Johnson Controls 2012 Annual Report Download - page 13

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13
We may not be able to successfully negotiate pricing terms with our customers in the Automotive Experience
business, which may adversely affect our results of operations.
We negotiate sales prices annually with our automotive customers. Cost-cutting initiatives that our customers have
adopted generally result in increased downward pressure on pricing. In some cases our customer supply agreements
require reductions in component pricing over the period of production. If we are unable to generate sufficient
production cost savings in the future to offset price reductions, our results of operations may be adversely affected.
In particular, large commercial settlements with our customers may adversely affect our results of operations or
cause our financial results to vary on a quarterly basis.
Volatility in commodity prices may adversely affect our results of operations.
Commodity prices can be volatile from year to year. If commodity prices rise, and if we are not able to recover these
cost increases from our customers, these increases will have an adverse effect on our results of operations.
The cyclicality of original equipment automobile production rates may adversely affect the results of
operations in our Automotive Experience business.
Our Automotive Experience business is directly related to automotive production by our customers. Automotive
production and sales are highly cyclical and depend on general economic conditions and other factors, including
consumer spending and preferences. An economic decline that results in a reduction in automotive production by
our Automotive Experience customers could have a material adverse impact on our results of operations.
A variety of other factors could adversely affect the results of operations of our Automotive Experience
business.
Any of the following could materially and adversely impact the results of operations of our Automotive Experience
business: the loss of, or changes in, automobile supply contracts or sourcing strategies with our major customers or
suppliers; start-up expenses associated with new vehicle programs or delays or cancellations of such programs;
underutilization of our manufacturing facilities, which are generally located near, and devoted to, a particular
customer’s facility; inability to recover engineering and tooling costs; market and financial consequences of any
recalls that may be required on products that we have supplied; delays or difficulties in new product development;
quantity and complexity of new program launches, which are subject to our customers’ timing, performance, design
and quality standards; interruption of supply of certain single-source components; the potential introduction of
similar or superior technologies; changing nature of our joint ventures and relationships with our strategic business
partners; and global overcapacity and vehicle platform proliferation.
Power Solutions Risks
We face competition and pricing pressure from other companies in the Power Solutions business.
Our Power Solutions business competes with a number of major domestic and international manufacturers and
distributors of lead-acid batteries, as well as a large number of smaller, regional competitors. The North American,
European and Asian lead-acid battery markets are highly competitive. The manufacturers in these markets compete
on price, quality, technical innovation, service and warranty. If we are unable to remain competitive and maintain
market share in the regions and markets we serve, our results of operations may be adversely affected.
Volatility in commodity prices may adversely affect our results of operations.
Lead is a major component of our lead-acid batteries, and the price of lead may be highly volatile. We attempt to
manage the impact of changing lead prices through the recycling of used batteries returned to us by our aftermarket
customers, commercial terms and commodity hedging programs. Our ability to mitigate the impact of lead price
changes can be impacted by many factors, including customer negotiations, inventory level fluctuations and sales
volume/mix changes, any of which could have an adverse effect on our results of operations.
Additionally, the prices of other commodities, primarily fuel, acid, resin and tin, may be volatile. If other commodity
prices rise, and if we are not able to recover these cost increases through price increases to our customers, such
increases will have an adverse effect on our results of operations. Moreover, the implementation of any price
increases to our customers could negatively impact demand for our products.