Johnson Controls, Inc. - Company Profile, Information, Business Description, History, Background Information on Johnson Controls, Inc.

5757 North Green Bay Avenue
Post Office Box 591
Milwaukee, Wisconsin 53201-0591

Company Perspectives:

Johnson Controls, Inc.'s corporate objectives are Customer Satisfaction: we will exceed customer expectations through continuous improvement in quality, service, productivity, and time compression; Technology: we will apply world-class technology to our products, processes, and services; Growth: we will seek growth by building upon our existing businesses; Market Leadership: we will only operate in markets where we are, or have the opportunity to become, the recognized leader; Shareholder Value: we will exceed the median return on shareholders' equity of the Standard & Poor's Industrials.

History of Johnson Controls, Inc.

Johnson Controls, Inc. is a diversified company made up of two main business groups: automotive systems, including seating, overhead and instrument panels, doors, and batteries; and building management and control systems. Johnson is the world's largest independent maker of automotive seating and interior systems, and is a leading supplier of batteries for the original equipment and automotive replacement markets in North America. The company is number one worldwide in building control systems, services, and integrated facility management, serving school districts, hospitals, and other nonresidential building owners. The Automotive Systems Group generates nearly three-fourths of overall revenues, with the Controls Group responsible for the remainder. Over the course of more than a century, Johnson Controls has an impressive track record, including the consecutive payment of dividends since 1885 and 52 straight years of sales increases through fiscal 1998.

Origins in Control Devices

Warren Seymour Johnson was born in Rutland County, Vermont and grew up in Wisconsin. Johnson worked as a printer, surveyor, school teacher, and school superintendent before he was appointed a professor at the State Normal School in Whitewater, Wisconsin, in 1876. He was known as a highly original teacher but Johnson's main interest was his laboratory, where he experimented in electrochemistry. In 1883 he produced the first Johnson System of Temperature Regulation, an electric thermostat system which he installed at the State Normal School.

When Johnson received a patent for the electric telethermoscope, he persuaded Milwaukee, Wisconsin, hotelier and heir to the Plankinton Packing Company, William Plankinton, to become his financial backer in producing the device. Their partnership, the Milwaukee Electric Manufacturing Company, allowed Johnson to resign his professorship so he could devote all his time to his inventions. Although retired from teaching, he would always be called "the Professor." On May 1, 1885, the company was reorganized as the Johnson Electric Service Company, a Wisconsin corporation, in Milwaukee. Plankinton became president and Johnson, vice-president and treasurer.

The Professor continued to invent additional control devices, but he also designed products such as chandeliers, springless door locks, puncture-proof tires, thermometers, and a hose coupling for providing steam heat to passenger railcars. The creations for which the young company received the most recognition were the Professor's impressive tower clocks. He developed a system powered by air pressure that increased the reliability of such clocks. The company built its first big clock in 1895 for the Minneapolis courthouse and a year later built the clock for the Milwaukee City Hall tower. Johnson's largest tower clock was installed in the Philadelphia City Hall. A large-scale floral clock for the Saint Louis World's Fair in 1904 received international acclaim and enhanced the growing reputation of the company. The clocks' success helped prove the usefulness of the pneumatic operations the company was utilizing in its control applications.

At the Paris World's Fair of 1900, Johnson's wireless-communication exhibit won second prize. In the same competition Guglielmo Marconi, developer of the wireless telegraph, placed third. The Professor, his sons, and inventor Charles Fortier began to test a variety of alloys in wireless sets. The men built a 115-foot tower several miles south of Milwaukee, but many attempts to transmit messages to the company's downtown factory were unsuccessful. Lee DeForest, whose audio tube would later provide the breakthrough for radio, also worked on the project.

Company directors elected Johnson president of the company in 1901, and a year later the firm's name was changed to Johnson Service Company. Even as president, Johnson was not able to convince the board to provide financial backing for his interest in establishing a national automobile company. Johnson saw the automobile as a way to ensure that the company was not completely dependent on temperature-regulating equipment. In 1907 he introduced a gasoline-powered engine. Johnson was the first to receive a U.S. contract to deliver mail with a horseless carriage. At the outset, according to an often-told story, the wary postmaster agreed to pay Johnson an amount equal to his horses' feed bills for the mail service. The company's failure to expand those automobile interests was a source of frustration to Johnson until his death in 1911. He had assigned more than 50 patents--most of them concerned with harnessing power generated by fluid, air, or steam pressure&mdashø Johnson Service Company.

