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5. Adient plc (Formerly Automotive seating business of Johnson Controls Inc.) Business Report FY ended Sep. 2018

Adient plc (Formerly Automotive seating business of Johnson Controls Inc.) Business Report FY ended Sep. 2018

Factors
1) Net Sales
-The Company’s sales in the fiscal year ended September 30, 2018 increased by 7.6% to USD 17,439 million. The increase in net sales was caused primarily by the positive impact from a full year of Futuris operations, which was acquired in September 2017, as well as a full year impact from the consolidation of a Chinese affiliate, which occurred in July 2017. Favorable foreign currency effects and higher sales volumes in Europe also contributed to the increase in sales, which were partially offset by lower volumes in North America and Asia.

2) Net Income
-In the fiscal year ended September 30, 2018, the Company showed net loss of USD 1,685 million. The net loss was attributable due to lower profitability across the Company as a whole, net-of-tax impairment charges across all segments and income tax charges.

3) Seating Segment sales
-Net sales in the Company's Seating segment for the fiscal year ended September 30, 2019 increased by 6.5% to USD 15,704 million due to a full year of Futuris operations and a full year of impact from a consolidated Chinese affiliate. Favorable foreign currency effects also supported the increase in sales, while overall lower sales volumes and net pricing reductions partially offset some gains.

4) Seat Structures & Mechanisms (SS&M) Segment sales
-The Company’s Seat Structures & Mechanisms (SS&M) segment had sales of USD 3,003 million, an increase of 6.9% over the previous fiscal year. The increase in sales was due to increased sales volumes, favorable foreign currency effects and specific material economic recoveries, which was partially offset by net pricing reductions.

Chinese Business

Source: Adient

-A key component in the Company’s growth strategy is its position of leadership in China. The Company is a leading supplier of just-in-time seating in China.

-The Company has formed joint ventures with all of the major Chinese automakers including SAIC, Dongfeng, FAW, Chang'an, BAIC, GAC and Brilliance Auto. These joint ventures have enabled the Company to hold significant market share with individual automakers.

-The Company’s operations in China include 21 joint ventures with 79 manufacturing facilities across 41 cities.

-The Company has a 30.0% stake in Yanfeng Automotive Interiors Systems Co., Ltd. The Company retained control of the stake from Johnson Controls upon completion of the spin-off.

Joint Ventures

-The Company and Arvind Limited announced the formation of Adient Arvind Automotive Fabrics, a joint venture that will develop, manufacture and sell automotive fabrics in India. Adient Arvind Automotive Fabrics will be based in Ahmedabad, where it will manufacture high-end performance fabrics for automotive seating systems. The Company is the majority stakeholder in the new company with a 50.5% share. Arvind and the Company will each have representation on the board of directors of Adient Arvind Automotive Fabrics. (From a press release on March 21, 2018)

Recent Developments

-The Company will not move its headquarters into the historic Marquette Building in downtown Detroit, but remain in its current facility in Plymouth, Michigan. The Company had planned to invest nearly USD 100 million to relocate 500 executive and leadership employees when it bought the downtown facility in 2016. With former GM executive Fritz Henderson taking over as interim CEO earlier in June, the Company determined that it can no longer fund the restoration. The Company will put the Marquette Building back on the market as soon as practical. (From a Detroit Free Press article on June 18, 2018)

Contracts

-At IAA Commercial Vehicles 2018, the Company announced that it will focus on key markets, displaying its seating solutions for volume-production European, Indian and Chinese models. In Europe, the Company and its premium brand Recaro are supplying Scania, Renault Trucks and Tadano Faun with original equipment seating solutions. From the end of 2019, the Company will deliver driver and passenger seats to MAN Truck & Bus. In India, Adient will supply Tata Motors with the 1516 Signa Seat for its Tata Signa model series of light- and medium-sized trucks. In China, JMC Heavy Duty Vehicles began producing its new JH476 heavy-duty truck for the Chinese market in late 2017. The Company’s joint venture, Chongqin Yanfeng Adient Seating, is supplying this new model series with two versions of driver seats. The Company is presenting both versions of the seat at IAA Commercial Vehicles 2018. (From a press release on September 19, 2018)

-Ford’s limited edition Mustang Bullitt features black leather trimmed Recaro sports seats. (From a press release on January 14, 2018)

