By Rhoda Miel
STAFF REPORTER
Published: October 30, 2013 4:52 pm ET
Updated: October 30, 2013 4:55 pm ET
Johnson Controls Inc. spent more than a decade creating an auto group that could supply complete interiors — from the seats to the headliners and electronics to trim.
But a shifting auto industry that once signaled its intention to buy complete systems from large Tier 1 companies has now moved the other way, and is more interested in controlling more from within its own walls. That leaves JCI, based in the Milwaukee suburb of Glendale, Wis., with looking at “strategic options” for its auto interiors group, including potentially selling it.
The Oct. 29 announcement from JCI comes less than a year after the company also began seeking buyers for its auto electronics unit, and after months of speculation that interiors would soon be offered as well.
JCI already has announced one sale from its electronics group, with Gentex Corp. of Zeeland, Mich., buying its Homelink business.
“[Interiors] has done a nice job turning the business around, but they’re sitting in the same position as we were at last year with electronics,” said Bruce McDonald, chief financial officer and executive vice president for JCI during a conference call with analysts. “They’d say, here’s some restructuring we’d like to do and here’s some capital expenditures we’d like to make, but we’re not in a position right now to put a lot of [money] into it.”
The interiors group saw $4.2 billion in sales last year, but lost $13 million. Net sales for all of JCI’s automotive businesses were up 9 percent for the year, with interiors seeing an 8 percent increase. However sales in Europe have been a drag on the business as the European economy tries to recover.
The auto industry’s shift from complete systems to individual components is not unexpected, noted Bill Rinna, senior manager of forecasting with LMC Automotive, a Troy, Mich.-based industry analyst. Buying a range of parts from multiple companies makes it easier to drill down on costs and reduce expenses.
“It’s hard to control suppliers who are supplying complete individual systems,” he said.
McDonald and CEO Alex Molinaroli — who took that post on Oct. 1 — both said they were not ready to discuss details of the potential future of the interiors group. Instead, the company will provide more background and data during a daylong meeting with analysts in mid-December.
However, both also said that JCI has no intention of simply shutting down production.
“We’re not planning on winding down the interiors business,” Molinaroli said. “We aren’t saying that we’re exploring our options, but we don’t know what we’re going to do. We have some irons in the fire.”
The interiors group, based in Plymouth, Mich., includes instrument panels, door panels, interior trim, headliners, consoles and other parts. Its holdings include parts of the one-time Plastech Engineered Products Inc. JCI bought some of the assets of Plastech in 2009 out of bankruptcy. It has extensive injection molding operations along with compression molding, interior skin production and other plastics processing. The interiors group up for sale does not include seating, which operates as a different business unit.
At this point, Molinaroli said, there is no reason why selling interiors will hurt seating.
“They’re only interconnected by commercial convenience,” he said. “I don’t think it would be harmful to our seating business at all.”
JCI does not expect to make one single transaction involving interiors, Molinaroli said. Instead, he described the options to be an “ongoing process.”
“A lot of rumors are out there,” McDonald said. “We felt it was important to be up front with what we’re planning on doing. We’d rather handle the communication like this than be reactive to a leak in the future.” | 
