Speaker 1: This is Bloomberg Business Week with Carol Messer and Bloomberg
Speaker 1: Quick Takes Tim Stinovic on Bloomberg Radio. Well, it is
Speaker 1: a thirty billion dollar market cap company customers around the globe,
Speaker 1: more than two thousand locations around the world, helping to
Speaker 1: create so called intelligent buildings to help address our worsening
Speaker 1: climate crisis. We're talking about Johnson Controls International, which is
Speaker 1: also a company's got a great vantage point when it
Speaker 1: comes to the global economy and corporate expenditures. Well, that's
Speaker 1: exactly where I want to start with George Oliver, Chairman
Speaker 1: and chief executive officer of Johnson Controls. George joining us
Speaker 1: via zoom from Milwaukee. George, how are you. I'm doing
Speaker 1: very well. Great to be with you today. Well, as
Speaker 1: Carol mentioned, you do have such a great view on
Speaker 1: what's going on here in the United States and around
Speaker 1: the world. What is your view of the economy here
Speaker 1: in the US. Yeah, when we look at what's happening
Speaker 1: within our business, um, you know, we see unprecedented demand
Speaker 1: for what we do within buildings. You know, let me
Speaker 1: start by talking about what we do or smart solutions
Speaker 1: are provider for buildings and infrastructure and uh, you know,
Speaker 1: we did a merger five years ago which put together
Speaker 1: to leadership companies in the space, Tycho and John's Controls,
Speaker 1: and with our strategy of of taking the multiple you know,
Speaker 1: building systems and then being able to deploy technology with
Speaker 1: a data platform that enables us to be able to
Speaker 1: significantly change the outcome of buildings. And those outcomes are
Speaker 1: reducing energy demand, improving the indoor into our air quality,
Speaker 1: and ultimately you know, making autonomous buildings. And so for us,
Speaker 1: given the the the environment that we're in, we're seeing
Speaker 1: very strong demand. We've got backlogs that are that are
Speaker 1: wrecking high backlogs. Our challenges have been shorter term is
Speaker 1: ultimately converting with the supply chain challenges on that demand.
Speaker 1: And when you look at what we do within buildings,
Speaker 1: you know, when you look at the global carbon footprint,
Speaker 1: it represents about the of the overall global covernment footprint
Speaker 1: buildings do. And then the opportunity that we have now
Speaker 1: as a smart building solutions provider to significantly reduce the
Speaker 1: energy that's consumed in the building at the same time
Speaker 1: that we're upgrading the indoor equality and ultimately creating an autonomous,
Speaker 1: autonomous building. So for us, we're watching the economy closely.
Speaker 1: But given what we see now going forward, where now
Speaker 1: buildings have become much more strategic UM. I think in
Speaker 1: the past they buildings were built with multiple systems separating apart,
Speaker 1: and now with the opportunity to bring that all together
Speaker 1: into one solution set, we're seeing very strong demand. So
Speaker 1: when we look at the market that ultimately is being
Speaker 1: created with these new problems that our customers are trying
Speaker 1: to solve, we see roughly accumulative about two d fifty
Speaker 1: billion dollars of additional market over the next decade. So
Speaker 1: we're watching it closely, but right now we're really focused
Speaker 1: on being able to execute on the backlock to support
Speaker 1: our customers. It's interesting when you talk about unprecedented demand,
Speaker 1: strong demand, UM George, how much of it is because
Speaker 1: of companies looking to cut costs and be more of fficient.
Speaker 1: How much of is it because of regulatory changes or
Speaker 1: the push towards you know, concerns about climate change and
Speaker 1: being much more sustainable. How much of the demand is
Speaker 1: new build Well when you look at let me start
Speaker 1: with the commitments have been made on climate change or
Speaker 1: decarbonization that have been made broadly across businesses as well
Speaker 1: as with governments, and I think coming back from Davos
Speaker 1: from last week, it's how do we take all of
Speaker 1: the commitments that have been made and ultimately how do
Speaker 1: we now you know, bring that together with a combination
Speaker 1: that's shared between business and government and ultimately now capitalize
Speaker 1: on what we see the opportunity to be So for
Speaker 1: us with those commitments and recognizing now to get to
Speaker 1: net zero, buildings are going to be an important part
Speaker 1: that have to be addressed to get to the commitments
Speaker 1: that have been made. So we're seeing that for instance,
Speaker 1: in our in our sustainable sustainable solutions business, we we
Speaker 1: see a pipeline now or let's say, about seven billion
Speaker 1: dollars and will convert roughly a billion of that during
Speaker 1: in the course of the year. So we are seeing
Speaker 1: a significant demand for the type of solutions that we
Speaker 1: can now provide. And we are uniquely positioned as Johnson Controls,
Speaker 1: and not only do we have the building systems, but
Speaker 1: now with our open Blue platform, which is a platform
Speaker 1: that allows us to be able to bridge all of
Speaker 1: the building systems together and then ultimately create outputs that
Speaker 1: historically haven't been delivered all right, so help me out here.
