Adient has made statements in this document that are forward-looking and therefore are subject to risks and uncertainties. All statements in this document, other than statements of historical fact, are statements that are or could be deemed forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. In this document, statements regarding Adient's future financial position, sales, costs, earnings, cash flows, other measures of results of operations, capital expenditures or debt levels and plans, objectives, outlook, targets, guidance, or goals are forward-looking statements. Words such as may, will, expect, intend, estimate, anticipate, believe, should, forecast, project, or plan, or terms of similar meaning, are also generally intended to identify forward-looking statements.
Adient cautions that these statements are subject to numerous important risks, uncertainties, assumptions, and other factors, some of which are beyond Adient's control, that could cause Adient's actual results to differ materially from those expressed or implied by such forward-looking statements, including, among others, risks related to uncertainties as to the timing of the spin-off and whether it will be completed, the possibility that various closing conditions for the spin-off may not be satisfied or waived, the expected tax treatment of the spin-off, the impact of the spin-off on the businesses of Adient, the ability of Adient to meet debt service requirements, the availability and terms of financing, the risk that disruptions from the spin-off will harm Adient's business, competitive responses to the spin-off, general economic and business conditions that affect Adient following the spin-off, the strength of the U.S.
Other economies, automotive vehicle production levels, mix and schedules, energy and commodity prices, the availability of raw materials and component products, currency exchange rates, and cancellation of or changes to commercial arrangements. A detailed discussion of risks related to Adient's business is included in the section entitled "Risk Factors" in Adient's registration statement on Form 10, filed with the U.S. Securities and Exchange Commission on April 27, 2016, as amended most recently on August 16, 2016, and available at www.sec.gov. Potential investors and others should consider these factors in evaluating the forward-looking statements and should not place undue reliance on such statements. The forward-looking statements included in this document are made only as of the date of this document, unless otherwise specified.
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Please welcome Chairman and Chief Executive Officer, Bruce McDonald.
Well, good morning, and thank you for being with us here today. It's a big event for the new Adient management team, and we couldn't be happier to be here in New York and spend the next three or four hours talking about our company and the exciting future that we have. In terms of our agenda today, I'm gonna start things off and just give an introduction to the company and really talk about the rationale for the spin-off and things like that. I'm gonna be joined, up next will be Byron Foster. Byron's a long time executive in Johnson Controls and been in the auto business for many, many years. He's one of my two executive vice presidents. Eric Mitchell, another executive vice president, is gonna come up and then really give a deep dive on our China business.
We thought it was important that we spend a fair bit of time going through our China operations, our joint venture structure, our strategies there, because that's a big part of the investment thesis about our company. One of the real differentiators about Adient versus almost any other supplier on the planet is our market position in China, the growth that we've experienced there, and I think the exciting future that we're uniquely positioned to deliver. We have Detlef Juerss. Detlef is our head of technology engineering. Again, based in our technical campus in Germany, Detlef has been in our organization a long time. Last but not least, Jeff Stafeil, our CFO. He'll come up and go through a lot of the financial details and our sort of future business projections. With that, I thought I'd just start with kind of a recap.
For many years, and for those of you that are familiar with Johnson Controls, automotive really was the growth engine of Johnson Controls for a very long period of time. We acquired a company called Hoover Universal in 1985. By the way, that's the company that John Barth, who eventually became our Chairman and CEO, was a plant manager in Erie, Pennsylvania at the time we made that acquisition. That's how we got into the automotive business. It was a business that had a couple different business lines and made some metal components. That's how we got into the business. You can see from this slide, series of acquisitions, we really received the bulk of the capital investment in Johnson Controls for many, many years, and you can just really put breathtaking growth rate here.
Over the course of the last three or four years, however, our strategy at Johnson Controls has sort of pivoted, we wanted to become more of a multi-industrial. We sold off our automotive electronics business, we constrained our capital investment to automotive, we sort of flatlined it from a growth perspective. That was really the reason why we decided that it didn't make sense for Johnson Controls to own the automotive business anymore, because we weren't willing to make the investments that we had historically made in this business. Running it sort of in a cash cow type mode was just going to damage the business over time. It wasn't a very difficult or a long debate that we had with our board of directors.
