UPDATE 1-Johnson Controls explores auto electronics unit sale

Wed Mar 6, 2013 6:14pm EST

By Soyoung Kim and Bernie Woodall

NEW YORK, March 6 (Reuters) - Johnson Controls Inc is exploring a potential sale of its automotive electronics business, but has no "current intention" to sell its automotive interiors unit, the company said on Wednesday.

Johnson Controls, the largest U.S. auto supplier with sales of $5.5 billion in car interiors and electronics for fiscal 2012, has grappled with industry-wide pressure on margins, low vehicle production in Europe and increased competition from China.

A successful sale of the electronics division would leave Johnson Controls with four other major business: automotive seating, automotive interiors, building controls and car batteries.

Johnson Controls' automotive electronics had sales of $1.4 billion in fiscal 2012, representing a quarter of the revenues in the company's interiors and electronics division.

Johnson Controls said it has retained JPMorgan to run the sale process for car electronics. The deal could fetch more than $1 billion, according to people familiar with the matter.

Three people familiar with the matter told Reuters earlier on Wednesday that the diversified conglomerate was looking to sell its automotive interiors division.

Two of them later corrected the statement, saying they were referring to the electronics part of the automotive interiors and electronics segment.

Shares of Johnson Controls closed up 2.6 percent at $32.63 on the New York Stock Exchange.

In October, Johnson Controls separated its car seating from its interiors and electronics businesses, saying that economic and competitive characteristics between seating, interiors and electronics are "increasingly different."

"If you look at those businesses, the business models, capital intensity, the manufacturing footprint requirements are very, very different. And we also wanted to bring more focus to each of those segments," Chief Executive Steve Roell said at that time.

The diversified manufacturer, along with the rest of the industry, has been battling to improve poor margins in car interiors over the past few years. Visteon Corp is also trying to exit its auto interiors business.

The company's fiscal 2013 year outlook called for electronics and interiors business margins of between 1.9 percent and 2.1 percent, and its mid-term outlook through 2017 called for those margins to rise to 6 percent to 7 percent.

In comparison, Johnson Controls' power solutions business - the world's largest provider of advanced batteries for vehicles - expects margins between 14.6 percent to 14.8 percent in its 2013 fiscal year and improvement in margins by 2 percentage points in its outlook to 2017.

Its building efficiency business expects 2013 margins of 6.4 percent to 6.5 percent.

A couple walks along the rough surf during sunset at Oahu's North Shore, December 26, 2013. REUTERS/Kevin Lamarque

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