Johnson Controls to Spin Off Auto Interiors Unit

Johnson Controls (NYSE:JCI) plans to spin off its auto-interiors business into a joint venture with China’s Yanfeng Automotive Trim Systems, as the diversified manufacturer shifts its focus to other units.

Johnson Controls said it will hold a 30% stake in the new company, which will become the world’s largest producer of door panels, instrument panels and other parts used in car interiors. The combined auto-parts maker will see revenue of about $7.5 billion a year.

The Johnson Controls unit currently has more than 20,000 employees and generates roughly $3 billion in annual revenue.

Under the agreement, Johnson Controls will keep its auto-seating business. The company is the top supplier of seats worldwide.

The joint venture will be headquartered in Shanghai with global engineering, development and customer centers in the U.S., Europe and elsewhere.

Johnson Controls said the transaction is expected to close in the first half of 2015.

Chairman and CEO Alex Molinaroli said the move “creates a strong combined company with a market leading position and a foundation for sustained global growth. This also aligns with Johnson Controls’ corporate commitment to China, which is increasingly becoming a major center for the global automotive industry.”

Johnson Controls has sought to bolster its non-auto operations, which book wider margins. Last month, the Milwaukee-based company agreed to pay $1.6 billion for Air Distribution Technologies, a provider of ventilation systems for residential and commercial buildings.

Rival auto-parts maker Visteon (NYSE:VC) recently said it intends to sell its interiors unit to Cerberus Capital Management for “nominal consideration.”

Shares of Johnson Controls drove 4% higher to $46.59 in recent trading. As of Friday’s close, the stock was down 12.7% year-to-date.