NEW YORK Johnson Controls (JCI.N) said on Sunday that it has agreed to sell its auto interiors business to a joint venture it is forming with a unit of China's biggest automaker, SAIC Motor Corp.
A Johnson Controls spokesman said the auto parts maker was contributing $3 billion in revenue to the joint venture, giving it a 30 percent stake. The newly formed company will have total value of $7.5 billion in revenue, he said.
The deal brings together Johnson Controls' auto interiors business with Yanfeng Automotive Trim Systems Co. Ltd., a wholly owned subsidiary of SAIC's component group, Huayu Automotive Systems Co. Ltd.
Johnson Controls had said previously it was evaluating strategic options for the unit, which had annual revenue of about $4 billion but had been struggling to turn a profit.
A spokesman for Johnson Controls said the company is keeping a "small portion" of the interiors business for itself, due to existing customer relationships. Those facilities not included in the agreement will continue to operate within Johnson Controls' existing network as part of the company's Automotive Experience business.
The deal, which is expected to close in the first half of the 2015 calendar year, is a non-cash transaction comprised of asset contributions by the two parties.
The new company will be headquartered in Shanghai. Additional global engineering, development and customer centers will be located in the United States, Europe, China, Japan and India.
The spokesman did not say whether the new joint venture would mean that Johnson Controls, which has plants in the United States and other parts of the world, would be closing down manufacturing elsewhere in favor of China.
The new venture "aligns with Johnson Controls' corporate commitment to China, which is increasingly becoming a major center for the global automotive industry," the company's chairman and chief executive officer, Alex Molinaroli, said in a statement.
Shanghai-based SAIC also owns ventures with Volkswagen AG (VOWG_p.DE) and General Motors Co (GM.N). SAIC reported a 12.6 percent rise in first-quarter earnings, helped by healthy sales growth from the joint ventures.
(Reporting by Christian Plumb and Ashley Lau in New York; Editing by Larry King)