JC plans spinoff of automotive interiors unit
Johnson Controls Inc. is spinning off its automotive-interiors unit, which generates more than half of its revenue.
Bruce McDonald, currently vice chairman and executive vice president of Johnson Controls, will take on the chairman and chief executive officer roles for the new company. The transaction, creating a new publicly traded company with more than $20 billion in annual revenue, is expected to close in about 12 months, the Milwaukee-based company said in a statement.
The move separates one of the biggest makers of car seats and other interior components from an otherwise unrelated business helping companies manage use of energy and other resources. Johnson Controls will also keep its unit that makes automotive batteries. The auto-interiors business generates slimmer profit margins than the other units.
“This is a great opportunity for our Automotive Experience business to further its position as the global leader in automotive seating and interiors,” CEO Alex Molinaroli said in a statement. “At the same time, Johnson Controls will move forward with our multi-industrial strategies and make investments in our core growth platforms around buildings and energy storage.”
The automotive unit reported income from continuing operations in the third quarter rose 19 percent to $342 million. It has longstanding relations with automakers, an established position in China, and strong cash flow, Johnson Controls said. The unit is developing a cost-savings program in preparation for the spinoff, according to the statement.
“This is traditionally a lower-margin business and its cyclicality requires a lot of cash,” said Sanjeev Varma, managing director of Teneo Capital. “The rest of the company is a higher-margin business, but that’s been diluted” by the interiors unit.