Johnson Controls Inc. has finally carried out its vow to exit the automotive interiors market.
The company announced Sunday 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 the Sunday statement, 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.”
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