Harry W. Ellis was elected president in 1912. Ellis, who had been manager of the Chicago branch office, decided to concentrate on opportunities for growth in the controls field. He sold all of the company's other businesses, improved the efficiency of factory operations in Milwaukee, and introduced a modern accounting system.

In 1885, the year the company was incorporated, it had sold the rights to sell, install, and service its temperature-control-regulation systems to two firms. The firms did not perform up to expectations, but the situation was not changed for years. By 1912 Johnson had regained the rights to do business directly throughout the country and had established 18 U.S. branch offices, six Canadian offices, and direct agencies in Copenhagen, Berlin, Saint Petersburg, Manchester, and Warsaw.

Early 20th-Century Growth

The Professor had insisted that only trained Johnson mechanics could install his company's devices and Ellis reinforced this policy. He insisted that the company was to serve not just as a producer of regulation equipment but as a single source for design, installation, and service. Johnson's temperature-control business expanded in tandem with the country's building boom. Skyscrapers became popular as structural steel replaced iron and other building systems were refined. During World War I, the company's temperature-control business was classified by the War Industry Board as nonessential to the war effort, since it was seen as a means of providing comfort. Johnson contracts dropped off as civilian construction was sharply reduced. The firm looked to government buildings for business and began seeking contracts to retrofit old buildings with new temperature-control systems.

In 1919 the company's new contracts exceeded $1 million. Although a business depression meant that few new office buildings were being constructed, movie theaters, department stores, and restaurants were introducing air-cooled interiors. By 1928 the company's new contracts passed the $4 million mark.

The Great Depression dealt a serious blow to the construction industry, and most new building-control installations in the 1930s aimed for economy. Projects in schools and government buildings that were assigned by the Public Works Administration also had fuel savings as a goal. Johnson's new Dual Thermostat, which allowed a building to save fuel by automatically lowering temperatures at times when the building was unoccupied, was in demand.

Joseph A. Cutler was elected president of the company in 1938. A former engineering professor at the University of Wisconsin, his presidency, like Ellis's, would last almost 25 years.

After the United Stated entered World War II, Johnson was classified as part of an essential industry, evidence of the change in the way the public perceived building controls. Johnson's contributions to the war effort included installing temperature-and-humidity control systems in defense facilities and the engineering of special military products. The company also made leak detectors that were used to test barrage balloons used over military installations, ships, and landing barges; developed the radiosonde to help combat pilots encountering unknown flying conditions to gather weather data; and manufactured echo boxes, devices that tested radar sets.

Post-World War II Boom

After World War II ended, civilian construction boomed and with it the company's new contracts. Along with this boom came a renewed interest in air conditioning. By 1949 the company's sales were $10 million.

In 1956 Johnson began to build and install pneumatic control centers that allowed a single building engineer to monitor panels displaying room temperatures, ventilating conditions, water temperatures, and the outdoor temperature. To ensure a steady and reliable source of customized control panels for these centers, Johnson purchased a panel-fabrication company in Oklahoma in 1960. Operations at company headquarters in Milwaukee were also expanding, so the company bought and eventually expanded an additional building there for its brass foundry, metal fabrications, assembly operations, and machining work.

Richard J. Murphy was elected company president in 1960, the year the company celebrated its 75th anniversary. Murphy had started with the company as a timekeeper in 1918 and had moved up through the ranks. Although his presidency lasted only six years, he was responsible for many innovations. Murphy established an international division, with subsidiaries in England, France, Australia, Belgium, Italy, and Switzerland. Each international office was managed as a virtually independent business, as were operations in the United States and Canada. In 1964 construction of the first foreign manufacturing plant began in Italy.

Since World War II, Johnson had enjoyed an excellent reputation for its work in atomic research plants and other installations requiring exceptional levels of reliability. In 1961 the Systems Engineering & Construction Division was established. It provided equipment for all 57 Air Force Titan II launch complexes and most other major missile programs. The National Aeronautics and Space Administration contracted with Johnson throughout the 1960s for mission-control instrumentation for the Apollo-Saturn program.

