On The Rise -- Johnson Controls: A Walk on the Green Side

Johnson Controls' headquarters campus in Glendale, Wis., is a showcase for many of the technologies the energy-management, battery and automotive products company is betting on to help fuel its long-term growth. Two years ago, the company more than doubled the office space on the headquarters campus, but through the careful integration of a host of green features such as solar photovoltaic arrays, solar hot-water panels, a geothermal system utilizing 272 wells each 300 feet deep, skylights and increased window space for natural lighting, all linked to a sophisticated energy-monitoring system, the company actually decreased its electricity costs by $67,000 a year.

After seeing sales plummet from $38.1 billion in 2008 to $28.5 billion in 2009, Johnson Controls is enjoying a strong recovery. On April 23, the company reported that its fiscal second quarter sales rose; to $8.3 billion from $6.3 billion, and it had record second quarter profits of $274 million, compared with a loss of $193 million in the previous year. The company expects sales for the year of $33 billion.

Along with efforts to make existing buildings more energy efficient, Roell pointed to the opportunities for greener new-building construction, particularly in China. He cited studies by McKinsey and Pacific Northwest National Laboratory indicating that 350 million Chinese will move from rural areas to cities in the next couple decades and that 50% of global new-building construction will occur in China through 2020. Johnson Controls has a strong presence there, with 23 joint ventures and 40 manufacturing facilities.

Renewable energy is a focus of Johnson Controls' Energy Solutions business, said Vice President and General Manager Iain Campbell. He noted that 51% of the Global 500 corporations have made their carbon footprint reduction goals public. He said almost one-third of the projects in its Energy Solutions pipeline include a renewable-energy component. That business is approaching $1 billion in sales, with a market anticipated to grow 12% to 18% annually. While Johnson Controls has completed a number of public sector integrated projects featuring energy efficiency and renewable-energy components, Campbell said private-sector adoption of such projects to the same degree would offer an $18 billion opportunity.

Roell said transportation offers the second-largest opportunity for clean technology. He noted that 22% of global-energy use involves transportation and that cars and light trucks account for two-thirds of that total. Here again, Johnson Controls is using its own operations to back up its market aspirations. The company has more than 250 hybrid electric vehicles in its fleet and is adding 230 more in 2011. The company also is introducing more than 300 electric vehicles, powered by Johnson Controls-Saft lithium ion batteries manufactured at its plant in Holland, Mich., between now and 2013. Johnson Controls received a $299 million American Recovery and Reinvestment Act grant to build the lithium ion battery plant.

Like many U.S.-based manufacturers, Johnson Controls has been extending its global reach through both acquisitions and organic growth. In May, the company offered to purchase Visteon Corp.'s interiors and electronics businesses for $1.25 billion. Roell said the acquisition would expand Johnson Controls' offerings and technology. Visteon rejected the offer, but Johnson Controls said it still wants to buy the two businesses. With their addition, the company would have revenues in China exceeding an estimated $7 billion in 2007.