It's pretty clear that the best answer, really a textbook reason for why companies spin off businesses, and that was really our fact pattern. When we set about the automotive spinoff, we tried to do something a little bit different. We kind of went into this process with a view that we wanted to set up two strong companies. What that meant was we wanted to set up automotive to be successful. Some of the principles that we did, and I think some of the proof points when you look at where we are today, if you look at the leverage of our business, we're coming out at about 1.9 or 2 times net debt to EBITDA. Our leverage is actually a little bit lower than the remaining Johnson Controls part of the company.
If you look at our balance sheet, by and large, Johnson Controls has retained most of the pension liabilities associated with commingled plans. We have a very low financial risk associated with pensions. We also said that from a corporate perspective, Adient, you take what you need, and that we will deal with the stranded cost back at Johnson Controls. When you look at our future projections that Jeff will go through, we don't have a lot of restructuring. We don't have a lot of cost in front of us. Most of those are behind us. Secondly, on terms of TSAs, this is kind of why our spinoff has taken the amount of time it's taken. We announced this back last July. If you think about the 15-month period here, really the timeline on that's really been separating the IT system.
We have very minimal TSAs going backwards and forwards, I think. It's a net number of less than $10 million in terms of TSA. Most of the heavy lifting in terms of the investment in separating our systems and things like that is behind us. Here's, I think, just sort of a short takeaway in terms of what was things like in automotive as part of Johnson Controls, and what's it going to be like in the future. As I said in my opening comments, initially, we were part of, obviously, a multi-industrial company, we had to compete for capital with our other two businesses. Obviously, in the future, we're 100% focused on automotive. We're going to be a smaller, leaner cost structure. From a setting up of our corporate overhead, we will have a leaner cost structure than Johnson Controls.
In terms of our business, you can see this even on a quarterly financials as we reported them all through 2016 here, our business is on an upward trajectory. If you look at our margins, we have strong margin improvement in automotive as we've gone through 2016, and we expect that momentum to continue on. We think we have about 200 basis points of margin expansion. When Jeff comes up and goes through his presentation, he'll really take you through a walk of where that 200 basis points comes from. I think one of the things that is another key takeaway, when you think about the 200 basis points of margin expansion, it really comes from things that we have 100% control, self-help. A bit of it is front-end loaded. We'll be setting up our corporate office in a leaner fashion.
We'll kind of get that benefit right out of the box here in 2017. Our metals operations, we're sort of in the, I'd say, the third or fourth inning of integrating our metals operations. That drives a significant amount of margin expansion opportunity for us. Lastly, kind of what we're doing to lean out, I would say, our SG&A structure. In terms of our cash flow, this is a very strong cash flow business. Jeff, again, will take you through the characteristics of our cash flow. We tie up very minimal amounts of working capital. We do plan on addressing the capital constraint that we've been operating under, and you'll see our capital investment ticks up here in 2017 as we invest about the same amount of capital as our competitors do. We've largely been reinvesting at the same level as our depreciation.
We'll be ticking that up a little bit to get our business back on a growth trajectory. That's kind of what it's like today and how things are going to be different here in the future. From a timeline perspective, we've had a busy month, and it seems like a long time ago, but the Tyco merger that we announced with Johnson Controls here in January of this year closed as we had expected to here on Friday, September 2nd. The new Johnson Controls board met in Ireland on September 8th and approved the spin-off transaction. That's a big milestone for us. All the regulatory approvals and things like that are behind us. The Johnson Controls board has approved it. We're obviously here today having our official coming out, you could say, from a new company perspective.
Over the course of now until we begin trading here at the end of October, we'll obviously be having a number of investor events and meeting with a lot of buy and sell-side analysts. In our announcement for the spin-off, we set our record date as October 19th, and our first day of trading, or when the shares are actually distributed, will be October 31st. When issued trading, we expect right now this to commence a couple days before the record date on October 17th. A lot of activity here in front of us. We're excited to be back here again at the end of October, and me and my extended management team will be ringing the opening bell at the New York Stock Exchange on Halloween morning. In terms of a business overview, this is Adient.
