Johnson Controls 2010 Annual Report Download - page 90

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90
16. RESTRUCTURING COSTS
To better align the Company’s cost structure with global automotive 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 is centralizing certain functions and rebalancing 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.
Since the announcement of the 2009 Plan in March 2009, the Company has experienced lower employee severance
and termination benefit cash payouts than previously calculated for automotive experience – Europe of
approximately $70 million, of which $42 million was identified in the current fiscal year, due to favorable severance
negotiations and the decision to not close previously planned plants in response to increased customer demand. The
underspend of the initial 2009 Plan reserves is committed to be utilized for additional costs to be incurred as part of
power solutions, automotive experience - Europe and automotive experience - North America’s additional cost
reduction initiatives. The planned workforce reductions disclosed for the 2009 Plan have been updated for the
Company’s revised actions.
The following table summarizes the changes in the Company’s 2009 Plan reserve, included within other current
liabilities in the consolidated statements of financial position (in millions):
Employee
Severance and
Termination
Fixed Asset
Currency
Benefits
Impairment
Other
Translation
Total
Original reserve
$
182
$
46
$
2
$
-
$
230
Noncash adjustment - underspend
(28)
-
-
-
(28)
Noncash adjustment - revised actions
28
-
-
-
28
Utilized - cash
(42)
-
-
-
(42)
Utilized - noncash
-
(46)
-
8
(38)
Balance at September 30, 2009
$
140
$
-
$
2
$
8
$
150
Noncash adjustment - underspend
(42)
-
-
-
(42)
Noncash adjustment - revised actions
20
-
-
-
20
Utilized - cash
(64)
-
-
-
(64)
Utilized - noncash
-
-
(2)
(6)
(8)
Balance at September 30, 2010
$
54
$
-
$
-
$
2
$
56
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 included workforce reductions and
plant consolidations. The Company expects to substantially complete the 2008 Plan by the end of 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 in 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.
Since the announcement of the 2008 Plan in September 2008, the Company has experienced lower employee
severance and termination benefit cash payouts than previously calculated for building efficiency – Europe and
automotive experience – Europe of approximately $95 million, of which $32 million was identified in the current