In 1962 Johnson, along with its main competitors Honeywell and Powers Regulator, were charged in a federal antitrust suit with price-fixing in the sale of pneumatic temperature control systems. The suit's resolution in a consent decree, coupled with new competitors entering the controls market, meant increasingly competitive bidding. Johnson occasionally won contracts on which it ended up making little or no profit.

Acquisitions in the 1960s

By the early 1960s it became apparent to Johnson management that electronics technology could be used to control all aspects of maintaining a building. To improve its in-house electronics capability, the company purchased the electronics division of Fischbach & Moore in 1963. Because of its increasing involvement in projects requiring exacting quality standards and high-quality components, Johnson acquired Associated Piping & Engineering Corporation and Western Piping and Engineering Company in 1966. The companies fabricated expansion joints and piping for nuclear and fossil fuel generating plants and many other industrial applications.

Fred L. Brengel became the sixth Johnson president in 1967. He had joined the company as a sales engineer in 1948 and served as manager of the Boston branch office and sales manager of the New England and Midwest regions before becoming vice-president and general sales manager in 1963.

The same year Brengel was elected president, Johnson introduced the T-6000, a solid-state, digital data logger that used "management by exception"--the system announced when its variables were outside specified limits so an engineer's attention was only called for when needed. The T-6000 not only performed heating, ventilating, and air conditioning functions, but also monitored fire and smoke detection, security, and emergency lighting systems.

Just a year after Brengel assumed the presidency, Johnson acquired Penn Controls, a 50-year-old company that manufactured controls for original equipment manufacturers (OEMs), distributors, and wholesalers. With its Penn acquisition, Johnson improved its competitive edge by having its own supply of electrical products for installation projects. Penn also had manufacturing plants and subsidiaries in Canada, the Netherlands, Argentina, and Japan, which helped Johnson expand its international markets. The year it acquired Penn, the company's sales rose about 20 percent, to $155 million.

Johnson introduced the JC/80, the industry's first minicomputer system that managed building controls, in 1972. One of the many advantages of the JC/80 was that operators of the system needed only a minimal amount of technical training. The JC/80, which could cut fuel requirements by as much as 30 percent, was introduced at the ideal time, just a year before international embargoes on oil would change the way people viewed energy consumption. Virtually overnight, people became interested in reducing energy costs.

The company adopted its present name--Johnson Controls, Inc.--in 1974. By 1977 it had captured approximately 35 percent of the estimated $600 million market for commercial-building control systems. It had 114 branch offices in the United States and Canada and more than 300 service centers, staffed by 10,000 engineers, architects, designers, and service technicians. In spite of a worldwide recession, the company's sales rose to almost $500 million that year.

Expanded into Batteries in 1978

Although Johnson fared well in the boom market for energy conservation products, new companies were beginning to crowd the building-controls field. To diversify, the company merged with Globe-Union, the country's largest manufacturer of automotive batteries, in 1978.

Founded in Milwaukee in 1911, Globe Electric Company had as its original aim the fulfillment of the battery needs of streetcars, rural light plants, and switchboards. In 1925 Globe's treasurer, Chester O. Wanvig, entered an agreement with Sears, Roebuck and Company President General Robert Wood to produce automobile replacement batteries for the company. Globe shareholders declined the opportunity and Wanvig organized the Union Battery Company to serve Sears. In 1929 Globe Electric and Union Battery consolidated, with Wanvig as president. By the late 1930s Globe-Union had ten manufacturing plants across the United States.

In the late 1950s Globe-Union invented the thin-wall polypropylene battery container, a major technological breakthrough that won the company a leadership position in the industry. The thickness of the battery walls was reduced and the container was lighter and stronger than hard-rubber cases. In 1967 Sears used this technology in its DieHard battery, made by Globe-Union. By 1971 Globe-Union had become the largest U.S. manufacturer of automotive replacement batteries, with its sales climbing past $100 million that year. The company turned to nonautomotive battery applications in 1972 when it formed an industrial products unit. One of its best-known creations was the Gel/Cell, a line of sealed, portable lead acid units for the standby power needs of security and telecommunications applications.