Speaker 1: So how much though is you know, in terms of demand,
Speaker 1: if you had to put it into cuts of a
Speaker 1: pie or percentage wise, how much of that demand is
Speaker 1: new build how much of is it cause of regulatory change?
Speaker 1: You know? How can you break it down a little bit.
Speaker 1: I'm curious about what's the psyche of people who are
Speaker 1: who are doing the spend. So Carola, what I would say,
Speaker 1: it's both with the pandemic. When the pandemic hit, we
Speaker 1: immediately saw our demand to be able to upgrade the
Speaker 1: indoor air quality, which require upgrading systems and deploying digital
Speaker 1: to be able to then optimize how you deliver a
Speaker 1: clean air delivery rate within buildings. So we we saw
Speaker 1: that which has really taken the built environment and being
Speaker 1: able to elevate that built environment to solve for today's problem.
Speaker 1: So a lot of retrofit, a lot of upgrade, a
Speaker 1: lot of repair, leveraging our our technologies. Now at the
Speaker 1: same time you've seen the new construction come back. You know,
Speaker 1: when you look at Architectural Building Buildings Index and a
Speaker 1: lot of the other metrics, you see where there has
Speaker 1: been an expansion and a lot of that growth is
Speaker 1: coming back. So for us, it's been both and it's
Speaker 1: not only a significant demand for upgrading the existing built environment,
Speaker 1: but at the same time fundamentally changing how buildings are
Speaker 1: built that ultimately going to be able to deliver a
Speaker 1: significant different outcome as it relates to energy consumed as
Speaker 1: well as the environment that's created. One thing I want
Speaker 1: to know, George, Um, you know, it's interesting we are
Speaker 1: David Weston catching up with Larry Think over a black
Speaker 1: rock and talking about we're gonna be living with more uncertainty,
Speaker 1: saying the inflation problem isn't you know, it's policy related,
Speaker 1: but that the feed isn't someone who can fix some
Speaker 1: of these issues. Specifically talked about the supply chain, uh
Speaker 1: and the supply chain problems. How is your supply chain?
Speaker 1: Are you seeing any kind of loosening in some of
Speaker 1: the snarls that have been out there? If you look
Speaker 1: at what's happened over the last couple of years with
Speaker 1: the pandemic and then the multiple shutdowns that have occurred
Speaker 1: to contain the virus and now some of what we're
Speaker 1: experiencing in China with the shutdowns there. I mean, then
Speaker 1: at the same time with the Ukraine crisis and and
Speaker 1: then with in our space, the unprecedented demands. So when
Speaker 1: you put all of that together, we've we've had our
Speaker 1: own challenges and we've it's really about resiliency, and so
Speaker 1: not only with what we do to help our customers
Speaker 1: with their buildings and infrastructure and creating resilient, much more
Speaker 1: resilient buildings and communities, but also making sure that we're
Speaker 1: working with our suppliers to create a much more resilient
Speaker 1: supply chain globally. And that's what that's what we've been
Speaker 1: doing in the last two years, and we've made a
Speaker 1: tremendous amount of progress. Now what we're seeing is with
Speaker 1: that strategy, we are seeing improvement um and and it's
Speaker 1: across all of our commodities, whether it be microchips and
Speaker 1: semiconductors or other other materials, and so we've been working
Speaker 1: through it um. But resiliency in in in supply chains
Speaker 1: and mean, George, what does that mean. Does it mean
Speaker 1: you're shifting where you're doing it or what does that mean.
Speaker 1: We've always had a strategy in our supply chain to
Speaker 1: be local for local, and so when you are manufacturing footprint,
Speaker 1: we have manufacturing footprint and all of the key markets
Speaker 1: we support, and then we build local supply chains to
Speaker 1: support those manufacturing plants with local supply and so there
Speaker 1: are when you're building a global supply chain, there are
Speaker 1: some products that are used across multiple markets and so
Speaker 1: you can't predict you know, whether it be the environment
Speaker 1: and natural disasters or pandemics or you know, these some
Speaker 1: of the geopolitical challenges that that might exist. And so
Speaker 1: our strategy has been to be local for local and
Speaker 1: we've been developing not only the right product but also
Speaker 1: having the local supply eye chain that creates resilience and
Speaker 1: how are how we're able to then you know, be
Speaker 1: able to support our customers and deliver for our customers.
