Transcript No Slide Title

Growth Through Effective Partnering
Garry Cardwell
Vice President and General Manager
China, South East Asia, India, Australia
Johnson Controls Inc.
Data source : Global Insight Automotive, Boston Consulting, PWC
Goldman Sachs & JCI Asia Pacific Marketing Team
Content

Johnson Controls Corporate Overview

Why It Makes Sense to Partner in China

How Johnson Controls Approaches Making Successful Partnerships

Johnson Controls’ Experience in Partnering
Data source : Global Insight Automotive, Boston Consulting, PWC
Goldman Sachs & JCI Asia Pacific Marketing Team
Diverse & Strong
Business Segments
AUTOMOTIVE GROUP (AG)
The global leader,
serving automakers
around the world.
 Founded in 1885
 123,000 employees worldwide
 2004 sales of US$ 26.6 billion
Data source : Global Insight Automotive, Boston Consulting, PWC
Goldman Sachs & JCI Asia Pacific Marketing Team
CONTROLS GROUP (CG)
Making customers'
buildings more energy
efficient, comfortable,
safe and productive.
Automotive Group
Seating
Overhead
Door
Panel
Data source : Global Insight Automotive, Boston Consulting, PWC
Goldman Sachs & JCI Asia Pacific Marketing Team
Instrument
Panel
Electronics/
Storage
Complete
Interior
Integration
Battery
AG Worldwide
• Over 6,000 in Engineering, Design, R&D
• 7 Technology Centers (Asia-Pacific):
– Pune, India
– Ayase, Japan
Recent Acquisitions:
– Ansan, Korea
• Ikeda Bussan, Japan
– Changchun, China • Sagem Automotive Electronics
– Shanghai, China
Group, France
– Malaysia
• Borg, Germany
– Australia
• Hoppecke, Germany
• Varta’s Automotive Battery
Group, Germany
• Grupo Imsa, Mexico
• Recent LOI for Delphi Battery
Data source : Global Insight Automotive, Boston Consulting, PWC
Goldman Sachs & JCI Asia Pacific Marketing Team
Shanghai, China
Asia-Pacific Operations
• Established first facility in
1997
• Operations in 9 Asia-Pacific
countries: Australia, China,
India, Japan, Korea,
Malaysia, Taiwan and
Thailand
• 10 joint ventures, 11,000
employees
• 37 manufacturing plants
• 25 OEM customers
Data source : Global Insight Automotive, Boston Consulting, PWC
Goldman Sachs & JCI Asia Pacific Marketing Team
CHANGCHUN
SHENYANG
BEIJING
KOREA
YANTAI
CHINA
YANCHENG
CHONGQING
JAPAN
SHANGHAI
FUZHOU
GUANGZHOU
INDIA
PUNE
TAIWAN
THAILAND
CHENNAI
MALAYSIA
AUSTRALIA
ADELAIDE
MELBOURNE
Johnson Controls in China
• Completed first JV agreement in 1996
– 6 primary, 4 subsidiary JVs today.
• One of the largest suppliers of seating
systems and components in China.
• 18 auto seating and interior plants, 2
technical centers.
• Capabilities include product design,
product evaluation, prototype build,
production verification, production
support, benchmarking, industrial
design and local supplier
development.
Data source : Global Insight Automotive, Boston Consulting, PWC
Goldman Sachs & JCI Asia Pacific Marketing Team
CHIN
A
CHANGCHUN
SHENYANG
BEIJING
YANTAI
YANCHENG
CHONGQING
SHANGHAI
FUZHOU
GUANGZHOU
Why It Makes Sense to Partner in China
Data source : Global Insight Automotive, Boston Consulting, PWC
Goldman Sachs & JCI Asia Pacific Marketing Team
A Color of Complexity: Three layers of networks, Geo-political barriers…….
China OEM
Xian
Hafei
CNHTC
Southeast
Changan-Ford
FuQi
Chongqing
Changan-Suzuki
Changan
Changan
Nanjing
Sichuan
FAW-Jilin
Merrie
Iveco
FAW
Geely
Yueda-Kia
Yuejin
Truck
Daihatsu
FAW-VW
Qinchuan
Middle Circle:
Purchased OEMs
NJ-Fiat
Qingling
FAW-Yangzi
Red Flag
Toyota
ULion
Xiamen Auto
FAW-Hongta
Harbin
Haoqing
Inner Circle:
Core OEM
CHNTC
Jiang
ling
TAIC
Mazda
Charade
Transit
Toyota
Yantai SGM
Aeolus
Outside Circle:
OEMs which are
outside the "Big Three"
Yizheng(SGM)
Yunque
SVW
Int'l OEMs
Future Possibility
Diesel Engine
Zhengzhou Nissan
DF-Honda
DF - Nissan
Jinbei GM
云雀
Yantai Daiwoo
Nissan-Diesel
Dongfeng
SAIC
Share in Market
SGM
Dongfeng 15%
DF-Honda
Engine
SGM Wuling
DF -PSA/Citroen
Other 44%
Dongfeng Renault
Liuzhou MPV
SAIC 18%
Chery
Hangzhou Bus
RENAULTGuangzhou Honda
FAW 23%
Canghe
Hefei
An Kai
Hyundai
Jianghuai
Jinke
CBA
BAIC
Changfeng
Jianghuai
BJ Jeep
(Pajero)
Songliao
Futian
BMW
Top 7 China OEMs
Keys To Partnering Success
Find Strong JV Partners to Share Risk
SAIC
FAW
Strong OEM Connections with
Current Business
DONG FENG
GUANGZHOU
CHANGAN
BAIC
Solid Existing Partner
Relationships with OEM
Data source : Global Insight Automotive, Boston Consulting, PWC
Goldman Sachs & JCI Asia Pacific Marketing Team
CBA
Keys To Partnering Success
Find Strong JV Partners to Share Risk
Existing Facilities
and
Supply Base
Lower Initial Investment
Local Market Knowledge
Legend
GM Plant
Ford Plant
DCX Plant
Honda Plant
Ren/Nissan Plant
Toyota Plant
Mitsubishi Plant
BMW Plant
VW Plant
Hyundai/KIA Plant
2005 Annual Volume, CSM Q1 2005 Forecast
Country volumes consist of only the above 10 OEMs
Data source : Global Insight Automotive, Boston Consulting, PWC
Goldman Sachs & JCI Asia Pacific Marketing Team
Keys To Partnering Success
Find Strong JV Partners to Share Risk
Management
Talent
Open to Learning
Reduced Expat Cost
Data source : Global Insight Automotive, Boston Consulting, PWC
Goldman Sachs & JCI Asia Pacific Marketing Team
Willing to Adopt Best Practice
Systems Quickly
Manufacturing
Purchasing
Leadership
Financial
Keys To Partnering Success
Find Strong JV Partners to Share Risk
Changchun Joint Venture
Est in 2001
Products: Seat, Door Panel, Instrument Panel, Headliner, Cluster,
Parcel Tray
Beijing Joint Venture
Est in 1997
Products: Seat, Door Panel, OHS
Shenyang Joint Venture
Est in 1999
Products: Seat, Door Panel, Instrument Panel
Chongqing Joint Venture
Est in 2003
Products: Seat, Parcel Shelf
Shanghai Joint Venture
Est in 1998
Products: Seats, headliner, visor, OHS
Guangzhou Joint Venture
To be est in 2004
Products: Seat
Data source : Global Insight Automotive, Boston Consulting, PWC
Goldman Sachs & JCI Asia Pacific Marketing Team
How JCI Approaches Making
Successful Partnership in China
Data source : Global Insight Automotive, Boston Consulting, PWC
Goldman Sachs & JCI Asia Pacific Marketing Team
Success Factors
Y = f ( Identifying, Assessing, Executing) = f (X1, X2, X3, X4, X5, X6)
Identify
Assess
Execute
X1
People