Awards

-The Company was named a GM Overdrive Award winner and a Supplier of the Year during General Motors' 26th annual awards ceremony held in April. GM's Overdrive Award, introduced in 2012, recognizes supplier partners for extraordinary leadership in cultural change and commitment initiatives that drove exceptional business results for GM. The Company was one of only four 2017 Overdrive Award winners. (From a press release on May 1, 2018)

R&D Facilities

-The Company has ten core engineering development centers in the following locations:

• Plymouth, Michigan, U.S.
• Burscheid, Germany
• Kaiserslautern, Germany
• Solingen, Germany
• Trencin, Slovakia
• Shanghai, China
• Changchun, China
• Yokohama, Japan
• Ansan, Korea
• Pune, India

-Yanfeng Automotive Interiors (YFAI), a joint venture of the Company, opened a new innovation center at the Neuss location. The space will house approximately 40 employees working on different disciplines relating to future vehicle interiors in this 2,550-square-meter location. The objective of the new innovation center is to consolidate all of the different functions of the innovation team under one roof. These include consumer and market research, as well as industrial design, product and process innovation, and user experience. In addition to the traditional interiors business of door panels, floor consoles, and instrument panels, YFAI is also focused on the interior of the future, which is increasingly characterized by the use of new, innovative materials and technologies. These include, for example, functional, smart, or adaptive interior surfaces that enable a new style, user experience, or interior functions. (From a press release on February 6, 2018)

-The Company announced that it has broken ground on a state-of-the art automotive seating prototyping and testing facility in Pune, India. Construction of the new facility marks a major expansion of the Company’s existing technical center in Pune. The Company will invest more than USD 30 million to build the new facility, situated on a 20,000-square-meter site near the existing center. The new facility, which is scheduled to open in late 2018, will provide physical testing to augment the capabilities of the technical center, a global Center of Competence at Adient for computer-aided engineering, computer-aided design automation and finite element analysis simulation expertise. (From a press release on November 16, 2017)

Technological Alliance

-The Company announced that it has become a partner with the American Center for Mobility (ACM). The state-of-the-art proving ground is a nonprofit testing, education and product development facility for future mobility. Through this collaboration, the Company will continue its development of new innovations, technologies and seating configurations for future mobility vehicles. (From a press release on March 27, 2018)

Product Development

"Seating tomorrow" demonstrator at 2018 IAA Commercial Vehicles
-The Company announced that with its “Seating tomorrow” demonstrator, premium brand Recaro will showcase innovative product ideas for the cabin in self-driving trucks of the future at the 2018 IAA Commercial Vehicles in Hanover, Germany. The “Seating tomorrow” demonstrator shows how driver and front passenger seats can be converted from a comfortable seat for the driver into a workstation, a relaxation zone or a position for rest. The demonstrator includes new comfort and safety features such as massage and mobilization functions and can also monitor body functions. (From a press release on September 5, 2018)

AI18 concept vehicle for autonomous driving with seating solutions
-The Company announced that it is showcasing advanced passive and active safety solutions for occupants, property and data at the North American International Auto Show. Its AI18 concept vehicle for autonomous driving being shown has front seats that include an integrated seatbelt concept to hold the seatbelt in the right position in different seating positions. For the interior's 180-degree rotatable passenger seat, Company engineers have developed an integrated airbag concept that can be triggered both forwards and backwards, depending on the seat position. In the case of a collision, the seats will have an automatic fast-adjustment system that can be coupled to predictive assistance systems. The Company recently announced a strategic partnership with Autoliv, one of the world's leading suppliers of automotive safety systems. (From a press release on January 16, 2018)

Recaro Performance Seat Platform
-The Company announced that its premium brand Recaro Automotive Seating is presenting the all-new modular Recaro Performance Seat Platform (RPSP) at the North American International Auto Show (NAIAS). Two examples of the RPSP will be unveiled at NAIAS: a reduced, lightweight design and a demonstrator with advanced features and innovations aimed at the premium luxury segment. In terms of autonomous driving, electrification, connectivity, and individualization, RPSP will offer various smart functions such as health monitoring, automated acclimatization, drive- and rest-mode seat adjustment, automated ingress and egress assistance, and an electrical swivel function as an add-on. Additionally, through its low block height and a hip-point of just 155 mm, the RPSP provides more room for battery packaging in the floor of electric vehicles. (From a press release on January 15, 2018)

Investments in the U.S.

-The Company announced that it will invest USD 10.8 million to expand production at its manufacturing facility in Lexington, Tennessee. The Company will use the investment to upgrade the facility, install new assembly equipment and expand production lines. (Tennessee Department of Economic Development release on April 3, 2018)