Johnson Controls CEO Shifted Focus
26 January 2016 - 7:02PM
Dow Jones News
(FROM THE WALL STREET JOURNAL 1/26/16)
By Bob Tita
Alex Molinaroli spent nearly three decades working at Johnson
Controls Inc. as it built itself into a large manufacturing
company. He has spent much of his two-plus-years as chief executive
working to pull it apart.
Mr. Molinaroli, 56 years old, came in as the firms CEO in
October 2013 determined to reduce the Milwaukee-based company's
reliance on car seats, dashboards, roof liners and other automotive
components. Those auto-related businesses -- built up under his
predecessors with a series of acquisitions -- accounted for more
than two-thirds of the company's annual revenue, which totaled
$42.7 billion in fiscal 2013.
But Mr. Molinaroli argued that continued exposure to the auto
industry caused investors to discount its stock to account for
sharp swings in vehicle demand and typically low margins on sales
of auto parts.
Just the ninth CEO in the company's history -- it was founded in
1885 -- Mr. Molinaroli set out to recreate Johnson Controls with a
focus on higher-margin businesses mostly connected to providing
climate-control equipment and other systems for commercial
buildings, schools and hospitals. The deal announced on Mondayto
merge with Tyco International PLC doubles down on that strategy,
resulting in a much larger company but one focused mostly on
building operations.
Johnson Controls already owned York-brand heating and air
conditioning gear and the systems to control it, giving Mr.
Molinaroli a base to build on. But the pivot from the automotive
industry also was risky given the size of that business: Johnson
Controls was the world's sixth-largest supplier of parts based on
sales in 2013. The previous CEO, Stephen Roell, had invested more
than $1 billion inthe auto-seating businesses about two years
before retiring.
Mr. Molinaroli wasted little time executing his plan. Even
before officially taking the CEO job, he began selling parts of the
automotive electronics business. In 2014, when he couldn't find an
outright buyer for the company's low-margin auto-interiors
business, he spun it off into a joint venture with Chinese supplier
Yanfeng Automotive Trim Systems Co.
The biggest move came last July with a plan to spin off the
auto-seating business and remaining auto lines to shareholders -- a
move that would slice off more than half of Johnson Controls'
annual sales and complete its exit from supplying components for
new vehicles. The new company, which will be called Adient, is
scheduled to start trading this fall.
Mr. Molinaroli, who joined Johnson Controls in 1983 as part of
its building-efficiency unit, has used the proceeds from the sales
to bolster the buildings business, buying ventilation-equipment
maker Air Distribution Technologies Inc. for $1.6 billion and
striking a deal for a 60% stake in Hitachi Ltd.'s commercial
air-conditioning business. Johnson Controls expects revenue of
about $32 billion in the current fiscal year, which ends Sept.
30.
Mr. Molinaroli's tenure hasn't been without hitches. In 2014,
the company's board fired a management consulting firm following
his disclosure of an extramarital affair with one of the firm's
principals. The company's board determined that no misuse of the
company's assets had occurred but said he hadn't complied with the
company's ethics policy and reduced his 2014 performance incentive
bonus by 20% over the incident.
Once the merger with Tyco is complete, which is expected by the
end of 2016, Mr. Molinaroli will stay on as CEO and chairman for 18
months. After that, he'll be replaced as CEO by Tyco chief George
Oliver; Mr. Molinaroli will turn over the chairman's title to Mr.
Oliver 12 months after relinquishing the CEO's job.
Mr. Molinaroli said in an interview, "Certainly we've got a lot
on our plate, [but] the time frame is right" for him to exit the
company.
(END) Dow Jones Newswires
January 26, 2016 02:47 ET (07:47 GMT)
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