Johnson Controls is the world’s largest automotive seat maker, but CEO Alex Molinaroli is trying to refocus the company on its other product lines -- namely batteries and energy management for buildings.
The company first disclosed plans to “explore strategic options” for the auto businesses last month. In a June 10 interview, Molinaroli told Automotive News that he had two reasons for doing so.
The auto industry is susceptible to booms and busts, he noted. “The cyclicality is not something that we particularly like, and it drives some of our decisions,” Molinaroli said.
The seating business, which had $17.5 billion in 2014 revenue, also requires major capital investments and Johnson Controls preferred to invest in other product lines.
The seating unit “competes well and does well,” Molinaroli said at the time. “To continue to be a leader, they will need a source of capital.”
To prepare for the spinoff, the seating operation will launch a cost-cutting campaign.
The company already had solved some of the automotive unit’s knottiest problems.
The biggest headache was the interior trim operation, which produces door panels, instrument panels and consoles. Johnson Controls struggled to make money in this segment, which was notorious for thin profit margins and price wars.
Last year, Johnson Controls combined its interior trim unit into a venture with Yanfeng Automotive Trim Systems Co. of Shanghai. JCI holds a 30 percent stake in the partnership, which generated $4.5 billion in revenue for JCI last year.
Johnson Controls’ remaining seat operation has some strengths to build upon. The company dominates China’s automotive seat market with a 43 percent share, and it announced plans in May to open six new plants.
By 2017, the company expects to have 72 factories in China producing seats and interior trim.