Johnson Controls to Shutter Plant

Wisconsin-based Johnson Controls Inc. (JCI - Analyst Report) is reportedly planning to close its assembly and manufacturing plant in Botetourt County by May 2010 after orders declined by about 30% in the last few months.

The Botetourt facility, near Bonsack, has been part of the company's Building Efficiency division, which focuses on mechanical systems for heating, ventilating and air conditioning for the residential (9%) and non-residential buildings (91%) market.

Johnson Controls dismissed nine employees at the plant last April. The shutdown will affect the remaining 44 employees. Workers who stay with the plant through the closing process and get involuntarily terminated will be eligible for severance consideration and other transitional assistance.

The auto-parts manufacturer plans to move operations from Botetourt plant to facilities in Texas, Pennsylvania and Mexico. The plant houses screw compressors and centrifugal compressors for chillers built in Mexico or Texas. It also manufactures rotors used in the production of screw compressors.

Johnson Controls is suffering from a weakness in its North American business, high inventory levels at the OEMs, a weakening product mix and unfavorable raw material pricing. The company reported modestly weaker-than-expected results for the third quarter.

The Building Efficiency segment has been hurt by the overall slowdown in construction spending, lower HVAC equipment volumes and the continued deferral of discretionary maintenance and retrofit projects. Its quarterly net income and sales fell 37% and 14%, respectively. We are concerned about the rapid deterioration in automotive production coupled with the worsening residential market, which is affecting the company.

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