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JCI to spin off automotive business in 12 months

Jonson Controls Inc. said in a statement on July 24 that it has decided to spin off its $22 billion automotive business including automotive seating and interiors business in the next 12 months to focus on building efficiency and automotive battery operations, according to a Reuters report.

When CEO Alex Molinaroli was asked about why the company decided to exit its automotive business, he said that the decision was mainly based on two premises. Firstly, it is really tough to deal with the serious cash flow problems caused by the volatility of the auto industry. Besides, in order to maintain the leading position of automotive seating business, large amounts of investments are required. Despite the income of $175 billion in 2014 brought by the seating business, JCI still determines to concentrate its resources on higher-margin building efficiency and automotive battery operations, where income rose 3 percent in the quarter to $272 million in the building efficiency segment and increased 22 percent to $234 million in the power solutions segment respectively.

The interiors business is now part of a joint venture, Yanfeng Automotive Interiors (YAI), between Yanfeng Automotive Trim Systems Co., Ltd., and Johnson Controls. YAI has become the world’s largest automotive interiors parts supplier.

Some analysts were surprised at how quickly Johnson Controls decided to spin off rather than sell the automotive business. “We see it as another sign that JCI is making progress toward recasting itself as a multi-industry company,” Barclays analyst Brian Johnson said in a research note.

As for the automotive seating business, JCI occupies 43 percent share of the Chinese market and 72 manufacturing plants will have been launched into operation by 2017, anticipated JCI.

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