Johnson Controls plans call for another 2,300 jobs to be cut

Johnson Controls International plc added the elimination of 2,300 jobs to its ongoing restructuring plans and recorded an additional $105 million in related costs during the fourth quarter of fiscal 2018, according to securities filings.

The company’s restructuring plans initiated in 2016, 2017 and 2018 called for the elimination of 9,200 jobs as of June 30, the end of JCI’s third quarter.

As of Sept. 30, the plans called for the elimination of 11,500 positions.

“Restructuring of Johnson Controls has been ongoing for some time as we are focused on accelerating growth, expanding gross margins and improving cash flow while investing in new products, technology and our sales team,” Fraser Engerman, a Johnson Controls spokesman, said in an email.

The company’s net sales increased 4.1 percent to $31.4 billion, but gross profit margin decreased from 31 percent to 29.9 percent. Margins improved in JCI’s building technologies and solutions segment, which will be the focus of the business moving forward. Power Solutions, which the company is selling to Brookfield Business Partners, was hampered by higher operating costs.

Johnson Controls has already cut ties with 4,900 of the 11,500 employees it plans to let go under the restructuring plans, which are scheduled to be substantially complete in 2020. The company made 3,300 separations this year, including 1,600 in the third quarter, according to a review of securities filings.

Despite the cuts, Johnson Controls’ overall employment increased from 121,000 globally at the end of fiscal 2017 to 122,000 at the end of fiscal 2018. The company invested an additional $37 million in its buildings solutions sales force this year, including the addition of 950 new sales people. Engerman said the buildings business will remain headquartered in Milwaukee and the company’s commitment and presence locally is not changing.

The buildings business is also set to have most of the workforce reductions included in the restructuring plans. At the end of the company’s third quarter this year the company included the reduction of 7,300 employees from building solutions. That figure increased to 9,100 following the fourth quarter.

Corporate operations would also see an additional 500 jobs cut under the updated plan for a total of 2,200.

Engerman said the reductions are not related to the sale of Power Solutions. During an analyst call following the announcement of the sale, executives said Johnson Controls would be able to reduce corporate expenses by $50 million within 12 months of the deal closing.

Excluding restructuring costs, corporate expenses were down from $602 million in fiscal 2017 to $526 million in fiscal 2018.

The company, which is operated from Glendale but is headquartered in Ireland for tax purposes, has now recorded $263 million in restructuring and impairment costs for its 2018 plan, up from $158 million at the end of the third quarter.

Most of the cost and the increase is attributed to the company’s Global Products business. The company had attributed $73 million in costs at the end of the third quarter and then added another $37 million by the end of the fourth.

Johnson Controls also more than doubled its expected restructuring costs in its corporate segment, recording an additional $26 million to bring the total to $50 million.

Another $12 million was attributed to the Building Solutions North America business, which is based in Milwaukee, for a total of $20 million in expected costs.

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Arthur covers banking and finance and the economy at BizTimes while also leading special projects as an associate editor. He also spent five years covering manufacturing at BizTimes. He previously was managing editor at The Waukesha Freeman. He is a graduate of Carroll University and did graduate coursework at Marquette. A native of southeastern Wisconsin, he is also a nationally certified gymnastics judge and enjoys golf on the weekends.

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