Sale caps series of moves over the last month
Johnson Controls (JCI) plans to sell part of its business to an affiliate of private equity firm Atlas Holdings. The terms of the agreement have not yet been released, although JCI has said it expects the deal to be closed by 30 April. In a statement, JCI said that the sale would "improve the overall competitiveness of our interiors business, improve our profitability and enable us to further strengthen and focus on our core interiors business."
The company indicated in 2013 that it wanted to sell the unprofitable interiors unit, as well as its electronics division. The electronics operations were sold to Gentex and Viseton. The Atlas sale would see JCI retaining the portion of the interior business that makes door panels, instrument panels, and floor consoles; reports indicate the unit generates USD4.2 billion in annual revenue. In an interview with the trade paper in January, the president of JCI’s seating operation said that seats and batteries were the company’s core automotive units, and that the entire interiors industry was unprofitable and that suppliers needed to consolidate. Atlas specialises in turning around distressed companies.
While strategically selling parts of its business, JCI has also invested in several areas, including planning 11 new plants in China , as well as a regional headquarters in Shanghai, a new seat-foam plant in Mexico, and two plants in Serbia. JCI has also grown through selective acquisitions, including the automotive sport and specialty seat businesses of Recaro and 90% of its battery partner, MAC, after earlier buying battery partner Saft.
Meanwhile, JCI has started production of molded polyurethane foam for automotive seats at its new plant in Queretaro (Mexico). The construction of the plant in Queretaro started in March 2013 and was completed in October the same year. The plant, spread on an area of 100,000 square feet, has one foam line. It currently employs 150 people. The company will hire more employees once the plant reaches full capacity, which is expected to happen in another five years. The plant will supply seating foams to OEMs in central Mexico.
JCI has been taking some restructuring actions to boost its profitability amid slowdown in the automotive industry, particularly focusing on pushing efforts to strengthen its seating sector. The new plant in Mexico will help the company mitigate risk associated with slow growth in the European economy. In October 2013, Andreas Eppinger, JCI’s group vice-president for technology management, told Automotive News in an interview that it is focusing on reducing the weight of seats. Also, in January this year, the company developed an automatic seat pre-adjustment system, which allows a driver to adjust the seat automatically depending on his size.
Earlier this month Johnson Controls announced plans to partially close its seating plant in Bochum (Germany) by the end of this year, reports World Socialist Web Site (wsws.org). The partial closure will result in the loss of 220 of 660 jobs at the plant. The company’s decision to partially shut down its German plant comes on the heels of GM’s plans to stop producing vehicles in Bochum by the end of this year. Johnson Controls supplies seats to GM’s Opel vehicles produced at the Bochum plant. Johnson Controls also produces seats for the Ford Fiesta, which is produced at Cologne (Germany).
According to Johnson Controls spokesman Ulrich Andree, 88 contract employees at the first plant will be the first to be impacted by the lay-off. However, the company has said workers from the Bochum plant can apply for 100 jobs at its other German plant located in Saarlouis, some 350 km away, which makes seats for Ford.
Opel is transferring production of the Zafira MPV from Bochum to Rüsselsheim in Germany. According to the report, Johnson Controls weighed the possibility of supplying seats to Opel’s Rüsselsheim plant from Bochum, but the job-cut announcement implies the company has decided otherwise. Opel’s Rüsselsheim plant is some 250 km away from the Bochum plant.
In November 2013, GM announced that it would close Opel’s Bochum plant by end-2014. The plant closure is part of GM’s strategy to restructure its loss-making European business. According to Bloomberg, GM’s European operation had accumulated USD18bn in in losses from 1999 to 2012. The company’s plan to close Bochum plant is expected to impact supply chains in the region and result in the loss of thousands of jobs. Johnson Controls may continue running the Bochum plant to supply seats to the Ford Fiesta produced at that US automaker’s Cologne plant. However, Ford is yet to decide to produce the new Fiesta at Cologne. The company said it would decide later this year whether the new Fiesta will be produced at Cologne from 2017. Ford is currently negotiating with the Cologne work council and IG Metall over concessions by the workers at the plant.
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