JCI Johnson Controls International PLC

By Bob Tita 

Alex Molinaroli spent nearly three decades working at Johnson Controls Inc. as it built itself into a giant manufacturing company. He's spent much of his two-plus-years as chief executive working to pull it apart.

Mr. Molinaroli came in as CEO in October 2013 determined to reduce the Milwaukee-based company's reliance on car seats, dashboards, roof liners and other automotive components. Those auto-related businesses--built up under his predecessors with a series of acquisitions--accounted for more than two-thirds of the company's annual revenue, which totaled $42.7 billion in fiscal 2013.

But Mr. Molinaroli argued that continued exposure to the auto industry caused investors to discount its stock to account for sharp swings in vehicle demand and typically low margins on sales of auto parts.

Just the ninth CEO since the company's 1885 founding, Mr. Molinaroli set out to recreate Johnson Controls with a focus on higher-margin businesses mostly connected to providing climate-control equipment and other systems for commercial buildings, schools and hospitals. The deal announced Monday to merge with Tyco International PLC doubles down on that strategy, resulting in a much larger company but one focused on building operations.

Johnson Controls already owned York-brand heating and air conditioning gear and the systems to control it, giving Mr. Molinaroli a base to build on. But the pivot from the automotive industry also was risky given the size of that business: Johnson Controls was the world's sixth-largest supplier of parts based on sales . The previous CEO, Stephen Roell, had invested more than $1 billion in the auto-seating businesses just before retiring.

Mr. Molinaroli wasted little time . Even before officially taking the CEO job, he began selling parts the automotive electronics business. In 2014, when he couldn't find an outright buyer for the company's low-margin auto-interiors business, he spun it off into a joint venture with Chinese supplier Yanfeng Automotive Trim Systems Co.

Last July came the biggest move, a plan to spin off the auto-seating business to shareholders--a move that would slice off more than half of Johnson Controls' annual sales and complete its exit from supplying components for new vehicles. The new company, which will be called Adient, is scheduled start trading this fall.

Mr. Molinaroli, who joined Johnson Controls in 1983 as part of its building-efficiency unit, has used the proceeds from the sales to bolster the buildings business, buying ventilation-equipment maker Air Distribution Technologies Inc. for $1.6 billion and striking a deal for a 60% stake in Hitachi Ltd.'s commercial air-conditioning business. Johnson Controls expects revenue of about $32 billion in the current fiscal year.

Mr. Molinaroli's tenure hasn't been without hitches. In 2014, the company's board fired a management consulting firm following his disclosure of an extramarital affair with one of the firm's principals. The company's board determined that no conflict of interest had occurred but said he hadn't complied with the company's ethics policy and reduced his 2014 performance incentive bonus by 20% over the incident.

Once the merger with Tyco is complete, which is expected by the end of 2016, Mr. Molinaroli will stay on as CEO and chairman for 18 months. After that, he'll be replaced as CEO by Tyco Chief Executive George Oliver; Mr. Molinaroli will turn over the chairman's title to Mr. Oliver 12 months after relinquishing the CEO's job.

Mr. Molinaroli said in an interview, "Certainly we've got a lot on our plate, [but] the time frame is right" for him to exit the company.

Write to Bob Tita at robert.tita@wsj.com

(END) Dow Jones Newswires

January 25, 2016 17:06 ET (22:06 GMT)

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