Speaker 1: So that with the idea that you have multiple sources globally,
Speaker 1: so as you're going through some of this disruption, you've
Speaker 1: got a supply chain that has multiple sources, so you
Speaker 1: can source from multiple multiple locations. Um, all of that
Speaker 1: comes together into having a supply chain that's much more resilient. George,
Speaker 1: I'm really intrigued when you said you're seeing improvement in
Speaker 1: the supply chain, where specifically are you seeing that and
Speaker 1: you're seeing improvement when it comes to commodities as well
Speaker 1: as it chips. Is it like? What is it? It's
Speaker 1: been when we look at the work that we've done
Speaker 1: to strategize our semiconductors and chips when making good progress
Speaker 1: there across the globe UM, A lot of our supply
Speaker 1: chain challenge was in North America. When we look at
Speaker 1: our supply chain, we have multi tiered suppliers and a
Speaker 1: lot of the challenges that we had with the disruptions
Speaker 1: from from COVID shutdowns and then some of the labor
Speaker 1: challenges UM not necessarily within our facilities, but within our
Speaker 1: suppliers that UM and so we've worked very closely with
Speaker 1: them and being able to address their their labor challenges
Speaker 1: ultimately getting the supply chain back operating. So it's really
Speaker 1: looking at all levels of the supply chain UM as
Speaker 1: well as all when you look at the global footprint,
Speaker 1: all regions, and we've been making part pretty much across
Speaker 1: the board. Georgia, are you expecting a recession maybe later
Speaker 1: this year or maybe next year? Are you? Are you
Speaker 1: when you gather your management team do you say, guys,
Speaker 1: this is what you know. We need to have the
Speaker 1: playbook ready for Well, you can go back with the pandemic,
Speaker 1: and I think we we we demonstrated this very well.
Speaker 1: We've been creating a lot of agility with how we
Speaker 1: operate as a company, and we've had an incredible opportunity
Speaker 1: with the work that we do within buildings and infrastructure
Speaker 1: to respond to these crisis like for instance, a good
Speaker 1: example is in the early days of the pandemic, we
Speaker 1: support critical infrastructure, which is healthcare, and we were on
Speaker 1: the front lines building hospitals in a matter of days
Speaker 1: that had the highest air quality and ultimately the resource
Speaker 1: that they needed to be able to attend to those infected.
Speaker 1: And so we've we've built, you know, we've been very
Speaker 1: agile with what we do, not only responding to the
Speaker 1: new demands and the crisis, but also agility relative to
Speaker 1: understanding a little bit of what's gonna potentially happening and
Speaker 1: make sure that we're always positioned to be able to
Speaker 1: deliver for our customers, be able to solve their biggest problems,
Speaker 1: and then ultimately make sure that we're taken into account
Speaker 1: what we see happening on the horizon. So being agile
Speaker 1: in case of whatever comes your way, so could be
Speaker 1: a recession, could not is that is that fair to say. Yeah.
Speaker 1: Like I said, right, our focus right now is delivering
Speaker 1: on the backlog and delivering for our customers given what
Speaker 1: we've seen here over the last about eighteen twenty four months. Obviously,
Speaker 1: I think the demand that we see now solving the
Speaker 1: biggest problems within buildings, which is indoor ear quality, making
Speaker 1: making them much healthier and safer, and then also being
Speaker 1: able to address the global carment footprint that domain is
Speaker 1: going to continue because the commitments have been made and
Speaker 1: ultimately our customers have to deliver on those commitments. So
Speaker 1: we're working closely to make sure we understand how that
Speaker 1: plays out and how we're positioned to support our customers.
Speaker 1: At the same time that we're taking into account making
Speaker 1: sure that we're we're gonna be agile with any downturn
Speaker 1: that might might occur in some of the key markets
Speaker 1: that we operated. But you know what, I it's really
Speaker 1: all about making sure that we're not only supporting the
Speaker 1: customer with the demand that we have today in the backlog,
Speaker 1: but at the same time taken into account the factors
Speaker 1: that we see that potentially could impact us longer term. George,
Speaker 1: thank you so much for your time today. I really
Speaker 1: appreciate it, George, all of our He is chairman and
Speaker 1: chief executive officer Johnson Controls, joining us via Zoom from
Speaker 1: Milwaukee