Johnson Controls Inc. took the first steps to dissolve its joint venture with French battery producer Saft Groupe SA, due to a "fundamental disagreement" about the direction and scope of the 5-year relationship, but Saft said it would fight the move.
Johnson Controls said it wanted to widen the partnership to have more flexibility and access to alternative technologies. Saft said it could consider "some adjustments" to the joint venture, but would stop short of expanding the partnership to lithium-ion markets where Saft has a strong presence.
"Saft believes that, whilst some adjustments in the scope of JCS could be considered, it would not be in its strategic interest to address through JCS certain lithium-ion markets where Saft is already strongly positioned and enjoys a rapid development," the company said in the statement.
Johnson Controls filed in Delaware's Court of Chancery to end the partnership in order to pursue other technologies outside the company's agreement with Saft to produce advanced lithium-ion batteries, Johnson Controls president Alex Molinaroli said in a statement.
"Johnson Controls and Saft have a fundamental disagreement about the future direction and appropriate scope of the joint venture," Molinaroli said.
"The industry is evolving rapidly and the investments needed to achieve market leadership requires us to do more than the joint venture has done or can do."
Saft said it would oppose the court filing. The company said it had proposed numerous compromises that were all rejected by Johnson Controls.
Both companies said Johnson Controls' filing would not affect the joint venture's customers.
The joint venture was established in 2006 to develop, produce and sell lithium-ion batteries for hybrid and electric vehicles.
Johnson Controls manufactures car interiors and vehicle batteries. Saft specializes in producing industrial nickel-cadmium batteries. Its lithium ion batteries have mainly targeted industrial or military users, rather than the automotive market.
Complicated to dissolve JV
Morgan Stanley analyst Ravi Shanker said the move would allow Johnson Controls to branch out into different markets, but dissolving the venture could be complicated. He forecast that Johnson Control may have to pay $50 million to $60 million to buy out Saft's stake.
Saft said the net asset value of the venture was about 45 million euros ($64 million), as of the end of March.
The venture has signed contracts to supply batteries for Ford Motor Co , BMW AG and others. Johnson Controls said Wednesday's filing would not affect current contracts, production orders or program launches.
The companies have a battery plant in Holland, Michigan, where cell production is slated to begin this summer.
For now, Johnson Controls' plants will continue running, company spokeswoman Rebecca Fitzgerald said in an e-mail.
"Today's filing was the beginning of the process," Fitzgerald wrote when asked about the Michigan plant. "It's premature for us to speculate what the outcome will be.
Johnson Controls of Milwaukee ranks No. 8 on the Automotive News Europe list of the top 100 global suppliers with $12.8 billion in global parts sales to automakers in 2009.
Reuters contributed to this report