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With pending $13.2 billion deal, JCI to fully exit West Michigan auto supplier operations COURTESY PHOTO

With pending $13.2 billion deal, JCI to fully exit West Michigan auto supplier operations

BY Friday, November 16, 2018 01:23pm

HOLLAND — Johnson Controls International plc would exit its last remaining automotive industry manufacturing operations in West Michigan if it completes a transaction announced this week.

The Milwaukee-based Johnson Controls (NYSE: JCI) said Tuesday that it had reached an agreement to sell its Power Solutions division to Brookfield Business Partners LP for $13.2 billion.

The Toronto-based private equity firm partnered on the deal with Caisse de dépôt et placement du Québec (CDPQ), a Quebec City-based pension fund manager. The transaction is expected to close by June 30, 2019.

JCI’s Power Solutions business produces a range of traditional lead-acid batteries, as well as advanced lithium-ion batteries for applications in hybrid and electric vehicles. The supplier has manufactured the advanced batteries at its Meadowbrook plant in Holland since 2010.

In a statement announcing the deal, Brookfield and CDPQ cited the advanced battery operations as a competitive advantage for the company in the years ahead.

“It is well positioned to benefit from growth in demand for advanced batteries in all vehicle powertrains including electric vehicles,” according to a statement.

As well, the Power Solutions business has stable cash flows, long standing customers, and a strong reputation for safety, quality and environmental performance, the company stated.

“We look forward to partnering with the management team to continue growing this world-class business and build on its track record of innovation,” stated Brookfield CEO Cyrus Madon.

If the sale to Brookfield proves successful, it would mark JCI’s strategic exit from its automotive supply chain operations, including in the West Michigan area, as it focuses on the building products and services sector.

Jennifer Owens, president of Lakeshore Advantage, a Zeeland-based economic development agency, said “it’s too soon to tell” what the changes will mean at JCI’s remaining operations at its Meadowbrook plant.

However, given the hundreds of millions of dollars JCI has invested in lithium-ion battery manufacturing equipment and capacity at the site, Owens thinks the plant will likely remain in operation at least in the near term.

JCI also received more than $299 million in federal American Recovery and Reinvention Act funding to support converting Meadowbrook to lithium-ion battery production, which could spell continued investment locally “for the near term, unless the company wants to repay those credits,” Owens said.

“We plan to reach out to our contacts there and say we’re here and happy to help,” Owens said. “We also plan to reach out to Brookfield and tell them all about the region.”

Multi-part exit

If the deal with Brookfield goes through, it would mark the culmination of a years-long process for JCI to sell off its automotive supply chain operations, which in West Michigan date back mostly to its 1996 purchase of the former Prince Corp. for $1.35 billion.

At one point, JCI employed more than 4,600 people across the region and was the largest automotive supplier in West Michigan as recently as five years ago, according to data tracked by MiBiz.

Starting in mid 2013, JCI began selling off its automotive holdings, including the sale of the HomeLink business to Zeeland-based Gentex Corp. (Nasdaq: GNTX), the electronics unit to Visteon Corp. (Nasdaq: VC) and the headliner and sun visor business to Motus Integrated Technologies.

JCI also formed a joint venture — which it later exited — with Yanfeng Automotive Trim Systems Co. Ltd. to take over its automotive interiors division, and spun out its seating business as a new public company, Adient plc (NYSE: ADNT).

As it looked to exit the automotive business, JCI also strengthened its holdings in building products and services via a mega merger with fire and security solutions provider Tyco International plc in 2016. The deal also redomiciled the combined company to Ireland in a move to lower its tax liabilities.

Moving parts

The JCI divestitures and spinoffs have led to a “bit of a game of chess” for Lakeshore Advantage, which has prioritized keeping both the divested companies and their talent pool in the region.

Owens noted that Motus and Yanfeng both engaged with Lakeshore Advantage, coming on as advisers and investors in the organization.

While Lakeshore Advantage continues to leverage local, plant-level relationships, it has strategically shifted to “broaden our engagement strategy … at their headquarters with the senior level executives and decision makers,” Owen said.

Although Yanfeng announced layoffs in Holland last month as it seeks to transition its headquarters to Southeast Michigan, as MiBiz previously reported, Owens said she believes Lakeshore Advantage will be successful in keeping engineering talent active and engaged locally, whether at existing companies or by helping them launch startups.

“The talent is really the secret sauce,” she said. “We want to keep the companies happy and keep them here, but the people also want to stay here and be in West Michigan and be successful. We’re here to provide resources to help them create opportunities.”

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