Johnson Controls to explore spinoff of its auto business
DETROIT -- Johnson Controls said it is "exploring strategic options" for its automotive business -- the first step in the possible sale or spinoff of its seat business.
CEO Alex Molinaroli, in a statement Wednesday, said the company “had no specific timetable for the completion of the strategic review, which includes a full range of strategic options for the automotive business.”
If JCI does sell its seating business, it will likely get a good price. The company already has sold or spun off its interior components operations, which suffered from tight margins and numerous competitors.
The U.S.-based supplier’s remaining seating unit is No. 1 in the segment.
The company said it will retain its battery business and also its non-automotive operations, which produce heating, ventilating and air conditioning for homes and buildings.
In an telephone interview Wednesday with Automotive News, Molinaroli cited two major reasons for the proposed spin-off. First, the auto industry is extremely cyclical -- with boom-and-bust cycles that can play havoc with a company’s cash flow.
“The cyclicality is not something that we particularly like, and it drives some of our decisions,” Molinaroli said.
Second, the seating business will require a big capital investment that Johnson Controls is not willing to make, Molinaroli said. The seating unit “competes well and does well,” he said. “To continue to be a leader, they will need a source of capital.”
Molinaroli said he may sell or spin off his seat business in chunks, or as a single unit. He added that no deal is imminent.
“I don’t even think that it’s even possible to happen this year,” he said. “It’s not something that can happen overnight.”