Though it has forecast a recovery for units supplying the US residential and commercial construction sector in the second half of next year, Johnson Controls remains cautious about prospects in the auto sector.
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“We have pockets of growth and pockets of softness right now and we are seeing how they will play out for us,” chief executive Stephen Roell told Dow Jones Newswires.
The Milwaukee-based company is realigning production after steep cuts to counter weakness in the construction and auto segments, which account for a half and a third of revenue, respectively.
Roell has cut 15,000 jobs, most of them from the auto business, to adjust to the slide in global demand, the news agency said.
Auto executives remain uncertain about future demand levels after the huge slide in demand following the global credit crisis. Roell said Johnson could break even with US industry sales of 8.3m cars and trucks, compared with sales of 11-12m before the latest round of cuts. Sales this year are expected to be around 10m.
In Europe, the breakeven is now 14.3m units, Roell told Dow Jones.
Auto production in North America and Eastern Europe won’t return to 2008 levels until 2012, Johnson Controls’ automotive unit head Beda Bolzenius added.
The report noted that Johnson Controls’ shares closed on Tuesday down 2.4% at US$26.48 as it forecast diluted earnings for the 2010 fiscal year of between $1.35 and $1.45 a share on revenue of $31bn compared with analysts’ expectations of $1.44 a share and $30.15bn in revenue.
Revenue in the auto business will grow 13%, while its automotive battery unit will report a 17% increase and building services will climb 3%, the report said.
According to Dow Jones, analysts have raised concerns about the lack of short-term growth potential and also cited the company’s order backlog which was cut in half to $2.5bn as automakers cancelled or delayed product launches.
For the fourth fiscal quarter, which ended on 30 September, earnings will be between 40 cents and 42 cents a share with all automotive regions posting a profit, Dow Jones said.
The mean earnings estimate of analysts surveyed by Thomson Reuters was 39 cents a share. Johnson Controls will announce Q4 results on Tuesday, 27 October.
