Johnson Controls Inc

Johnson Controls, Inc undertakes in building competence, automotive know-how, and power solutions business world over. It is proficient in construction industry, blue-prints, develops markets, and installs integrated heating, ventilating, and air conditioning structures, and the construction of control systems, managements, and safety and motorized equipment. This entity also offers methodical services, energy control consulting as well as operations of realty portfolios for the non-residential structural market. Collectively, this business presents residential air conditioning and heating structures, and mechanized refrigeration artifacts. The firm’s automotive experience industry designs and process interior artifact and structures for commuters care and light vehicles, including vans as well as sport/intersect utility automotives.

It presents seating structures and elements; cockpit structures consisting of mechanism plates and clusters, information exhibitions, and cadaver controllers; overhead structures, like headliners and electronic expediency facets. This company nevertheless, offers vehicle internal blueprint structure for innovative apparatus processing. Its power resolutions industry creates lead-acid vehicles batteries that support automotive novel machine producers and the general vehicle battery aftermarket. The company manufacturer’s lead-acid batteries, and also produces absorbent goblet mat and lithium-ion battery expertise to power hybrid automotives. Founded in 1885, in Milwaukee the firm was initially referred to as Johnson Electric Service Company and altered its name to Johnson Controls, Inc by 1974.

Introduction

Johnson Controls is a global technological and industrial company with headquarters in Milwaukee, Wisconsin, U.S.A. The company has operations in more than 150 countries in the world. Its main focus is development of products, services and solutions that make maximum and efficient use of energy in buildings; interior systems of automotives, lead –acid batteries for automotives and sophisticated batteries for hybrid and electric vehicles (The Asssociated Press, 2011). The company was started in 1885 by its founder professor Warren S. Johnson after the invention of the electric room thermostat and has grown to specialize in three divisions; automotive inventions, power solutions and building efficiency. The company was recently voted by the Institutional Investor Magazine as one of the top companies in America for Best Investor relations (Jaffray, 2011). This is because it has continued to pay shareholders dividends since 1887 when the company gave its first dividends up to today without failure.

The company employs about 142,000 people, who work in its operations in its 290 facilities in 30 countries and 1300 locations around the world (Johnson Controls, 2011). Since its establishment in 1885 it has become a multi-billion dollar corporation and a worldwide leadership in its three divisions due to its high quality and innovative products. Its net sales increased according to the CEO Bruce MacDonald from $8.3 billion in 2010 to $10.1 billion in the first quarter of 2011, a 22% increase (Jaffray, 2011).

The company is listed in the New York Stock Exchange with its shares trading at 41.00 with a rise in net income for the second quarter by 29% to $354 million (Jaffray, 2011). it set higher targets for the third quarter to $500 million or 53 cents per share. This according to Bruce MacDonald is in consideration of the prospects for production cuts by automobiles manufacturers in North America and Europe which is predicted to be cut by 400,000 units from April to June. The cuts are because of the Japanese earthquake early this year as Jaffray, (2011).

Products

Johnson Controls Inc designs a wide range of products in three categories: building, automotives and power solutions. In the building category, it designs a line of heating, ventilation and air conditioning products for both residential and light commercial markets.  These are in the brand names of Luxaire, Coleman, Mini split systems (Johnson Controls, 2011).

It also manufacturers commercial and industrial refrigeration controls and controllers for supermarkets, restraints and convenient stores and also food and beverage refrigeration systems and natural gas compressors for industries. These include compressors, packaged equipment condensers, evaporators, air handler’s vessels and heat exchangers (Johnson Controls, 2011).

In the building division the company makes the Metasys Building management system and facility explorer control system products and services for all kinds of buildings. These combine building automation and information technologies (Johnson Controls, 2011).

In power solutions brands the company makes several brands for lead-acid batteries. These include Optama, Varta, LTH, Heliar and private brands. The company also manufactures hybrid and electric battery systems in Milwaukee Battery Technology Center and other centers that conduct research and development (Just-Auto, 2010).

In automotive interiors Johnson Controls offers a wide range of electronic solutions for driver information, infotainment, connectivity, body electronics and Homelink. These are tailor made for specific customers and are designed to suite each vehicle interior. These are designed and in seven research and development centers in Europe and North America. The vehicle interiors division also makes a wide range of products including seats, cockpits and instrument panel, floor consoles, lighting, climate seat systems, seat safety and overhead product among others (Johnson Controls, 2011).

