Johnson Controls Inc. (JCI) has taken a legal action in the Delaware Chancery Court to dissolve its 5-year joint venture with French battery maker Saft Groupe SA due to a “fundamental disagreement” about the direction and scope of the joint venture. However, Saft has opposed to its partner’s move, failing to understand the legitimate grounds for the dissolution.
The Johnson Controls-Saft Advanced Power Solutions joint venture was formed in January 2006 to develop, manufacture and sell lithium-ion batteries for hybrid and electric vehicles. The joint venture opened the world’s first lithium-ion manufacturing facility for hybrid electric vehicles in 2008 in Nersac, France for producing lithium-ion batteries for hybrid, plug-in, fuel cell and electric vehicles.
The joint venture also has a plant in Holland, Michigan, where cell production is slated to launch later this year. These apart, it has a 58,000-square-foot Battery Technology Center in Milwaukee, Wisconsin, which is the largest and most sophisticated automotive battery research and development, engineering and validation facility, including cell design, system engineering, manufacturing, prototype assembly, testing and integration, in the U.S.
The joint venture has production contracts with Daimler Mercedes S-Class hybrid, BMW 7-Series hybrid, Chery small sedan hybrid, Azure commercial delivery trucks hybrid Electric and Ford Motor’s (F) plug-in hybrid electric vehicle (PHEV). It has development contracts with Ford, General Motors (GM), SAIC, Daimler (DDAIF) and United States Advanced Battery Consortium (USABC).
Johnson Controls stated that it wanted the partnership to have more flexibility and access to alternative technologies. With the dissolution, it will buy out Saft's stake in the venture. Saft revealed that the net asset value of the venture was about €45 million ($64 million) at the end of March 2011.
Johnson Controls, a Zacks #3 Rank (Hold) stock, reported a 31% increase in profit to $383 million (excluding non-recurring items) in the second quarter of fiscal 2011 from $292 million (excluding non-recurring items) in the same quarter of previous year. On earnings per share, profits improved 30% to 56 cents from 43 cents per share in the prior year, beating the Zacks Consensus Estimate by a penny.
The improvement in earnings during the quarter was attributable to higher sales on the back of the company’s strong position in the key geographic markets. Net sales in the quarter grew 22% to $10.14 billion, which was higher than the Zacks Consensus Estimate of $9.25 billion.
The company anticipates revenues to increase 15% to $39.5 billion in fiscal 2011, up from the previous forecast of $38.5 billion. The increased guidance was driven by growth expectations for Building Efficiency and a stronger Euro. However, higher Building Efficiency revenues will be partially offset by a negative impact associated with automotive production disruptions in Japan in the third quarter.
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