X2
Market Due Diligence



X3
Product Strategy



X4
Decision Making



X5
Implementation Method



X6
Soft Factors



Data source : Global Insight Automotive, Boston Consulting, PWC
Goldman Sachs & JCI Asia Pacific Marketing Team
JV Process (Science)
•
•Identification
•
Kickoff
•Assessment
Decision
•
•
Closing
•Due Diligence
•Integration
Handoff
•Operations
•+ Relationships
•ongoing
•-3 months
•-2 months
•100-180 days
•12-18 months
Key output:
Ranking:
Report:
 Regions
 M&A Potentials
 Market
Opportunities
 JV potentials
 Product Lines
 Footprint
 Product Strategy
 Business Plan
Data source : Global Insight Automotive, Boston Consulting, PWC
Goldman Sachs & JCI Asia Pacific Marketing Team
 M&A or JV,
Contracted,
 CAR for
Greenfield
 Execution of
Integration Plan
 Validation of
Business Metrics
Science
A Balance Between Art and Science
Guangzhou Joint Venture
To be est in 2004
Products: Seat
Beijing Joint Venture
Est in 1997
Products: Seat, Door Panel, OHS
It varies on:
• Market Entry Timing
• Global OEM vs. Local Political Leverages
……………
Changchun Joint Venture
Chongqing Joint Venture
Est in 2001
Products: Seat, Door Panel, Instrument Panel, Headliner, Cluster,
Parcel Tray
Est in 2003
Products: Seat, Parcel Shelf
Shenyang Joint Venture
Est in 1999
Products: Seat, Door Panel, Instrument Panel
Shanghai Joint Venture
Est in 1998
Products: Seats, headliner, visor, OHS
Art
Data source : Global Insight Automotive, Boston Consulting, PWC
Goldman Sachs & JCI Asia Pacific Marketing Team
JCI’s Experiences in Partnering
Data source : Global Insight Automotive, Boston Consulting, PWC
Goldman Sachs & JCI Asia Pacific Marketing Team
Partnering: Failure Modes and Success Factors
Reasons JVs Fail –
Things to Avoid
How to Ensure Success
• Financial failure
• Parties don’t trust each other, can’t work
together successfully
• Involved parties have conflicting objectives
• Partners can’t achieve their objectives
•
•
•
•
•
•
•
•
Data source : Global Insight Automotive, Boston Consulting, PWC
Goldman Sachs & JCI Asia Pacific Marketing Team
Strong daily execution
World-class quality
Maintain trust, partnerships
Innovative technology
Localization of materials
Willing to adopt best practice systems quickly
Good partners resolve any differences rapidly
Both partners able to achieve their objectives
Summary / Conclusion

China represents nearly half of the automotive growth for the next
ten years and the market is likely to become one of the Top 3 in the
world.

We will be facing many challenges while the opportunities are
tremendous for both growth and cost reductions.

Forging effective partnerships is critical for success as a supplier.

A successful partnership starts with relationship supported by
transparent objectives, nourished by mutual trust and maintained
through consistency in doing what we say we will.
Data source : Global Insight Automotive, Boston Consulting, PWC
Goldman Sachs & JCI Asia Pacific Marketing Team
Effective partnerships are based on trust
Data source : Global Insight Automotive, Boston Consulting, PWC
Goldman Sachs & JCI Asia Pacific Marketing Team