General Motors Company (GM): Who Will Bid for Johnson Controls, Inc. (JCI)’s Electronics Unit — the Chinese?

It’s not a small business. Electronics accounted for about $1.4 billion of JCI’s revenue in fiscal 2012. JCI says that it has “over 1,000 engineers, electronics specialists, and designers at seven Research and Development Centers in Europe, North America, and Asia who develop innovative electronics solutions for Driver Information, Infotainment, Connectivity, Body Electronics and HomeLink®”

So, why is JCI looking to sell? It’s unclear, but reports have suggested that Electronics is less profitable than the other parts of JCI’s Automotive Experience division, and Johnson Controls, Inc. (NYSE:JCI) would rather have the money it could get for the unit to reinvest in its other auto-interior businesses.

Like other auto suppliers, Johnson Controls, Inc. (NYSE:JCI) has faced significant pressure on margins from cost-conscious automakers, as well as ongoing pressure from the economic downturn in Europe, which has left auto sales near two-decade lows. JCI may also be facing increasing pressure on some parts of its business from local competitors in China, where it has invested heavily with an eye toward future growth.

JCI has hired JPMorgan Chase to advise on the sale, so they’re serious about getting a deal done. Who might step up to buy?

Who might buy this division?
Aside from JCI’s big-name competitors in the auto-parts space – Magna International Inc. (USA) (NYSE:MGA) and Lear Corporation (NYSE:LEA) , to name two – it seems likely that interest will come mainly from China. The more sophisticated domestic Chinese automakers (and the better local companies that supply them) are increasingly interested in finding a route into the global auto business, one that leads to big-name clients like Toyota and Ford.

Buying an established company (or in this case, part of one) is a way to make that happen. It’s likely that one or more well-financed Chinese firms will kick the tires on Johnson Controls’ Electronics unit in coming weeks. Will that lead to a sale? Stay tuned.

The article Who Will Bid for Leading U.S. Auto Supplier’s Electronics Unit — the Chinese? originally appeared on Fool.com and is written by John Rosevear.

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