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Johnson Controls CEO sees slowdown in China hurting its auto business

Johnson Controls CEO sees slowdown in China hurting its auto business
The logo and trading symbol for Johnson Controls International is displayed on a board on the floor of the New York Stock Exchange (NYSE) in New York, U.S., October 16, 2018. REUTERS/Brendan McDermid   -   Copyright  Brendan McDermid(Reuters)
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(Reuters) – The chief executive officer of Johnson Controls International Plc <JCI.N> said on Tuesday that he was seeing a slowdown in automotive production in China, an important segment for the Irish-based car batteries maker.

Interviewed on Reuters’ Global Markets Forum in Davos, George Oliver said that the slowdown in the world’s biggest auto market would likely affect its power solutions (PS) unit, which makes and distributes about 154 million lead-acid batteries for passenger cars and light trucks annually.

“Relative to our PS business, we definitely would agree that we saw (auto) production slow (in China),” he said in a chat with forum participants.

The Chinese economy grew at its slowest pace in 28 years in 2018, pressured by faltering domestic demand and bruising U.S. tariffs.

Johnson Controls’ PS unit gets three-quarters of its revenue from replacement sales of batteries, while the remaining quarter from sales to new vehicles manufacturers. China accounted for about 7 percent if its annual sales in the 2018 fiscal year.

The company has agreed to sell the PS unit to investment firm Brookfield Business Partners L.P. in a cash deal valued at $13.2 billion that it plans to complete by June.

Oliver said Johnson Controls was on track to improve its 2019 free cash flow conversion, a metric that has been closely monitored by the investment community, following the sale of the PS unit.

“We are positioned to continue our improvements and deliver stronger free cash flow in 2019,” Oliver said expecting to tap into the potential of its remaining building technology unit, which makes heating, ventilation and air conditioning systems.

((This interview was conducted in the Reuters Global Markets Forum, a chat room hosted on the Eikon platform. To join the forum, click here

(Reporting by Parikshit Mishra and Ankit Ajmera in Bengaluru, Michael Connor in New York and Divya Chowdhury in Davos; Editing Patrick Graham, Bernard Orr)

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