Johnson's merger with Globe-Union doubled its sales, broadened its financial base, and gave it leadership in a new field. Three years after the merger, sales surpassed $1 billion. In the early 1980s Johnson took the lead in developing controls for "intelligent buildings," which featured state-of-the-art technology to manage energy, comfort, and protection needs. Despite the entrance of many new companies into this sector, Johnson remained a leader in the field. In the latter part of 1989, Johnson announced a joint venture with Yokogawa Electric Corporation to manufacture control instrumentation and to integrate and service industrial automation systems for the North American market.

Acquired Hoover Industrial in 1985

Johnson greatly expanded its automotive business in 1985 when it acquired Hoover Industrial, a major supplier of seating and plastic parts for automobiles and a new entrant in the plastic-container industry. Although company officials denied it, industry analysts speculated that the acquisition may have at least in part been an attempt to thwart a possible takeover attempt by Miami financier Victor Posner. One of Posner's companies owned almost 20 percent of Johnson in 1985.

At the time of its purchase, Hoover was changing its emphasis from supplying seating components to building completely assembled automotive seating. The company had an excellent reputation for its just-in-time delivery system, which meant the company supplied its automotive customers with needed parts and components precisely when they needed them to avoid customer storage charges.

The same year it purchased Hoover, Johnson also acquired Ferro Manufacturing Corporation, a supplier of automotive seating components and mechanisms. Hoover and Ferro units unrelated to Johnson's major businesses were sold shortly after the acquisitions were completed.

With its new components in place, Johnson became known as a parts supplier that could design, engineer, assemble, and deliver modular systems to their customers' plants "just-in-time." In addition to supplying components to the major domestic carmakers, Johnson also supplied several of the U.S. operations of Japanese auto manufacturers, including Toyota, Honda, and Nissan, and a Toyota-General Motors joint venture.

James H. Keyes was elected chief executive officer in 1988, after serving as president since 1986. A certified public accountant, he joined Johnson as an analyst in 1966 and held several key executive positions, including treasurer and chief operating officer.

Johnson expanded its plastics business in 1988 by acquiring Apple Container Corporation and the soft drink bottle operations of American National Can Company. In mid-1989 the company spent $166 million to purchase Pan Am World Services, a leading provider of high-tech and other facility-management services for military bases, airports, and space centers. This acquisition was intended to bolster Johnson's nascent business of providing engineering and protection services for commercial buildings.

Johnson's controls business had had an international presence, concentrated in Europe and the Far East, since the 1960s. During the mid-1980s Johnson also began to expand its plastic-container and seating businesses into Europe. This aggressive expansion was facilitated primarily through acquisitions. By 1990 Johnson claimed leadership positions in both markets.

In 1989, meanwhile, Johnson's battery group acquired Varta, the largest automotive-battery maker in Canada. That same year the battery division unveiled the EverStart, a new automotive battery that carried its own emergency backup power system. It was called the first real breakthrough in battery technology in decades.

Although there were rumors about possible takeovers of Johnson in the late 1980s, the company's management was committed to rebuffing all such attempts. President Keyes told Forbes in March 1989, "It depends on whether you take a short-term view and want to improve returns immediately, or you take a long-term view and seek to maintain market leadership. We've chosen the latter approach."

Automotive Systems Became Predominant in the 1990s

During the 1990s Johnson Controls' automotive businesses would become by far the company's most important business sector. The decade began, however, with the introduction of the Metasys facility management system. In development for three years at a cost close to $20 million, Metasys was a breakthrough system designed for buildings as small as 50,000 square feet and tied together the entire control system through a distributed computer-controlled network.

In 1991 Johnson acquired several European car seat component manufacturers, furthering its overseas expansion. That year also marked the company's involvement in a landmark sex discrimination lawsuit settled by the U.S. Supreme Court. During the 1980s Johnson Controls had switched from a voluntary to a mandatory policy barring women of childbearing age from jobs involving exposure to high levels of lead at its 15 car battery plants. The company was concerned that pregnant women exposed to a potentially harmful substance might sue if the exposure resulted in birth defects. The Supreme Court, however, in a 6-3 ruling, said that decisions about the welfare of future children "must be left to the parents who conceive, bear, support, and raise them rather than to the employers who hire those parents." The Court ruled that Johnson Control's policy was discriminatory against women and therefore could not stand.

