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Johnson Controls (JCI)Stock (Auto Parts Industry, Manufacturing Industry)
 A decrease in the total number of new cars sold in the U.S. from 16.5 million in 2006 to 16.1 million in 2007 resulted in decreased sales for the company's Automotive Experience segment.[1] On the other hand, favorable exchange rates gave the company a $1.5 billion revenue boost in 2007.[2] Likewise, a $0.31 per kilowatt hour increase in the price of electricity between 2006 and 2007 resulted in more sales for the company's Building Efficiency operations.[3] Johnson Controls competes with companies like Ingersoll-Rand Company (IR), Siemens AG (SI), Honeywell International (HON) and United Technologies (UTX) in the HVAC products and services market and companies like Lear (LEA) and Magna International (MGA) in the automotive interiors market.
[edit] Business Segments[edit] Building Efficiency (37%)Building Efficiency generated 37% of the company's 2007 revenue. The segment manufactures and sells control systems and mechanical equipment for heating, ventilation and air conditioning (HVAC) applications. The company's HVAC products are designed to maximize the energy efficiency of commercial buildings. In addition to manufacturing HVAC products, Building Efficiency offers services such as energy efficiency consulting and on site maintenance and property management. Customer relationships often last for the life of a building as the company installs HVAC systems in new buildings and maintains them over time.[5] Building Efficiency competes with similar products and services from Trane, Siemens Building Technologies, Honeywell International (HON), and Carrier Corporation.[6] [edit] Automotive Experience (50%)Automotive Experience generated 50% of the company's 2007 revenue. The segment designs and manufactures automotive interiors and interior components for automobile companies such as Ford Motor Company (F), General Motors (GM) and Daimler AG (DAI).[7] The company's Automotive Experience products include seats, instrument panels, information displays, headliners and doors.[8] The segment's products compete with similar products from companies such as Lear (LEA) and Magna International (MGA).[9] [edit] Power Solutions (13%)Power Solutions generated 13% of the company's 2007 revenues and produces lead-acid automobile batteries. The company sells most of it's automobile batteries to aftermarket purchasers through retail outlets like Pep Boys-Manny, Moe & Jack (PBY) and Wal-Mart Stores (WMT). The company also sells batteries to automobile manufacturers. Power Solutions also manufactures absorbent glass matt (AGM), nickel-metal-hydride and lithium-ion batteries that power hybrid vehicles.[10] [edit] Business FinancialsJohnson Controls Revenue, Operating Income and Net Income for years ending Sept. 30[12][13] ($ in millions)
[edit] Key Trends and Forces[edit] Demand for automobiles affects the demand for Johnson Controls' automobile componentsWhen consumers purchase more automobiles, Johnson Controls' sales increase, as automobile manufacturers need to purchase more of the company's interior equipment for the cars they make. On the other hand, when automobile sales decrease, automobile manufacturers purchase less of the company's interior equipment. Between 2006 and 2007 U.S. sales of automobiles fell from 16.5 million new cars to 16.1 million new cars.[14] Despite attempting to minimize the effects of decreased automobile demand by negotiating contracts, Johnson Controls' Automotive Experience revenues decreased by $722 million dollars between 2006 and 2007.[15] [edit] Exchange Rates resulting in a weak dollar boost Johnson Controls' revenueBecause Johnson Controls reports their revenues in U.S. dollars but does 61% of their business outside of North America, it is exposed to fluctuations in exchange rates. If foreign currencies depreciate, the dollar value of Johnson Controls' international revenues decreases. On the other hand, if the dollar value decreases (foreign currencies appreciate), the dollar value of Johnson Controls' international revenues increases. Between June 18, 2007 and June 18, 2008 the Euro value of one U.S. dollar decreased from 0.75€ to 0.65€.[17] During the same period of time, the dollar also depreciated in relationship to the Japanese Yen.[18] As a result of the dollar's depreciation, Johnson Controls received a revenue boost to the tune of $1.5 billion in 2007.[19] [edit] Rising electricity costs result in more demand for Johnson Controls' Building Efficiency products and servicesAs the price of electricity rises, individuals and businesses that own office buildings and other commercial real estate spend more money on products and services offered by Johnson Controls that help them cut electricity costs. On the other hand, when the price of electricity falls, commercial real estate owners are less likely to purchase Johnson Controls' Building Efficiency products and services because the savings generated by the new products and services don't cover the costs of implementing them. Between 2006 and 2007, the price of electricity supplied to commercial customers rose from $9.46 per kilowatt hour to $9.67 per kilowatt hour.[20] During the same period of time, Building Efficiency revenues increased 24%.[21] [edit] Key Competitors
Johnson Controls and Key Competitors 2007 ($ in millions)
Note: Johnson Controls ends its year on September 30. Figures for Siemens AG (SI) were converted from Euros using average 2007 exchange rates.[28]
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