Johnson Controls Inc announced recently it would move to spin off its $22 billion automotive business during the next year and also announced quarterly earnings that mostly followed analyst guidelines.
The company announced its automotive income from continuing operations jumped 19 percent to $342 million during the quarter that ended on June 30 as opposed to the figures posted during the same period a year ago. But the segment’s overall revenue slid 6 percent to $5.4 billion as the dollar continued to gain strength and reduced the value stemming from overseas deliveries. “I think there is a little disappointment with the spin versus a sale,” commented UBS analyst Colin Langan. “But personally, I don’t think it is a big deal either way; only if they sell it, JCI would have gotten a lot of cash.” The automotive division includes automotive seating, overhead systems, floor consoles, door panels and instrument panels. “It is the largest seating supplier in the world,” added Langan. “There are only a handful of people that could come up with that size of the financing to do the deal.” Last month the company announced it was mulling the options to divest its automotive seating and interiors business, seeking a refocused strategy on its higher-earnings yielding building efficiency and automotive battery operations.
Some analysts were caught off guard by the swift decision to have the unit spun off rather than sold to another competitor. Chief Executive Officer Alex Molinaroli commented the rising uncertainty from the decision to transaction the division had been bad news for the company’s customers, especially the ones in China. He added that after discussing with those clients extensively, it became clear a spin off was preferred to the sale process, but the potential for it to be purchased later on has not been abandoned.