Of all of the company's diversified operations, its battery unit was the least profitable, partly because prices for batteries had not increased in a decade, and partly because the unit's unionized plants had to compete with nonunion plants of other companies. In mid-1991 Johnson Controls attempted to sell the battery division but could not find a buyer. The unit was further battered when it lost its contract to supply DieHard batteries to Sears in late 1994. Since that time contracts were signed or renewed with such retailers as AutoZone and Wal-Mart, and the company also supplied the largest battery distributor in the nation, Interstate Battery System of America. In October 1997 a contract was signed to supply Sears with DieHard Gold batteries, the top of that product line. The battery unit also began to target overseas markets more aggressively, opening a plant in Mexico in 1994, forming a joint venture in China in 1996 to make batteries for Volkswagen, and creating another joint venture in 1997 with Varta Battery AG of Germany to make batteries in South America.

In the mid-1990s Johnson Controls made a number of significant acquisitions in the area of automotive systems that helped to greatly increase sales in the company's automotive segment--a 94 percent increase from 1995 to 1998 alone. In 1995 Johnson spent $175-$200 million for a 75 percent interest in Roth Freres SA, a Strasbourg, France-based major supplier of seating and interior systems to the European auto industry. In October 1996 the company paid about $1.3 billion for the Prince Automotive unit of Prince Holding Corporation in the largest acquisition in Johnson Controls history. Based in Holland, Michigan, Prince Automotive brought to Johnson an innovative supplier of automotive interior systems and components, such as interior ceilings, overhead consoles and switches, door panels, armrests, and floor consoles. The addition of Prince meant that Johnson Controls could now make virtually all major interior auto components.

Also in 1996 the company made a number of moves to expand in the Asia-Pacific region. A joint venture was formed in China with Beijing Automotive Industry Corp. to run a car seating and interior system factory in Beijing. Another joint venture was launched in India to supply seats and trim for Ford Escorts built there. In addition, Johnson Controls purchased Aldersons, a unit of Sydney, Australia-based Tutt Bryant Industries PLY Ltd. that supplied interior systems to Australia's four major automakers.

To help to pay down the heavy debt incurred by the purchase of Prince Automotive, Johnson Controls sold its plastic container division to Schmalbach-Lubeca AG/Continental Can Europe, a unit of German conglomerate Viag Group AG, for about $650 million in February 1997. That year also saw a major expansion of the company's automotive business in South America, where its number of plants increased from 2 to 11 during the year.

Joint ventures and acquisitions continued in 1998. In April the company announced the formation of a venture with Recaro North America Inc. (a unit of German seat manufacturer Recaro GmbH & Company) whereby Johnson Controls would supply brand-name specialty seats for the first time--under the Recaro brand. In July Johnson acquired the Becker Group, a supplier of interior systems in both North America and Europe, for $548 million and the assumption of debt. The addition of Becker propelled Johnson Controls to the number one position in Europe in interior systems. In a move to divest a noncore unit and to help pay down additional debt taken on to purchase Becker, Johnson Controls sold its plastics machinery business to Cincinnati Milacron Inc. for about $190 million in September 1998.

In July 1998, John M. Barth was named president and chief operating officer, with Keyes remaining chairman and CEO. For fiscal 1998 Johnson Controls reported record sales of $12.59 billion, an increase of 13 percent over the previous year, and record net income of $302.7 million, an increase of 16 percent. The company's emphasis on its more profitable Automotive Systems Group (over its Controls Group) and its aggressive expansion through acquisitions and joint ventures had served Johnson Controls well in the 1990s. If there was any cause for concern about the firm's future it was in the increased debt level Johnson Controls had incurred to fund this growth&mdashøtal debt having more than doubled from fiscal 1994 to fiscal 1997.

