Johnson Controls: A Step Ahead

Jan. 23, 2006
Innovative auto-components manufacturer brings hope to a hurting industry.

Based on the list of new products and technology developments announced by Milwaukee-based Johnson Controls Inc. at the 2006 North American International Auto Show in Detroit and a strong 2006 first-quarter performance, it's hard to believe that the U.S. auto-parts industry is struggling.

The maker of automotive interior systems, car seats and batteries posted a record $7.5 billion in sales for the first quarter of 2006, which ended Dec. 31, 2005. That's up 14% from the same period last year. The quarterly report also shows the company earned a record 86 cents per share, up from 81 cents a year earlier. Net income dropped slightly to $165.4 million from $168.4 million in 2005.

During the auto show, the company introduced the official start-up of its joint venture with French battery manufacturer Saft SA to produce nickel-metal-hydride and lithium-ion batteries for hybrid-electric vehicles (HEVs) and electric vehicles.

Currently nickel-metal-hydride batteries power most HEVs, but lithium-ion batteries likely will become the preferred choice for HEV manufacturers because they offer power, size, weight, cycle-life and cost advantages, according to Johnson Controls, one of IndustryWeek's IW 50 Best Manufacturing Companies for 2005.

Johnson Controls Inc.
At A Glance

Johnson Controls Inc.
Primary Industry: Motor Vehicle Parts
Number of employees: 136,000
2004 In Review
Revenue: $26.6 billion
Profit Margin: 3.1%
Sales Turnover: 1.8
Inventory Turnover: 26.3
Revenue Growth: 17.3%
Return On Assets: 6.72%
Return On Equity: 19.2%
The announcement in Detroit took place nearly four months after the company opened its $4 million research and development facility for lithium-ion batteries in Milwaukee. The new laboratory is part of the company's plan to create and sustain a global center for lithium-ion battery development, the company said in a September 2005 statement.

"We believe that lithium-ion batteries will be the wave of the future, and we're excited to be a leading organization in helping to drive this battery technology forward," said Greg Sherrill, group vice president and general manager of batteries, in the September press release.

The company's involvement with lithium-ion batteries dates back to 2004 when the United States Advanced Battery Consortium granted it a contract for developing an abuse-tolerant lithium-ion battery with extended life and better power-to-weight performance than current hybrid-battery technology.

Other new developments announced at the auto show included a new overhead system that allows vehicle designers more freedom when integrating customer use points, a voice-activated Bluetooth dialing and music-search system and a seating system that provides quicker access to third-row seats in minivans and crossover and sport-utility vehicles.

Kirkland, Wash.-based VoiceBox Technologies Inc. will supply the hands-free dialing and music-navigation feature as part of a multiyear deal with Johnson Controls. The product release date has not yet been announced.

The new integrated trim feature enables designers to build overhead lights, coat hangers and handles into the overhead system. It also enables designers to add safety elements, including side-curtain airbags that can be delivered pre-assembled to automakers. The concept, called the Perimeter Overhead System, is scheduled for production in 2010.

The EZaxis seating system features second-row seats that can fold flat to the floor. In addition, it includes storage areas for small items and built-in child-seat attachment anchors.

While its advancements in the automotive industry have taken center stage for the company in recent weeks, Johnson Controls also is expanding its heating and cooling offerings with its $3.2 billion acquisition of York, Pa.-based York International Corp. in December. York's 2005 sales were $5.7 billion. The merger is expected to save Johnson Controls more than $275 million in costs by 2008.

As a result of the buyout, Johnson Controls will design and sell integrated controls and heating, ventilating, air-conditioning and refrigeration equipment and will gain a stronger position in China, Central Europe, Latin America and the Middle East, the company says.

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About the Author

Jonathan Katz | Former Managing Editor

Former Managing Editor Jon Katz covered leadership and strategy, tackling subjects such as lean manufacturing leadership, strategy development and deployment, corporate culture, corporate social responsibility, and growth strategies. As well, he provided news and analysis of successful companies in the chemical and energy industries, including oil and gas, renewable and alternative.

Jon worked as an intern for IndustryWeek before serving as a reporter for The Morning Journal and then as an associate editor for Penton Media’s Supply Chain Technology News.

Jon received his bachelor’s degree in Journalism from Kent State University and is a die-hard Cleveland sports fan.

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