Vehicle interior and battery specialist Johnson Controls on Friday said it would book an additional pre-tax restructuring charge of US$200-$215m for its fiscal 2009 second quarter but expected a return to profitability in its third and fourth quarters with its interiors business expected to break even by the end of the fiscal year. The restructuring includes unspecified workforce reductions and the closure of 10 manufacturing plants expected to be completed in 2010 with a planned payback of 1.5 years.


“The ‘Automotive Experience’ (interiors) restructuring is targeting excess manufacturing capacity resulting from lower industry production in Europe, North America and Japan,” the supplier said in a statement.


JCI said it now expected vehicle production in its 2009 fiscal year to be 8.8m units in North America and 14.3m in Europe, lower than forecast in December 2008.


“On an annualised basis, North American production in the March quarter was at a 27-year low,” the tier one supplier noted.


“Initiatives in the company’s Power Solutions (battery) business are focused on optimising manufacturing capacity. The actions reflect lower overall demand for original equipment batteries resulting from lower vehicle production levels.”


Johnson Controls said the second quarter impact of the restructuring would be partially offset by an approximately $75m non-recurring tax benefit. The company had said previously it expected tax benefits in the second, third and fourth quarters of fiscal 2009 to total $150 to $200m.


In the fourth quarter of fiscal 2008, the supplier announced a $495m restructuring program with cost reduction initiatives across all three of its businesses and said today these restructuring actions were approximately two-thirds complete.


“The timeline for the actions is ahead of schedule, aided in part by the lower automotive production levels, which enabled the closure of plants sooner than originally planned.


“The benefits from the 2008 restructuring programme will begin to meaningfully impact the company’s financial performance in the fiscal 2009 third quarter.  The company continues to expect these initiatives to be substantially completed by the end of fiscal 2009 and forecasts that they will result in a $0.20 to $0.25 earnings per share benefit in 2010,” JCI said in a statement.


It added it did not expect any further restructuring in the foreseeable future.