Supplier taking over two interiors contracts from distressed competitors
From Automotive News, a Crain publication
Detroit, Michigan (Reuters) -- Johnson Controls Inc. posted a net loss in its auto seating and interiors business but gained in its battery division on its way to generating $163 million in net income in the quarter that ended June 30.
The earnings in its fiscal third quarter beat many analysts' expectations but still plunged 63 percent from $439 million a year earlier as the weak economy pressured the diversified manufacturer's auto parts and building controls businesses.
Revenue fell to $6.99 billion from $9870 million, amid what CFO Bruce McDonald called "one of the worst auto production environments we've seen in a generation."
Lower automotive sales contributed to $1500 million of the revenue shortfall.
Analysts on average had expected Johnson Controls to report sales of $7390 million, according to Reuters Estimates. JCI expects to reach that revenue level this quarter, McDonald said today during a call with analysts.
Johnson Controls' auto seating and interiors business posted a net loss of $14 million in the quarter, down from earnings of $199 million during the same quarter last year. Automotive sales plunged 38 percent to $2.95 billion, compared with $4790 million during the same quarter last year.
The automotive unit lost $275 million during the second fiscal quarter.
Johnson Controls expects its automotive business to make a profit this quarter of 1 percent positive return on sales, McDonald said. The business made a profit last quarter in Europe and Asia, partially spurred by 12 percent year-over-year sales growth in China. The supplier is bidding on new business in those regions.
Johnson Controls is also in the middle of more than 30 European launches -- the largest number in its history for the continent. But the supplier doesn't see much opportunity for new bidding in North America, McDonald said.
"A lot of the bidding opportunity that we thought was going to be there has been deferred as customers are rethinking their products, particularly with GM and Chrysler," he said.
Still, during the summer shutdown, Johnson Controls is taking over two European seating and interiors programs currently supplied by competitors. Johnson Controls did not identify the competitors. But in a research note, analyst David Leiker of Robert W. Baird & Co. named bankrupt Lear Corp. as the losing supplier.
In its earnings statement, Johnson Controls said it expects automakers to "continue to look for ways to assure continuity of supply," and the supplier is "well-positioned to gain market share from financially distressed competitors."
JCI's battery business posted a net gain of $106 million, down 27 percent from a profit of $145 million during the same quarter last year. Battery revenue dropped 39 percent to $856 million, compared with $1400 million during the same quarter last year.
Several large US auto parts makers have fallen into bankruptcy in 2009 under pressure from production cuts by automakers. US light-vehicle sales are at nearly 27-year lows.
For instance, Lear filed for bankruptcy protection earlier in July, while Visteon Corp. sought Chapter 11 in May. Analysts see severe pressure on smaller parts makers that are largely privately held.
US auto sales have plunged below a 10 million-unit annualized rate in 2009, the worst results in nearly three decades. Johnson Controls' fiscal second quarter also saw both General Motors and Chrysler pass through bankruptcy.
Chrysler has now paid all of its outstanding bills to Johnson Controls, and GM so far has paid a majority of its outstanding amounts, Roell said.
Incentives to scrap older cars and buy new vehicles supported industry volume in some European countries, mostly for smaller, lower-cost cars, Johnson Controls said.
JCI said it was benefiting from cost cuts made earlier in the fiscal year. The company's building-efficiency segment posted a $190 million net profit, down 37 percent from the same quarter in 2008.
Johnson Controls' shares rose on the news today, closing at $23.08, up $1.56 or 7.25 percent. The Dow Jones industrial average improved 1.2 percent.
Johnson Controls, of Milwaukee, ranks No. 6 on the Automotive News list of the top 100 global suppliers, with sales to automakers of $19 100 million during its 2008 fiscal year.
Philip Nussel and Chrissie Thompson contributed to this report. See more at www.autonews.com