The company has grown tremendously in its 125 years of existence since 1885 both in its products range and diversity. This can be attributed to its innovations of coming up with products that exceed customers expectations every time a new product is launched. This has been possible according to (Johnson Controls, 2011) dues to innovations and continuous improvement in quality, services, productivity and the time compression.

The History of Johnson Controls Inc

Johnson Warren while a collage professor at Whitewater, Wisconsin, created many devices such as pneumatic tower clocks, electric storage batteries, wireless telegraph lines, steam powered vehicles among others according to Johnson Controls, (2011). He received more than 50 patents for his creations most of which were devices for exploiting the sustainable power generated from steam, air or fluid pressure. However, his first patent on electric room thermostat he had developed to make his students more comfortable in class from the distraction of the janitor who came regularly to check temperatures, was what his legacy is known mostly for (Johnson Controls, 2011).

In 1885, Johnson and a group of Milwaukee investors launched a company by the name Johnson Electric Service Company set in Milwaukee with Johnson as the vice president of the company and its treasurer.

The company started manufacturing, installing and servicing automatic temperature regulation systems for buildings.  Johnson and his company designed and manufactured many other gargets such as steam and gas powered automobiles, wireless telegraph communication and electric storage batteries. In 1901 the company started manufacturing steam powered cars and trucks and later launched gasoline cars with luxurious leather and wood interiors (Johnson Controls, 2011).

In 1902 the company was renamed Johnson Service Company and was installing thermostats in many parts of the world including a palace in Tokyo, another one in Madrid, Spain, the city hall in Toronto, Canada and a factory in Warsaw, Poland. There was a building boom in the 1900s and the company was needed to install temperatures controls to skyscrapers, restraints and stores. However, in 1911 Warren Johnson died and Harry Ellis took over and sold the automotive and clock part of the business to concentrate on building controls (Johnson Controls, 2011). Ellis focused on efficient manufacturing and customer service.

In 1911, Johnson Services, Globe Electric Company in Milwaukee started manufacturing electrical equipment for street cars, street lights and later automotive battery production. The Hoover Steel Ball company in Ann Arbor, Michigan which was part of the Johnson began producing interior parts of automobiles in 1913. During the Worlds War 1, the U.S government classified temperature control industry as non essential and therefore not needed in the war effort. To get business the company turned to government buildings and retrofitting old buildings with new controls. Things turned for the better after the war ended, business picked and later a dual Thermostat to lower temperatures during off hours and to adjust indoor temperatures based on outdoor temperatures was realized by the company. When the Great Depression hit and fuel saving was a necessity Johnson products were high in demand (Global Content Management, 2005).

In 1940, Johnson Service Company was sold to the public, went to the stock market and began trading its shares. During the World War II the company was classified as essential to war effort by the government. It was contracted to provide the defense facilities with temperature and humidity control systems, gas leak detectors, radiosondes for gathering weather data in airplanes and echo boxes for radar sets. This greatly built the company in terms of products diversification and profitability demand (Global Content Management, 2005).

After the war, the company again gained a lot of interest due to renewed awareness in air conditioning as a comfort and health aspect. This is demonstrated in the 1955 discovery and mass production of polio vaccine where the company installed temperature regulating device in the virus incubation rooms. Consequently, large buildings had installed many control devices that the company had to be checked regularly during the day. This brought another business aspect into Johnson Control, pneumatic control centre, established in 1956. This allowed temperature control devices for a building to be monitored from one point. This propelled the company to sales of up to $50 million in 1959 (Johnson Controls, 2011).

In 1960s, space exploration was on and so was Johnson Service as it made mission control equipments for Apollo and Saturn programs. In the same period the company acquired Penn Controls businesses in Canada, Netherlands, Argentina and Japan. A new innovation into building control was introduced in 1972 with the invention of the mini-computer system which could reduce fuel consumption b 30% demand (Global Content Management, 2005). In the era of rising oil prices, this was highly desirable in the market.

