Johnson Controls plans to spin off automotive business
Johnson Controls Inc., one of the nation’s largest auto suppliers and a major force in Michigan, is spinning off its auto business — another sign that the auto parts business may be going through consolidation.
Milwaukee-based Johnson Controls remains a major parts source to Detroit’s Big Three and has a big 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. But he said the company will focus on its other businesses, including energy storage and building trades that he thinks are undervalued. Johnson Controls makes York air conditioners.
Molinaroli said that by selling the auto business, it will be able to get enough investment to thrive. He thinks it will also allow for a higher valuation for its business, especially its battery business. Another issue is the auto business is cyclical — even though auto sales have risen for six consecutive years.
The company’s auto business represents just over half of its revenue.
Johnson Controls said on an investor call that 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 preference is not be to sell the company in pieces.
Company officials said there is no specific timetable for the completion of a possible sale or spinoff.
The company’s stock, which trades on the New York Stock Exchangeas JCI, soared by 3.9 percent in heavy trading Wednesday, closing at $53.57.
Johnson Controls’ auto business has 240 plants worldwide and plants in automotive seating, overhead systems, floor consoles, door panels and instrument panels.
Over the years, it has acquired Michigan suppliers or plants. In 1996, it bought Holland’s Prince Automotive in a $1.35 billion cash deal, making it the world’s largest automotive interior parts supplier. It also bought Visteon’s Highland Park plant.
Johnson Controls’ auto facilities in Michigan include a 750,000-square-foot campus in Holland with more than 1,000 employees; its Plymouth Technical campus is headquarters of its North American auto business. The campus has over 500,000 square feet of office space and more than 1,000 employees within three buildings.
Citi analyst Itay Michaeli said a spinoff or sale could prompt more consolidation in the seating business — and could be positive for competitors Lear, which is based in Southfield, and Ontario-based Magna.
The state has lost 38,400 jobs in the supplier sector since 2007 and today has 92,200 employees working for auto suppliers.
Last month, German auto supplier ZF Friedrichshafen completed its acquisition of one of the largest U.S. auto suppliers, Livonia-based TRW Automotive Holdings Corp., in a $12.4 billion deal.
Michigan has more auto supplier-related jobs than any state in the U.S., but it suffered brutal losses in the last decade, as hundreds of factories closed and much of the work was shipped to Mexico, China or other low-wage countries.
In 2000, Michigan had 230,000 people working in the auto parts sector — a figure that fell as low as 77,000 in 2009. The sector currently employs 122,000 people in Michigan — up 7,500 jobs over the previous year, according to the Bureau of Labor Statistics.
The United States has about 550,000 auto parts manufacturing jobs — up 150,000 since the recent low of 400,000 in 2009 — but still significantly below the 850,000 people employed in 2002.
dshepardson@detroitnews.com