JCI divests control of interiors business to China's Yanfeng with joint venture

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Johnson Controls Inc. has finally carried out its vow to exit the automotive interiors market.

The company announced today that it will spin off its $3 billion interiors unit -- which produces door panels, instrument panels and consoles -- into a joint venture with Yanfeng Automotive Trim Systems Co. of Shanghai.

JCI will hold a 30 percent stake in the joint venture, while Yanfeng will maintain control with a 70 percent stake.

The new partnership -- as yet unnamed -- will be headquartered in Shanghai and have global sales of $7.5 billion and an estimated 15 percent share of the global automotive interiors market.

In a statement today, JCI said the noncash transaction will be comprised of asset contributions by the two longtime partners. The deal is subject to limited conditions and is expected to close in the first half of calendar year 2015, JCI said.

“Joining our two interiors businesses is a natural extension of our already very successful existing partnership with Yanfeng in automotive seating, which has flourished over the past 15 years,"  Alex Molinaroli, Johnson Controls chairman and CEO, said in a statement. "It creates a strong combined company with a market leading position and a foundation for sustained global growth.”

The agreement will exclude certain facilities in both Yanfeng and Johnson Controls’ existing networks.

In an interview with Automotive News, Molinaroli said that the company may retain control of a few plants if customers request it.

“We’ve got to talk to our customers over the next nine months and understand what’s best for them,” Molinaroli said. “We’ll just make sure that everybody is comfortable with the deal.”

The spinoff will leave Johnson Controls’ automotive division with battery and seating operations, which dominate their segments.

Yet the new partnership will allow Johnson Controls to grab a bigger share of China’s fast-growing automotive market, since Yanfeng is well connected.



The company is owned by the in-house supplier to Shanghai Automotive Industry Corp., China’s largest state-owned automaker.



Yanfeng also inherited the product expertise and global reach of its former partner, Visteon Corp., which sold its 50 percent stake in Yanfeng to its China partner last August.

The new joint venture will have a niche in China. Moreover, Molinaroli expects the joint venture will be profitable, with an estimated net profit margin of 6 percent.

That’s because Johnson Controls already has trimmed money-losing operations -- particularly in Europe.

Yanfeng also has a portfolio of global customers, plus a well-equipped r&d center in Shanghai. With an estimated market share of 15 percent, Yanfeng can pitch itself as a global player.

The new venture “will be able to serve our global customers better than any of our competitors,” Molinaroli said. “This is a business that will prosper.”

PRESS RELEASE:

Johnson Controls and SAIC's Yanfeng Automotive Trim Systems Co., Ltd. form global joint venture for automotive interiors

SHANGHAI â€" May 19, 2014 â€" Johnson Controls, (NYSE: JCI), a global multi-industrial company, and Yanfeng Automotive Trim Systems Co., Ltd., a wholly owned subsidiary of Huayu Automotive Systems Co., Ltd. (HASCO), the component group of Shanghai Automotive Industry Corporation (SAIC), today announced the signing of a definitive agreement to form a global automotive interiors joint venture.

The agreement is a noncash transaction comprised of asset contributions by the two parties that will create the largest automotive interiors company in the world with revenues of approximately $7.5 billion. Yanfeng will hold the majority 70 percent share in the joint venture, and Johnson Controls will have a 30 percent share.

“Joining our two interiors businesses is a natural extension of our already very successful existing partnership with Yanfeng in automotive seating, which has flourished over the past 15 years. It creates a strong combined company with a market leading position and a foundation for sustained global growth,” said Alex Molinaroli, Johnson Controls chairman and chief executive officer. “This also aligns with Johnson Controls’ corporate commitment to China, which is increasingly becoming a major center for the global automotive industry.”

The new company will be headquartered in Shanghai with global engineering, development and customer centers in the United States, Europe, China, Japan and India. The product portfolio will include instrument panels and cockpit systems, door panels and floor consoles.

The transaction is subject to limited conditions and is expected to close in the first half of calendar year 2015.

The agreement excludes certain facilities in both Yanfeng and Johnson Controls’ existing networks. Johnson Controls will continue to operate those within its network as part of Johnson Controls’ Automotive Experience business. Johnson Controls will host an analyst call Monday

May 19 at 3 p.m. CDT. It is available via webcast in the investor section of http://www.johnsoncontrols.com/investors.

About Johnson Controls:

Johnson Controls is a global diversified technology and industrial leader serving customers in more than 150 countries. Our 170,000 employees create quality products, services and solutions to optimize energy and operational efficiencies of buildings; lead-acid automotive batteries and advanced batteries for hybrid and electric vehicles; and interior systems for automobiles. Our commitment to sustainability dates back to our roots in 1885, with the invention of the first electric room thermostat. Through our growth strategies and disciplined focus on operational execution, we are committed to delivering value to shareholders and making our customers successful. In 2014, Corporate Responsibility Magazine recognized Johnson Controls as the #12 company in its annual “100 Best Corporate Citizens” list. For additional information, please visit http://www.johnsoncontrols.com.

You can reach David Sedgwick at dsedgwick@crain.com.

http://www.autonews.com/article/20140518/OEM10/140519889/jci-divests-control-of-interiors-business-to-chinas-yanfeng-with