Johnson Services Company changed names again to Johnson Controls in 1974 and rewarded itself by acquiring Globe-Union, a big manufacturer of automotive batteries in 1978. Soon the sales hit $1billion. In 1985, Hoover Universal and Ferro Manufacturing were the next acquisitions and the automotive seating was the next division of Johnson Controls business supplying to the automotive original manufacturers.

A ground breaking innovation of the Metasys building management systems in 1990 revolutionized the building control business. This combines management of a buildings environment, lighting, fire safety, security and energy use. Today this innovation offers web and wireless solutions. The company doubled its building controls business by acquiring York International in 2005 (Global Content Management, 2005). The company now leads in provision of gear and controls for heating, ventilation, air conditioni9ng, security systems and refrigeration for all sorts of buildings; residential, commercial and industrial with a variety of brands.

In 1996, the company acquired Prince Automotive which expanded its automotive business by manufacturing seating systems, cockpit modules and complete interiors. In 2000 the company was supplying automotive interiors for 35 million vehicles a year. This business has expanded to markets in Europe and joint ventures in China bringing a lot of business by 2010 (Johnson Controls, 2010).

Johnson Controls became the biggest manufacturer of lead-acid batteries in 1985. Today in its power solutions division, it is producing lithium-ion batteries for mass hybrid vehicles in a joint project with Saft. To this end, the company has received $300 million in grant in 2009 from the US government to establish industry for producing hybrid, plug-in and all electric vehicles in Holland, Michigan (Johnson Controls, 2010). With all this growth and diversification, the company still maintains its values of sustainability, innovation, customer satisfaction, integrity and a culture of employee engagement. This has been the secret of the Johnson Controls growth.

Business Reports Results for Johnson Controls

This year, the company has recorded net sales of $10.1 billion in the second quarter compared to $8.3 billion in the second quarter in 2010. This is an increase of 22% as Johnson Controls, (2011) reports. The report also indicates that the net income in this quarter is $354 million which translates to $0.51 per diluted share. Last year the same income was $292 million or $0.4 per share. This is because of increased profitability of the company in this quarter as the Chairman Stephen Roel is quoted in the report saying.

In 2010 the sales for the company were$16.6 Billion with North America contributing 41% of the sales, Europe 49% and Asia 11%. Automotive sales were the highest contributing 79%, electronics covering 6% and interiors making up 15% of the total sales (Johnson Controls, 2010). The report again says that China market has experienced tremendous growth in 2010 providing $3.1 billion in unconsolidated revenues and took a 45% share of the market for automotive seating. This was in the company’s 47 manufacturing locations, which employ 18,000 people and have a full engineering and development capacity.

Building efficiency

In this division of Johnson controls, sales for the second quarter of 2011increased from those of last year by 18% reaching $3.5 billion while the 2010 were $3.0 billion (Johnson Controls, 2011). From this report, the division also recorded an increase in all its sections with Asia recording the highest increase of 31% and global Workplace solutions hitting 27% mark.  It also recorded a backlog of $5.1 billion which is an increase of 18% over the same period last year which reflected a double digit increase in all regions. The orders made for this year in this sector also rose by 21%. This resulted to an income of $132 million which is a 27% increase compared to last year’s $104 million. This resulted from high volumes of sales made for that year.

In building efficiency business in 125 countries revenues for 2010 amounted to $12.8 billion with nonresidential buildings contributing 92% of the revenues and residential 8% (Perez & Farnham, 2010). North America region was the highest contributor with 53% of the revenue while Europe came second with 29% and finally Asia with 18% of the revenues. The company markets these products and services and are preferred due to provision of comfortable indoors environment at the lowest operation cost and therefore at the lowest prices to the customers as Perez & Farnham, (2010) and Johnson Controls, (2011)continue to say . There are also the benefits derived from reduced energy use and improved operational costs. The growth in this area was enhanced due to markets recovering from the market crush and long term and short term growth opportunities coming from emerging markets.

In non-residential buildings the reports say the market is fragmented but has significant opportunity. These are arising in the markets trends facilitated by the necessity for energy efficiency, climate change legislation and outsourcing. This division employs a service team with large number of technicians and broad capacity in the branch locations. The company has 149 branches in North America, which generated $6.3 billion in 2010, Europe with 161 and 4 manufacturing generating $3.7 billion; Asia with 144 branches and 4 manufacturing generated $1.7 billion; Latin America has 30 branches and 1 manufacturing plant generating $0.6 billion and; finally Middle East with 17 branches and 3 manufacturing generated$ 0.5 billion.

