Auto Interior Behemoths Merge In Joint Venture

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In a deal that is emblematic of how the rapid growth of the auto industry in China is changing the landscape, Johnson Controls is spinning off part of its collection of automotive assets to form a new joint venture with an expanding Chinese company that will focus on automotive interiors.

JCI and Yanfeng Automotive Trim Systems Co. Ltd., a wholly owned subsidiary of Huayu Automotive Systems Co., Ltd., the component group of Shanghai Automotive Industry Corp., announced they had signed a definitive agreement forming the new venture where Yanfeng will hold a 70 percent stake and JCI the remaining 30 percent. The noncash transaction creates the largest automotive interiors company in the world with annual revenues of approximately $7.5 billion.

Big suppliers such as JCI and Huayu, like other companies in the automotive space, have proven quite capable with a diverse roster of automakers. However, the proposed spin-off does create some interesting crosscurrents in this particular case. SAIC, HASCO’s parent company, is General Motors’ principal partner in China and as well as other parts of Asia, while JCI has been the principal supplier of interior components for Toyota’s operations.

The deal underscores how the rapid growth of the Chinese market is re-arranging the global automotive market. Major suppliers from Europe and North America now have major operations in China while Chinese suppliers are pressing hard to bring their operations up to global standards. GM, for example, is now using Chinese companies to provide sophisticated equipment in its newest plants in China.

The new JCI-Yangfeng joint venture will be headquartered in Shanghai where SAIC is based with global engineering, development and customer centers in the United States, Europe, China, Japan and India. The product portfolio will include instrument panels and cockpit systems, door panels and floor consoles.

The transaction is subject to limited conditions and is expected to close in the first half of calendar year 2015. 

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