If you think about our company, we're the largest automotive seating supplier in the world by a considerable margin. I really like to think about our business in three distinct pieces. One, we have a $17 billion automotive seating operation in North America, Europe, and Asia. In China, we're unique. We have about a $7 billion collection of joint ventures that we don't consolidate. If you look at the unconsolidated revenue of all of our joint ventures, that's about another $7 billion. In addition to that, we have our 30% investment in Yanfeng Automotive Interiors. That's a global automotive interiors joint venture. That's the largest automotive interiors supplier in the world. It's about $8.5 billion. We have a 30% share of that business. Our Chinese partners, Yanfeng, have a 70% share. Those are the three distinct pieces to our company.
When you flip to our seating business, we have about 230 locations globally, as this slide suggests. We make about 25 million seat sets a year, or about one every second. We have about 75,000 men and women around the world. Again, these numbers exclude our China operations, and Eric will do a deep dive on comparable figures for China. That's the way you think about the business. In terms of our board of directors, we're targeting having a board of eight individuals. We've got seven of them named, so there's a couple people that we're talking about in the pipeline. I think what we tried to do when we put the new board together was really find a group of people with global experience. That was something that we were looking for. Obviously, automotive background or manufacturing as a minimum.
Here's what we've come up with. From the Johnson Controls board, Julie Bushman, who's Executive Vice President at 3M, Ray Conner, who's Vice Chairman and CEO of commercial airline business at Boeing, and Richard Goodman, retired CFO of Pepsi, they'll come off the Johnson Controls board and come onto the Adient board. We have good continuity of leadership at the board level from those three individuals. In terms of people that we brought in from the outside, we asked John Barth, who was Johnson Controls Chairman and CEO from 2002 to 2007, to come back. John, in fact, when I took this assignment on, I called John and asked him, he's retired, and I know a lot of people know John, but he's retired, he's not on any boards. I asked him if he would come on and help us set this thing up, and he couldn't have been prouder to be asked, and I couldn't have been prouder that he agreed to take the assignment on.
Great there. We have Fritz Henderson. Fritz is Chairman and CEO of SunCoke Energy, but obviously, a lot of you folks would know Fritz from his previous days at General Motors, where his final position in the financial downturn was Chief Executive Officer. We have Barb Samardzich on the team. Barb, she's retiring from Ford, actually, at the end of this month. She's right now Chief Operating Officer for Ford in Europe. Has been a big part of the automotive turnaround in Ford's European operations.
Barb will be, as I said, retiring from Ford here at the end of the month and joining our board at the end of October. That's kind of what we've got from a board of directors perspective. From a leadership team point of view, here's my direct reports and a couple of comments here. We originally going to put how many years of automotive experience the team had, but we couldn't add that high. A lot of automotive experience on team. It's a blended team of executives that essentially ran the Johnson Controls automotive segment, as well as some of us on the corporate side, that stepped up into, you could sort of think the lead roles, from a functional perspective. From an external perspective, we brought in two people. We brought in Neil Marchuk as our head of Human Resources.
Neil held a similar role at TRW Automotive, and then we brought Jeff Stafeil in as our CFO. Prior to this assignment, Jeff had been CFO at Visteon. A very experienced management team, and I couldn't be happier to be sharing this journey with the team. As we've gone through the spinoff process, the 10 of us and I'd say another 10 or 15 of our sort of top regional leadership around the globe, have kind of really spent a lot of time kind of reflecting on the fact that we're really being given the opportunity of a lifetime here and to set up a brand-new company. Not just a brand-new company, but a $30 billion brand-new company. What we really wanted to do is sort of step back, take some time to reflect on what type of company do we really want to be.
We have a lot of great things that we are taking with us from Johnson Controls, and we wanted to make sure that a lot of the things that made us great as part of Johnson Controls, that we took with us. We're going to be a different company. We're going to be a single industry company. There's also some things that we want to make sure that we did differently. Really starting that journey with what is our mission, what's our vision statement? I sort of not going to go through all the words here, but I would reflect on the fact that in terms of our vision, you can see we want to improving the experience of a world in motion. I think that really fits what we do.
