Johnson Controls Throttles Back

Johnson Controls thinks it has found a short-cut around Detroit's business pile-up. The auto-components maker is expanding its cost-reduction program with the hope of being profitable in the second half of this year.

Johnson Controls (nyse: JCI - news - people ), the maker of automotive interiors, is the latest casualty of the demand draught. The Milwaukee-based auto supplier announced Friday that it would be closing 10 plants and making layoffs in an effort to return to profitability for the second half of 2009. The company did not disclose how many employees would be affected by the layoffs and has yet to return calls for comment.

Shares of Johnson Controls opened the trading day lower Friday, losing 1.7%, or 22 cents, to $12.68, showing investors have little faith that the company can deliver on its promises of profitability.

The restructuring will cost the company between $200.0 million and $215.0 million in the second quarter, but will be slightly offset by a nonrecurring tax benefit of $75.0 million.

"While we don't expect near-term recoveries in our markets, we believe we can manage through this environment from a position of strength and enhance our ability to gain further market share while improving our margins," said Chairman Stephen A. Roell. "Earlier this month, we completed a debt offering that significantly improves our liquidity and gives us the flexibility to take advantage of opportunities that may arise as a result of the economic environment." The debt offering completed in early March was a sale of 6.5% convertible notes due 2012 for an aggregate total of $852.5 million.

The company announced in the fourth quarter a $495.0 million restructuring program that would provide cost reductions across all three of its businesses: automotive, building efficiency and power. The automotive unit makes interior systems for passenger vehicles, the power unit develops lead-acid automotive batteries, and the building efficiency unit makes heating and ventilation systems for commercial buildings. The company said the restructuring is currently two-thirds complete.

The restructuring is meant to deal with the markedly lower demand that car makers and their suppliers have had to deal with since the recession began. Americans have virtually stopped buying new cars in favor of used cars and spending money to fix cars they already own. Johnson Controls said it expects vehicle production in its 2009 fiscal year to be 8.8 million units in North America and 14.3 million units in Europe, below its forecast in December 2008 of 9.3 million units in North America and 16.2 million units in Europe.