Even a big Tier 1 supplier such as Johnson Controls Inc. can't escape the ripple effect of lower vehicle production.
The Milwaukee supplier said July 20 that sales for its interiors business in the quarter that ended June 30 dropped 6 percent, to $4.68 billion. The company also said North American sales fell 8 percent because of falling demand for light trucks.
John Barth had spearheaded expansion of the seat and interiors business before becoming CEO in 2002. And although Barth is bulking up the building efficiency business, Johnson Controls still depends on automotive interiors for about two-thirds of its sales.
On the plus side, Johnson Controls' car battery business is growing, with sales up 33 percent to $886 million in the quarter ended June 30. The company credited the July 2005 acquisition of Delphi Corp.'s battery business for more than $200 million of the sales increase.
Barth, 60, discussed the automotive business with Special Correspondent Dale Buss during a recent visit to Barth's Milwaukee office.
Considering the troubles facing North America's auto industry, what is Johnson Controls doing to buck the trend?
The auto industry is sort of fragile right now. Our goal is to continue to have growth that's significantly beyond how the market is growing. There will be some winners and some losers. So we have to be very careful how we work our way through the significant investments that we make.
But our customer base is the broadest of any supplier. We partner very well. And certainly with the Big 3, with the capabilities that we've put into place and the commitment that we have to help our customers succeed, it's only going to (mean) opportunities for us.
Interiors will continue to be an opportunity for them to differentiate their products - to have more surprise-and-delight features and content that will help them sell their vehicles.
As (our) competition is sort of trying to define what they want to be, we're in an advantageous position going forward. We have a focus on helping our customers succeed. We invest in technology and innovation more than most. That allows us to go in and have things on a different playing field and allows us to have discussions that we otherwise wouldn't have.
You became a big global supplier earlier than most of the competition. How does that help?
We may have anticipated moving into low-cost regions of the world a little earlier than most. So when you look at the footprint we have in Asia or eastern Europe or Mexico, we have a strong position there. In managing our global operations, you need to have a local presence. We have Europeans running our European business and Asians running our Asian business. We've done a good job in investing in leadership all over, as opposed to Americanizing the world.
Talk about the automotive battery business.
We already supply everyone around the world with nickel-metal hydride batteries, including in Europe for commercial-bus applications. And we're developing orders that we have for new (vehicles) that will be in the market in the next two to three years.
We're in a strong position (because of) the partnerships that we have in place - and the fact that we've been a major auto battery supplier. And we're also investing heavily in what will be the long-term future of hybrid technology: lithium-ion batteries.
Minority-owned supplier development seems to be important to Johnson Controls. Why, and how do you demonstrate that?
We are one of just 12 or 15 companies in the United States that purchase more than $1 billion a year from minority suppliers, and that is across all industries. We are the only automotive supplier in that group. Going back seven or eight years, we recognized the importance of minority purchasing to the Big 3. So we set our sights on helping our customers - which we knew, in turn, would help us.
And today we've been rewarded because of the commitment we've put in place and the partnerships we've formed with GM, Ford, DaimlerChrysler, Toyota and Honda.
We have the largest minority-owned joint ventures in place among their suppliers. It was an opportunity we recognized that has been win-win-win.