Give credit to Johnson Controls for pulling the plug on part of its interiors operation.
Last week the company sold its headliners and sun visors unit to Atlas Holdings, a private investment firm based in Greenwich, Conn.
The deal allows Johnson Controls to focus more tightly on its strengths: batteries and seats.
But the sale offers worrisome hints that the auto industry's interiors sector -- which includes headliners, instrument panels, door panels and the like -- remains a financial black hole.
Here's why: Johnson Controls did not sell to a strategic buyer, a company such as Magna, IAC or Faurecia with a major presence in that segment.
Strategic buyers are in it for the long haul, and they have long relationships with their customers. By contrast, private equity firms often buy distressed companies, clean them up and flip them in a few years.
Will Johnson Controls find a buyer for the remainder of its $4.2 billion interiors unit, which also produces instrument panels, consoles and door panels? Stay tuned.
In any event, it will take more than the Atlas deal to repair a dysfunctional interiors industry.
Certain products such as turbochargers, wire harnesses, airbags and seats are dominated by a small number of global suppliers. Those companies can invest in technology and command good margins.
But it doesn't take deep pockets or sophisticated engineering to make a plastic storage bin. All you need are injection molds, an empty factory and a customer that wants to pinch pennies.
Beda Bolzenius, chief of Johnson Controls' seating operation, summed up the situation in January in an interview with Automotive News.
"You still need to defend yourself against [suppliers] who are trying to push into the market," Bolzenius said. "That business is totally broken. The stress is unbelievable."
Yes, some suppliers are trying to consolidate this industry -- most notably International Automotive Components Group, a company that was formed by Wall Street billionaire investor Wilbur Ross in 2007.
Ross successfully consolidated the steel industry, but the automotive interiors segment has more manufacturers than the steel business.
And key suppliers previously tried to consolidate the interiors segment, without success.
In the 1990s, Johnson Controls and Lear snapped up a number of suppliers in a bid to reinvent themselves as producers of complete interiors -- headliners, seats, carpeting, instrument panels, door panels.
It was during this feeding frenzy that Johnson Controls picked up Prince Automotive in 1996, a Holland, Mich., company that more than doubled Johnson Controls' share of the North American market for headliners.
By producing everything, Lear and Johnson Controls could ensure that the hundreds of plastic parts, chrome, wood trim, cloth and leather would present a unified look.
But automakers didn't want to surrender control of a vehicle cockpit to one supplier.
Lear eventually shed its interiors operation, and now Johnson Controls is following suit.
Automakers can help the segment with minor assists, such as ending last-minute design changes for their cockpits. But the real medicine is consolidation.
"If we can agree to certain rules in the game -- if there is a certain consolidation in the number of players -- [interiors] can be a good business," Bolzenius said. "But we cannot continue running it the way we do today."
You can reach David Sedgwick at firstname.lastname@example.org