If we think about the experience of driving an automobile, I mean, very related to the comfort on the seat. It's part of the safety system, probably one of the most critical safety systems, because we really want a seat that can move up and down and backwards and forwards and recline. In the event of an accident, you're sort of counting on that seat not moving, then the seat belt holding the occupant to the structure of that seat and protecting you from bodily damage. It's a critical component to the vehicle and the driving experience. That statement, I think, gives us the right to participate not just in the automotive sector, but in other seating opportunities around the world. That's kind of how we came up with our vision statement.
From a mission point of view, we really reflected on the fact that we are the world's largest automotive seating supplier in the world, and we want to be the best as well as the largest. There's a lot of companies out there that are the largest in their space, but their customers don't like doing business with them. I'm sure in the technology field, we can all think of a few companies that you might put in that bucket. For us, being the best, it really means being a leader in cost. We got to be the cost leader in our industry. We're not the cost leader in our industry today, but we need to be the cost leader in our industry. That you'll see is in our mission statement here.
Quality and launch execution are two things that quality in particular, our industry, I think we have a bit of a black eye right now in terms of some of the quality issues that our industry is facing. I would say from a supplier perspective, that translates into more rigorous standards, and it just means that the tone in terms of quality, the expectations around not having quality spills is higher than ever. We've had a great track record from a quality perspective, and that's something that we have to up our game. Launch execution. I mean, this is a business that our product is integral in the launch of a new vehicle. We're a big part of a new vehicle architecture when something's going on. If we have a hiccup, we cause our customers to have a big hiccup.
Launch execution, making sure we launch well is critical. Lastly, customer satisfaction. That really means doing what we say we're going to do with our customers. You can see this last sentence, we put this sort of second sentence in very deliberately, is we said, "Look, we're first and foremost automotive seating company, and we're always going to be first and foremost automotive seating company." We didn't want to run, jump out of Johnson Controls, where we've constrained investment to automotive seating business and invest elsewhere. We do have opportunities outside of automotive seating, and I would say in seating in some adjacent markets.
What we're talking about here, Detlef will show you some of the things in his presentation later on, is where we have world-class capabilities and only in places where we have world-class capabilities, we will look to make some investments and grow beyond the automotive sector. In terms of our values, I won't sort of go onto these, Values really set the tone for the culture we want to have at our new company. Again, just like we have, I would say, an outstanding culture at Johnson Controls, we want to make sure we steal that from them, carry it on, and make it even better. A couple of things I would say that are sort of real buzzwords that we're sort of putting into practice as we set up our new company.
You can see one that says, "Pick up the pace." Again, being in a single industry company instead of part of a multi-industrial company, we want to be operating at a faster clock speed. "We before I" is another big one that we talk about, and that is how you folks found teamwork and doing things for the team. Anyway, those are the values that are going to drive our culture at Adient as we go forward. Lastly, in terms of the type of company we want to be, this is a long document, and it's probably easier to read in there, but this is something that we called our five-year marker, and we had a 10-year marker at Johnson Controls.
What this really means is when you look at our mission statement, our vision statement, and we say, "What tangibly do you mean?" This document really says, "Hey, in five years' time, this is what we mean when we talk about being the best automotive seating supplier in the world. This is what we mean when we talk about improving the experience of a world in motion." It's things that we can measure ourselves against, easy to put metrics together, and in some cases, we're throwing out a gauntlet to the rest of the organization. I'll just reflect on a few of the things that are in our five-year marker that we've color-coded here.
In product development and innovation, you can expect that just like we've constrained investment from a capital perspective to our automotive business in the past, we've also constrained our investment in innovation and new programs. That will be, and that is how we grow our business by operating new, interesting, must-have features to our customers. Innovation and what we do with innovation, the amount of money we spend on innovation, our Auto Show experience that you'll see will reflect a big step up in innovation investment, and we look forward to. I know a lot of you folks come to the North American Auto Show, but you'll see a real difference in our booth this year in terms of the commitment that we're making to upping our game in innovation.
