In the wake of Shanghai municipal government's order to stall
lead-acid battery production,
Johnson Controls Inc.
) recently announced that it will close its lead-processing
operations at the Kangqiao battery plant in China. The municipal
government's decision was triggered by the pollution arising from
the plant that has resulted in increased blood-lead levels in
children, making them sick.
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However, the move undertaken by the company is not expected to
affect the customers as the lead-processing capacity will be
shifted to its other facilities in China. The Kangqiao plant will
continue storing, labeling, prepping, and shipping batteries
manufactured by other facilities.
Subsequent to the closure of lead-processing operation, the company
will be retrenching some of the employees in the Kangqiao plant.
Johnson Controls has shown concern about the employees; it even
plans to shift the interested employees to other facilities. The
company will also be providing severance packages to the affected
employees, which are well above the legal requirements.
Lead acid batteries are used in cars and electric scooters.
Production and recycling of the batteries results in lead
pollution. According to sources, emission levels at the Kangqiao
plant were below national standards and high lead levels were due
to the waste recycling facility near Kanghua New Village.
Meanwhile, the company will be working with governments and the
industry to deal with such environmental issues.
Johnson Controls is a supplier of automotive interiors, batteries,
and other control equipment. Its main competitors include
) in the Automotive Experience segment,
Honeywell International Inc.
) in the Building Efficiency segment and
) in the Power Solutions segment.
Johnson Controls remains under pressure due to the challenging
global markets, pricing pressure from OEMs and strong competition.
Currently, the company retains a Zacks #4 Rank, which translates
into a short-term Sell rating. We have a long-term (more than 6
months) Underperform recommendation on the stock.