Johnson Controls Inc, a major global auto supplier, has announced on Wednesday it mulls an exit out of the automotive seating and interiors sectors in a bid to concentrate all its prowess in the higher margin businesses – the building efficiency and auto battery divisions.
JCI, a major auto supplier that counts among its clients most of the important automakers, announced that among options being weighed are a spinoff, a divestiture, a joint venture or the sale of the seating business by pieces. Shares of the company, which have been gaining around eleven percent since the year started, were trading 4.4 percent up at $53.84 in afternoon trading yesterday after the announcement was made. Around 51 percent of JCI’s $42.83 billion revenue in the fiscal year 2014 was made up by the automotive seating and automotive interiors business units, at $17.53 billion and $4.5 billion, respectively. The combined revenue of the two divisions was made at around $10.1 billion in North America, $9.5 billion from Europe and $2.3 billion from Asia. According to analysts, the seating unit could have a value of around $7.3 billion, with an earnings margin of around five percent during the past fiscal year. On the other hand, the profit earnings from the building efficiency business and automotive batteries yielded were of 11.8 percent and 9 percent, respectively.
JCI Chief Executive Officer Alex Molinaroli, discussing the decision on a call with wall Street analysts, said his intention was to sell the entire seating business to a single buyer, though if the need arose they could also deliver it to more than one in pieces. The interiors business meanwhile is part of a previously introduced joint venture with China’s SAIC Motor Corp division Yanfeng Automotive Trim System, a deal expected to be finalized this summer.