Johnson Controls Inc.
(
JCI
) recently divulged a plan to construct a new automotive battery
plant in Tianjin, China. With an investment of $200 million, the
state-of-the-art-facility will be manufacturing high quality
maintenance-free lead-acid starter batteries and advanced
batteries, designed for Start-Stop vehicles for automakers and the
aftermarket in China.
The construction of the Tianjin plant will start between 2012
and the first half of 2013; with the plant becoming operational in
late 2014. The company expects that the plant at full capacity will
be producing about 6 million batteries annually.
Johnson Controls estimates that car sales will hit 25 million by
2015. This will be beneficial to the company, helping it meet the
growing demand of the automotive industry in China. The company
intends to expand battery capacity in China to 30 million by
2017.
Johnson Controls operates in China with its plant in Shanghai
being part of the 2005 acquisition and Changxing facility. The
company expects that revenues from Power Solutions for fiscal 2012
will escalate 11% to 13% due to market share gains along with a
positive impact from production in the Changxing plant. In
addition, it is also planning the launch of the Chongqing plant by
this year.
Johnson Controls focuses chiefly on the aspects of
sustainability with energy saving and emission control. The new
project will provide a platform to leverage Johnson Controls'
technologies along with expansion in China.
However Johnson Controls faces fierce competition from companies
including
Tenneco Inc.
(
TEN
), which is also expanding its global footprint in the emerging
regions around the world using its manufacturing and engineering
capabilities. It has launched new emission control facilities in
Changchun and Beijing in China. With the expansion of the OEM in
the growing markets like Brazil, Russia, India, China, and
Thailand, Tenneco has started producing locally cost competitive
products that will lead to growth in its business.
Wisconsin-based Johnson Controls is a supplier of automotive
interiors, batteries, and other control equipment. The company
functions through three segments: Automotive Experience, Building
Efficiency and Power Solutions.
Currently, Johnson Controls retains a Zacks #3 Rank, which
translates into a short-term (1 to 3 months) "Hold" rating. We have
a long-term (more than 6 months) "Neutral" recommendation on the
stock.
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