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Adient Refocuses on Core Seating Business

Restructures joint ventures with Yanfeng, divests Recaro unit
#JohnsonControls #Yanfeng #Adient

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Adient, which has floundered in red ink since it was spun off from Johnson Controls in 2016, announced several new initiatives as part of a turnaround plan that aims to help the supplier breakeven this year.

Unlike its two main competitors (Lear and Magna), which continue to diversify their operations, Adient is refocusing its efforts around its core seating operations.

China JVs

To this end, several changes have been made related to the joint ventures Adient operates with Yanfeng Automotive Trim Systems. The latter is the components arm of Chinese carmaker SAIC Motor.

  • The partners are extending their Yanfeng Adient Seating joint venture through 2038. The long-running venture supplies complete seats and various components to the Chinese market.
  • Adient is selling its 30% stake in Yanfeng Global Automotive Interior Systems to Yanfeng, which already owns the remaining 70% stake, for $379 million. The six-year-old company supplies cockpit systems, instrument panels, door panels and floor consoles.
  • The supplier also is selling certain patents and related intellectual property to Adient Yanfeng Seating Mechanisms (AYM) for $20 million. Moving forward, Adient and AYM will cross license technologies to each other.

The proceeds of the two deals, which are due to be completed by September, will go toward paying down debt and investing in product development.

Divests Recaro

Adient also confirmed that it sold its Recaro Automotive premium brand in early January to Raven Acquisition, a Detroit-based investment firm. Terms of that deal weren’t disclosed.

Recaro generated $150 million in sales last year but didn’t contribute any profits. To make the unit profitable, Adient said it would have had to make significant investments in next-generation technologies. 

Financial Headway

CEO Doug Del Grosso says the turnaround plan launched when he took the helm in late 2018 is starting to yield results.

For the fiscal year ending Sept 30, 2019, Adient had a net loss of $491 million compared with a loss of $1.7 billion in 2018. The improvements are attributed to improved product launches, cutting unprofitable programs and trimming expenses. 

The latest quarter, ending Dec. 31, showed Adient’s first year-over-year EBITDA increase in more than two years, despite sales falling 5% to $3.9 billion during the period. The company expects sales in the second half of the current fiscal year to be $400-$500 million lower than the first half due to a forecasted decline in global car production.  

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