Earlier this year, we mentioned analyst rumblings that Jonhson Controls(JCI) ought to spin off its automotive seating business. Now, the company has decided to undertake a major move, but not the one suggested. Johnson will be spinning off its auto interiors business into a joint venture with a subsidiary of Chinese auto maker SAIC. Johnson will own 30% of the new company, which,with $3 billion in annual sales, will have 15% market share of the market for instruments, door panels, plastic and wood trim and other interior components.
As for the seating business:
Johnson Controls will retain its auto-seating business. The company is the world’s largest seat maker, and Mr. Molinaroli considers the business a core asset. Profit margins for seating are better than for interiors.
“Our top line may shrink, but our bottom line will grow. When you dial forward five years, you will see a company that is more profitable, with higher margins and more balanced,” he said.
So, no new security to invest in, but perhaps an opportunity for the market to more appropriately value Johnson Controls.
Disclosure: The author holds no position in any stock mentioned