Principal Subsidiaries: Apple Container Corp.; Becker Group; Creative Control Designs, Inc.; G-U Export, Inc.; Globe International Delaware, Inc.; Globe-Union, Inc.; Hoover Universal Inc.; Hyperion Corp.; IKIN L.L.C.; Interior Product Services, Inc.; Interstate Battery System International, Inc.; Intertec Systems L.L.C.; J.C. Capital Corporation; Johnson Control Products, Ltd.; Johnson Controls Battery Group, Inc.; Johnson Controls DISC, Inc.; Johnson Controls Engineering, Inc.; Johnson Controls Facilities, Inc.; Johnson Controls Holding Company, Inc.; Johnson Controls International, Inc.; Johnson Controls Investment Company, Inc.; Johnson Controls Management Company; Johnson Controls Management Systems, Inc.; Johnson Controls Network Integration Services, Inc.; Johnson Controls Nevada, Inc.; Johnson Controls Northern New Mexico L.L.C.; Johnson Controls Richland, Inc.; Johnson Controls Services Company; Johnson Controls Technology Company; Johnson Controls World Services Inc.; Johnson Controls-RMS, Inc.; Johnson International Trade Co.; Johnson Service Co.; Joventa USA Inc.; Maintenance Automation Corporation; NAV L.L.C.; NYLLE L.L.C.; P & ET Container, Inc.; Prince Corporation; Readiness Management Support L.C.; SAVID L.L.C.; SECH L.L.C.; Setex, Inc.; TechnoTrim, Inc.; Trim Masters Inc.; Vintec Co.; XYZ Container Corporation

Johnson Controls lists additional subsidiaries in Argentina, Austria, Australia, Barbados, Belgium, Brazil, Canada, Cayman Islands, China, Czech Republic, France, Germany, Hong Kong, Hungary, India, Indonesia, Italy, Japan, Luxembourg, Malaysia, Mauritius, Mexico, Netherlands, Norway, Poland, Portugal, Singapore, Slovakia, South Africa, Spain, Sweden, Switzerland, Thailand, Turkey, United Kingdom, Venezuela, and the Virgin Islands.

Principal Operating Units: Automotive Systems Group; Controls Group.

Additional Details

Further Reference

Berss, Marcia, "Watizzit? Johnson Controls Is a Strange Mixture--Car Seats, Thermostats, Plastic Bottles, and Automobile Batteries. But It Works," Forbes, August 28, 1995, p. 100.Byrne, Harlan S., "Johnson Controls: Strong Market Positions Help It Ride Out the Recession," Barron's, February 24, 1992, pp. 51-52.Dubashi, Jagannath, "Slump Control: Johnson Controls Thought One Good Deal Would Eliminate Two Pet Peeves," Financial World, May 29, 1990, p. 49.Gardner, Greg, "JCI Buys Itself a Prince," Ward's Auto World, August 1996, p. 35.Marsh, Peter, "A Sitting Target for Two Rivals," Financial Times, April 15, 1996, p. 10.------, "Standing Up to Seating Challenge," Financial Times, February 23, 1998, p. FTS7.Miller, James P., "Johnson Controls' Container Business Will Be Sold to Unit of Germany's Viag," Wall Street Journal, December 10, 1996, p. A3.Right for the Times: Johnson Controls 100th Anniversary, Milwaukee, Wis.: Johnson Controls, Inc., 1985.Rose, Robert L., "Johnson Controls Agrees to Purchase of Becker Group," Wall Street Journal, April 28, 1998, p. B22.------, "Johnson Controls Gets a Big Boost from the Bottom," Wall Street Journal, February 3, 1997, p. B4.------, "Johnson Controls Plans to Expand into Asia, Pacific," Wall Street Journal, September 26, 1996, p. B2.------, "Johnson Controls to Buy Prince Unit As Car-Interior Industry Consolidates," Wall Street Journal, July 19, 1996, p. A3.Rose, Robert L., and Robert L. Simison, "Johnson Controls and UAW Reach Pact," Wall Street Journal, February 21, 1997, pp. A3, A4.Tetzell, Rick, "Mining Money in Mature Markets," Fortune, March 22, 1993, p. 77.Wermiel, Stephen, "Justices Bar 'Fetal Protection' Policies," Wall Street Journal, March 21, 1991, pp. B1, B5.

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