Johnson Controls Inc.’s $435 million acquisition of the automotive electronics business of Sagem SA of France represents a significant strategic move that takes JCI well beyond its current status as one of the world’s largest suppliers of vehicle interiors.
With Sagem, JCI will be a producer of fuel injectors and engine controllers, putting JCI in a market already saturated by Delphi Automotive Systems Corp., Robert Bosch GmbH, Siemens VDO Automotive and Denso Corp., among others.
Sagem’s one U.S. plant – in Greenville, SC, supplies fuel injectors for gasoline engines. In Europe, Sagem’s customers for fuel injectors and engine controllers are the French automakers.
But Sagem’s business with U.S. automakers is growing. The company has a contract to supply instrument clusters for a future car produced in the U.S. A decision has not been made on whether the contract will require a new plant in the U.S.
JCI announced the Sagem deal on July 25. JCI’s Jim Geschke, vice president and general manager of electronics integration, spoke with journalists Thursday morning at the Management Briefings Seminars in Traverse City, MI.
With $552 million in automotive sales, Sagem also produces multimedia displays. But it’s the instrument cluster business that made Sagem so attractive to JCI, Mr. Geschke says.
With Sagem, JCI will have the internal capability for integrating clusters in a fully dressed instrument panel (IP), which is a growth product for JCI. On the new Jeep Liberty, JCI supplies the full IP, but Mr. Geschke says his company doesn’t make much money on it because other companies supply the components for the IP.
The bottom line: greater profitability for JCI. He declines to estimate, however, by how much margins could improve for certain product lines due to the Sagem acquisition. He says he expects no plant closings or employee cuts as a result of the deal.
Sagem initially was one of several companies that JCI had identified as “peer partners” for integrating electronics in vehicle interiors.
The deal also will help JCI fulfill General Motors Corp.’s handing off of interior development of future vehicles. Mr. Geschke says, however, that the Sagem deal was not necessary for JCI to handle the GM work.