In terms of our operating system, we've talked at Johnson Controls about the Johnson Controls operating system and how it's going to deliver a significant margin expansion opportunity for Johnson Controls. When you really look at the genesis of where did it all come from, most elements of the Johnson Controls operating system have come from our automotive operations. We are carrying on what the Johnson Controls automotive or the Johnson Controls operating system will call the Adient operating system. It really is making sure that we have all our plants at level 5 capability. It's rolling out low-cost SG&A functions across the world, standardizing our IT global infrastructure, those kinds of things to be cost leaders. Operational excellence really is the five-year mark that drives our cost leadership.
In terms of global growth, you can see we talk about we already are number one, but I think the thing that's different for us, and I think some of the longer-term trends that we face as an industry is the emerging role of China in the global automotive industry. Already, we're seeing some of our customers develop global products in a Chinese homeroom. GM program would be probably the biggest example right now. I think that Adient, with our strong position that we have in China, our technical footprint that we have there, I think we're uniquely positioned to leverage that trend to grow our business outside of China. For years and years and years, we've been strong in China and taken our global platforms and launched them in China.
I think that flips on its head over the next 10 years, and more and more you're going to see programs being developed in China and tailored for the lower volume North American, European markets. I think we're really well-positioned to lead that charge. Lastly, I put about shareholder value. We're coming out with a balance sheet that's a little bit more highly leveraged than we'd like, at about 1.9 times. We understand that our business is a cyclical one and that we're, at least here in North America, we're probably in the later innings from a volume perspective.
We'll be very heavily focusing here on the initial few years of getting our balance sheet in shape, getting back to investment grade type metrics, which we think we can do fairly quickly, and making sure that we have a balance sheet that sustains us through the economic cycles that are inherent in our industry. Anyway, that's just a rundown of kind of what we mean. When we're doing something, and we're talking to the street about it will directly tie into this one page, I guarantee that. Now let me just talk about some of the real key takeaways and why we're excited about the investment opportunity in our company. First of all, market share. This chart shows Adient's global market share at about 34%, and we're at least 50% bigger than our next closest competitor. Clear market share leadership.
If you look at our sales by geography, we are, I would say, very unique in that we are about. This is sales in the territory that we do business in. We have about one-third of our sales in each of the major theaters of operation. You can see we're slightly larger in Europe and Asia, China, than we are in North America. I think that the takeaway here is there's a lot of large automotive suppliers out there. We'll be amongst the top 10 or so on the planet. A lot of large European players are big in Europe. A lot of large North American players are big here in this market. A lot of big Japanese suppliers are big in the Asian market. There's very few companies that have a revenue diversification like us.
There's almost no other large supplier of anywhere near our scale that has revenue diversification like Adient does. I think the other takeaway, there's some concern, quite rightly so, about what stage are we at in terms of the cycle here in North America. This chart already sort of puts it out. I'd say from my perspective, I see North America market sort of plateauing here. I don't see it going down, but I certainly don't see us experience the type of growth that we've had over the last three or four years. Europe is, quite honestly, it's just bouncing off the bottom here. I think there's a lot of runway in terms of a European uptick. We don't see that happening next year, but I think the European market's operating at a level that's fairly depressed if you look at where it was back in 2007, 2008.
China, I think we see that market slowing to mid-single digit type growth. Uniquely, we're only 1/3 here positioned in North America. Some of the concerns around downturn planning, what's the sort of impact if North America falls off a cliff? That only affects about 1/3 of our revenue stream. It's nice to have that revenue diversification, the geographic diversification. This chart here is our customer diversification, and here, without question, Adient is the envy of the automotive industry. Again, nobody has. I think if you were to go ask any automotive supplier, what would they like their customer diversification to be? What would their vision be? It would be like our customer diversification is today. It's very strong.
You can see in Asia, we have a great position with the Japanese customers in Japan and globally. We're well-positioned with the strong European and North American players. Industry-leading diversification, you can see our largest customer is about 14% of our sales. We don't have any platform that we're super exposed to. Excellent customer diversification, the envy of the industry. China, we talked about China. Eric will take you through a deep dive here. We got into China first, and that's really what's the key to our successes. We got in early. Our first joint venture was formed in 1996, so it's about 20 years ago, and we went in in a minority joint venture structure. Those are the two differences that we did, and it has served us exceptionally well.
