JCI is going to restructure

Preliminary disclosure: Usually, I refrain from commenting about issues relating to my own employer. But today, Johnson Controls issued a press release unusually significant that I assumed would be worth an exception.

The American economy is in pain, the automotive industry is in pain: General Motors should see a slowdown of 30% or more, Ford forecasts 22% less activty from one year to the next and Toyota would be good at only loosing 7,5%. With this, nobody should be surprised when automotive part manufacturers are preparing to quickly reduce the costs like is done by most car manufacturers (GM is announcing regularly plant closings).

It is in this context that Johnson Controls announces an important restructuration. We will know details only later, but it is clear that $450 to $500 millions of  restructuing charges will lead to major job layoffs. JCI only gives the general orientation and says that they want to cut down automotive plants/footprint in the USA, follow the move toward Low-Cost Countries including in Europe. Which is normal since interior vehicle parts (like large plastic parts) are very difficult to transport and car manufacturers are also moving toward Eastern Europe.

If you add to it the difficulties of real estate in the US, a market where JCI is very present with its Building Efficiency division, it is easily understood that adaptation will touch this branch too, since experts do not forecast any quick improvement in this part of the American economy.

These intense perturbations in the immediate environment of Johnson Controls may have enough power to bring some auto parts manufacturers down to their knees. The most fragile ones may have to take really drastic measures (or more drastic than massive layoffs, if you follow my reasoning). But Johnson Controls could well be among those who will survive best (or relatively best); According to Investopedia.com, Johnson Controls and Autoliv are those most apt to protect themselves.