Johnson Controls 2010 Annual Report Download - page 35

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35
currency translation ($66 million), an impairment charge on fixed assets in the first quarter ($33 million)
and higher net direct material purchasing costs ($31 million). These factors were partially offset by lower
engineering expenses ($65 million) and SG&A costs ($52 million).
The decrease in Asia is primarily due to lower volumes ($60 million) and the unfavorable impact of foreign
currency translation ($10 million), partially offset by higher equity income at our joint ventures mainly in
China ($24 million), lower SG&A costs ($10 million) and lower engineering expenses ($4 million).
Power Solutions
Year Ended
September 30,
(in millions)
2009
2008
Change
Net sales
$
3,988
$
5,850
-32%
Segment income
406
541
-25%
Net sales decreased primarily due to the impact of lower lead costs on pricing ($1.5 billion), lower sales
volumes ($352 million) and the unfavorable impact of foreign currency translation ($260 million), partially
offset by improved price/product mix ($215 million).
Segment income decreased due to lower volumes ($56 million), the unfavorable impact of foreign currency
translation ($17 million), a nonrecurring charge related to the disposal of a manufacturing facility and other
assets in Europe ($20 million), other nonrecurring items recorded in the prior year ($11 million), and the
negative impact of lead and other commodity costs not fully recovered through pricing ($230 million),
which includes a $62 million out of period adjustment as discussed in Note 1, ―Summary of Significant
Accounting Policies,‖ to the accompanying financial statements. Partially offsetting these factors was
improved price/product mix ($192 million) and higher equity income from joint ventures ($7 million).
Restructuring Costs
To better align the Company’s cost structure with global market conditions, the Company committed to a
restructuring plan (2009 Plan) in the second quarter of fiscal 2009 and recorded a $230 million restructuring charge.
The restructuring charge related to cost reduction initiatives in the Company’s automotive experience, building
efficiency and power solutions businesses and included workforce reductions and plant consolidations. The
Company expects to substantially complete the 2009 Plan by the end of 2011. The automotive-related restructuring
actions targeted excess manufacturing capacity resulting from lower industry production in the European, North
American and Japanese automotive markets. The restructuring actions in building efficiency were primarily in
Europe where the Company centralized certain functions and rebalanced its resources to target the geographic
markets with the greatest potential growth. Power solutions actions focused on optimizing its manufacturing
capacity as a result of lower overall demand for original equipment batteries resulting from lower vehicle
production levels.
To better align the Company’s resources with its growth strategies while reducing the cost structure of its global
operations, the Company committed to a restructuring plan (2008 Plan) in the fourth quarter of fiscal 2008 and
recorded a $495 million restructuring charge. The restructuring charge related to cost reduction initiatives in its
automotive experience, building efficiency and power solutions businesses and includes workforce reductions and
plant consolidations. The Company expects to substantially complete the 2008 Plan in 2011. The automotive-related
restructuring was in response to the fundamentals of the European and North American automotive markets. The
actions targeted reductions in the Company’s cost base by decreasing excess manufacturing capacity due to lower
industry production and the continued movement of vehicle production to low-cost countries, especially Europe.
The restructuring actions in building efficiency were primarily in Europe where the Company centralized certain
functions and rebalanced its resources to target the geographic markets with the greatest potential growth. Power
solutions actions focused on optimizing its regional manufacturing capacity.
Refer to Note 16, ―Restructuring Costs,‖ to the accompanying financial statements for further disclosure related to
the Company’s restructuring plans.