UPDATE 1-INTERVIEW-Johnson Controls to build on core business
(Recasts, adds details from interview, background, byline)
By David Bailey
MILWAUKEE, Sept 20 (Reuters) - Johnson Controls Inc (JCI.N) plans to maintain its core automotive interiors, building controls and auto battery units and build on them through smaller acquisitions, its vice chairman and incoming chief executive officer said on Thursday.
Johnson Controls, which has long-range expectations for annual revenue growth in excess of 10 percent, in July named Stephen Roell as only the eighth chief executive in the history of the more than century-old company effective Oct. 1.
"I don't think we have to expand beyond those three core to achieve those growth objectives," Roell said in an interview at the company's headquarters.
Some of the growth could come from smaller acquisitions, but most is expected to come from within, Roell said. Emerging markets such as China and Eastern Europe are a major focus for that growth, he said.
The diversified manufacturer expects revenue of about $34.5 billion for its fiscal year that ends at the end of September. That would be a slightly slower pace of growth than it has seen in recent years.
Roell, who has been at Johnson Controls for a quarter century, also said the Detroit-based automakers must have economic concessions from the United Auto Workers union in the current contract talks just to close the gap with competitors.
Negotiations between the UAW and General Motors Corp GM.N have run nearly a week beyond the contract expiration last Friday with the automaker's main needs including cutting health-care costs and a potential two-tier wage system.
"It is critical to the survival of those companies," Roell said, adding that it would improve their cash flow and cost structure and allow the Detroit-based automakers to invest more in developing technologies and vehicles.
"At the end of the day, the success of those companies is going to depend on their new products, new models and interiors, and from my standpoint that is what we focus on," Roell said of the Johnson Controls auto interiors business.
Cost-cuts achieved by the automakers are not likely to trickle through to auto parts suppliers, he said.
Johnson Controls has a diverse auto customer base globally and in North America, reducing the impact from market share losses at U.S. automakers in recent years that have pressured other suppliers and sent some to bankruptcy court.
Johnson Controls typically looks for privately held companies that have attractive technology.
The company greatly expanded its building controls unit with the acquisition of York International in 2005, but residential sales remain a small part of overall revenue.
Roell does not believe the housing market turmoil has ended, but sees Johnson Controls as well-positioned.
The company has a broad commercial focus that includes education, health care and government buildings in addition to offices, and service contracts.
Roell said the Federal Reserve's rate cut was more a benefit to consumer confidence and may give some flexibility to companies that have a weak investment grade credit rating or higher junk rating, but would not change the housing market.
((Editing by Jeffrey Benkoe and Carol Bishopric; Reuters Messaging: david.bailey.reuters.com@reuters.net; e-mail: david.bailey@reuters.com; +1 312-408-8135)) Keywords: JOHNSONCONTROLS/
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