UPDATE: Johnson Controls To Close 10 Plants; Cuts Auto Outlook
The global automotive recession appears to be deepening after
Johnson Controls Inc. (JCI), a bellwether of the parts making
sector, cut its auto production forecast and said it will close 10
The Milwaukee-based company now expects North American light
vehicle production to fall another 500,000 vehicles to 8.8 million
vehicles during its fiscal year ending Sept. 30. The company also
cut its European forecast another 12% to 14.3 million units.
Parts makers are the best gauge to measuring the health of the
auto industry since their products are ordered ahead of time by
auto makers based on demand.
"When you look at the restructuring by Johnson Controls and
Autoliv Inc. (ALV), both among the most proactive in the supplier
industry, it is a signal to us that things have not bottomed and
there will be more restructuring to come from the other suppliers,"
said Robert W. Baird analyst David Leiker, who is based in
Johnson Controls, a supplier of batteries and interior
components to almost all auto makers, will spend as much as $215
million to close the plants and trim an undisclosed number of jobs.
the company didn't say which plants will be closed. The company
also operates a building division that provides services and
products to commercial properties.
Autoliv, the world's largest maker of seatbelts and airbags,
said earlier this week it cut 3,000 more jobs in the first two
months of 2009 and will sell 13.4 million treasury shares of its
common stock in hopes of raising $364 million to help offset the
cash drain from a drop in demand.
"In December and January, U.S. auto sales appeared to have
stabilized and then we got February numbers and March is expected
to be a bigger step down," Leiker said. "We also see Europe weaker
than expected and now it looks like sales won't stabilize there in
the summer as expected."
Johnson Controls said about 80% of the restructuring will be
concentrated on the auto-parts business, resulting in a charge for
the fiscal second quarter ending Tuesday. An undisclosed number of
jobs will also be trimmed. Some cutbacks will also take place in
Johnson Control's auto-battery business.
This is the second restructuring announcement the company has
made in six months. In September, the company launched a $495
million program aimed at reducing costs in its interiors, battery
and building services business. The company said it is ahead of
schedule and nearly two-thirds complete. The effort will boost the
bottom line starting in the fiscal third quarter and increase it by
some 25 cents a share in the fiscal year starting Oct. 1.
Housing and autos have been among the industries hurt most both
during and before the recession, threatening Johnson Control's
investment-grade credit ratings. The company earlier this month
announced plans to sell $750 million of convertible notes and
equity units to pay short-term debt.
Shares fell 26 cents or 2% to $12.64 in earlier trading Friday.
The stock has lost nearly two-thirds of its value over the past six
-By Jeff Bennett, Dow Jones Newswires;
(Kevin Kingsbury contributed to this story.)