin off would come as part of CEO Alex Molinaroli's push to move away from the automotive industry and redefine the Milwaukee-based company as a ''multi-industrial''. 

The company does not provide details of its moulding, but at the time it took over manufacturing in 2008 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 had also recently declared a quarterly dividend, which would be paid on Friday, 2nd October.

The company had a market cap of $30,849 million and there were 654,831,000 shares in outstanding. Excluding businesses being sold as also restructuring costs, the company said its operating earnings were 91 cents a share, up 15 per cent from 76 cent past year.

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