Johnson Controls Sells Rest of Auto Electronics Unit to Visteon for $265M

1/13/14Follow @XconomyWI

Johnson Controls said Monday it will sell the remainder of its automotive electronics business for $265 million to Visteon, a global automotive supplier with offices in Michigan, China, and the United Kingdom.

The deal marks the completion of a significant piece of Johnson Controls’ strategic shift. In the past year, the company has focused on what it considers its core businesses: building-efficiency products, automotive seating, and energy storage and batteries, which includes the development and production of lithium ion batteries for hybrid cars in Holland, MI. Johnson Controls (NYSE: JCI), based near Milwaukee, is Wisconsin’s largest publicly traded company by revenue, with $42.7 billion in sales in the last fiscal year.

Johnson Controls spun off its automotive electronics division in pieces. It previously sold HomeLink—its line of radio-frequency products that let drivers remotely control garage doors and other security systems—in September 2013 for $700 million to Gentex, an automotive supplier based in Zeeland, MI.

Johnson Controls’ exit of the automotive electronics market shows how quickly strategy can change within a major corporation. Almost exactly one year ago, Johnson Controls was at the Consumer Electronics Show in Las Vegas announcing its entry into the automotive information and entertainment electronics market. Just two months later it announced plans to sell the business unit that contained those products.

Why the about-face? Stock analysts pointed to the high expense of achieving scale in markets like Asia. Being successful in auto electronics would likely have required Johnson Controls to spend significant dollars on acquisitions, as I reported for The Business Journal in Milwaukee.

Under new CEO Alex Molinaroli, Johnson Controls is taking a hard look at itself and making some landmark decisions. The company has also said it’s exploring a sale of its automotive interiors business that makes door panels, floor consoles, and other products. Johnson Controls aims to “reallocate capital to further diversify its portfolio” and drive shareholder returns, it said Monday.

Visteon (NYSE: VC) will take over Johnson Controls’ instrument cluster, infotainment, display, and body electronics product lines in today’s deal, which is expected to close in the second quarter. The acquisition makes Visteon a top-three global supplier of “automotive cockpit electronics,” with combined sales estimated at $3 billion for that part of its business, the company said.

Visteon’s businesses in electronics, auto interiors, and climate control products generated $13.8 billion in sales in 2012. Like Johnson Controls, Visteon is also considering a sale of its interiors business. The company has 22,000 employees in 29 countries. Its corporate offices are located in Van Buren Township, MI; Shanghai, China; and Chelmsford, U.K.

Jeff Engel is the editor of Xconomy Wisconsin. Email: jengel@xconomy.com Follow @XconomyWI

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