Energy solutions

In the second quarter of 2011, the company realized a 19% increase in sales to hit $1.4 billion mark form the previous year’s $1.2 billion (Jaffray, 2011). This was all due to increase in aftermarket and original equipment batteries volumes. In the Americas market there was a 17% increase and in Asia 163% as Jaffray reports. This the company attributes to increased market share, increase in manufactured volumes due to the launch of a new plant in China and a consolidated joint venture in Korea. It is also expanding its battery manufacturing in China from four million units to 30 million by 2015 which is expected to increase the sales volume (The Asssociated Press, 2011). Overall, the income from this division increased by 33% which represents $178 million as compared to $134 million last year.

This is attributed to increase in volumes and efficiency in operations of the company. Energy solutions service vehicles novel machinery producers and the battery aftermarket by presenting hi-tech battery expertise, coupled with structural design, marketing and utility know-how. Management analyses the operations of the sections centered elementarily on section earnings, which stand for earnings from unending activities before levies and non-controlling profits in addition to net financing expenses. The wide ranging corporate as well as other overhead charges are allotted to business sections in determining section earnings. Fiscal data relating to the organizations recordable sections is outlined below in millions.

Table 1 below shows the financial information of Johnson’s Controls, Inc.

The company has also made major investments in the power industry by building a lead recycling facility in Mexico and another one in South Carolina which is expected to be complete by 2012 (Johnson Controls, 2011). This will help the company to recycle about 50% of North America lead requirements. The plans are also underway to increase the capacity of AGM lead-acid batteries in the US by 2013 to 6.8 million due to increase in contracts for the same in the country according to the website.

In this sector, North America provided the largest source of revenue for Johnson Controls. K-12 was the biggest customer contributing 30% of the revenues followed by higher education with 16% and then the state government with 15% and local government with 13% (Johnson Controls, 2011). The federal government and health care were the least contributors with 8% and 7% respectively. This made the company the largest energy solutions provider in North America with approximately 25% share. In this sector a good example of the company’s customer is the contract with the University of Massachusetts Amherst (Perez & Farnham, 2010). This requires the company to provide a campus wide improvement in energy use so as to reduce the costs and meet sustainability goals. This will cost the company $40 million in the 10-year period in retrofits and upgrades bringing in a $55.5 million savings for the campus.

Automotive experience

The automotive sales in the second d quarter increased by 25% which accounts for $ 5.2 billion compared to those of 2010 which stood at $4.2 billion (Johnson Controls, 2011). This was as a result of increased production and introduction of new programs in interior and seating. In the North America market the revenues increased by 22% compared to those of last year while in Europe sales increased by 26% and in Asia by 37%. In China alone unconsolidated revenues were up by 31% which amounted to $979 million. In this quarter also 18 launches were made of which seven were new seating programs and seven interior programs while four were global electronics program.

This saw the income of the quarter come to $247 million after acquisition-related costs were deducted. This is a rise of 31% compared to $189 million realized last year as the website reports. This increase is attributed to increased volumes of sales and improvement in operational efficiencies. The company has acquired CR Hammerstein which closed in February 2011. This will bring non-recurring acquisition and integration costs of $0.05 per share. The two charts below shows the competitive edge of Johnson’s Control Inc as a leading international producer of structures and elements for seats, overhead structures, doors, cockpits and electronics. The graphs and figures below shows the automotive share of Johnson’s Control, Inc, with sixty percent increase in backlog sales.

Conclusion

There is no doubt that Johnson Controls is a global leader in the innovation and manufacture of sustainable products and services as the financial summaries show. In this era of increased fuel prices and calls to deal with global warming and the resultant climate change once and for all, the company has demonstrated that sustainable development is not only possible but also profitable. The history of the company also shows how continuous improvement of products to address the growing needs of the market propels a company ahead of its pact. It is wise for companies to design new products that address the concerns and needs of the changing environment and to put sustainability at the very core of its building blocks.