We Expect Adient To Continue Restructuring While Reducing Debt and Buying Back Shares

Adient is Johnson Controls’ automotive seating business, spun off to JCI shareholders in a taxable transaction in 2016. Adient, along with Lear, is a top-two player in the seating market, with about a 20% global share. We think ignoring Adient just because it is an auto-parts supplier is shortsighted. Seating is one of the stickiest parts of the supplier sector because it is very difficult to replace an incumbent on a vehicle program, and automakers need suppliers that can consistently deliver high-quality seats in a just-in-time system worldwide. Automakers have global platforms and are willing to pay for the right supplier rather than the lowest-price supplier. We think the seating sector can benefit from autonomous and electric vehicles rather than be hurt by the change because autonomous vehicles and electric vehicles open up new seating configurations and possibly more electronics content in seats.