The chart here on the bottom just shows what our growth rate has been. We expect to be through 2020 based on book business, 25% compound annual growth or a little bit north of that. Our sales in China, as I said in my opening slide, on a seating side, about $7 billion this year. We have more manufacturing in China than any other geography in the world. We have 60. We have 17 parent-level joint ventures, but several of those joint ventures have joint ventures underneath them. We're in 32 cities. You can see from the map, obviously not just in the coastal areas, but we sort of carpet bombed the country in terms of manufacturing locations. Huge position in China. It's been a huge part of our growth story, and it's something that we expect to continue. We are winning our share there.
We expect our share gains to continue on a go-forward basis. China, if you're going to be in the automotive industry, and you've got to be in China, Adient's in China in a big way, I think second to nobody. In terms of end customers. We've had a lot of questions about, well, what do the customers think about the spin-off? This chart I think really shows the proof is in the pudding. What we've done on this chart here is, over the last three years, this is the amount of new orders that we've won. This is a combination of not just new programs, but also replacement business. Then you can see here that over the last three years, while we've been in a capital constraint mode, we've booked somewhere between $3 billion and $3.8 billion of new business.
This year, where we've sort of said to our sales team, "Look, we're going to be spun off. We're willing to spend more money on engineering. We're willing to hire in some of our technical areas. We're willing to put the capital investment down in the future." We are back to our old winning ways. On a year-to-date basis, you can see through August, we've got one more month to go here, we've already booked $5.1 billion of net new business, or nearly 50% more than we have on the average of the last three years, and we expect about another nearly $1 billion here of stuff to come through in the month of September. I sort of liken this chart to my opening slide is, look, we know how to grow the automotive business.
We just took the oxygen away, now we put the oxygen mask back on. We haven't lost ability to flex those growth muscles, our customers are recognizing how we can support them globally, they're voting with their wallet. We're back on our winning ways. What this will do is it translate into top-line growth, not next year, not 2017, not in 2018, but you'll start to see top-line growth come back on our consolidated business in 2019. I talked a little bit about our profitability and our 200 basis points of margin expansion. I thought this chart's important to sort of say, "Hey, we're not starting from scratch here." This is the automotive profitability in the first three quarters of this fiscal year. The quarter ended in June 30th. On a year-to-date basis, here I've cleaned up the deconsolidation of interiors.
On a year-to-date basis, if you just look at our consolidated seating business, adjusting for foreign exchange, we're up about 2%. No top-line growth because we've been capital constrained. On the other hand, we have been focusing on margin expansion. You can see on a year-to-date basis, our segment income is up about 13%. Our margins, 16 over 15 are up, our 15 over 14 are up. We're on an upward trajectory. The actions that I talked about around leaner corporate office, that will benefit this. The SG&A initiatives that we have globally, that will benefit this, the metals improvement opportunity, that will benefit this. Jeff will sort of spend a bit more time deep-diving each one of those three. Upward profitability trajectory. In terms of our market, what do we have from an industry point of view?
Is it a headwind or a tailwind? Let me first really break this down into three components. If you think about the industry, we expect to see about a 2% compound annual growth rate in industry production here between now and 2020. China, we think, will grow quicker than that, about 4.2%. That's a slowdown in China versus how it's been operating in the past. But still, you can see the Chinese numbers, still pretty big numbers, and 4%'s nice. We got that as a tailwind. With mix, and here I would point to really two things. One, the amount of content that is migrating into seats. It's things like more leather or a better interior on smaller vehicles. That's probably the biggest takeaway. On smaller vehicles, used to be cheap interior. You're seeing better interior features on smaller vehicles.
The shift to SUVs, this one, quite honestly, doesn't really get a lot of publicity, for those of us that are in the seating business, we love SUVs. The seats are much bigger, i.e., they sell for more, a lot of them have three rows of seats instead of two rows of seats, we really like that. The SUV mix has shifted from a 50/50 here in North America three years ago to a little bit north of 60. I think when you look at SUV, I'm including CUVs in here as well, we see that trend continuing to migrate upward. I think if you look at IHS projections, they have North American market shifting to a 30% passenger car, 70% truck, SUV, and CUV. That's a good thing for us.
China, huge growth in SUV this year, more than 40% compound annual growth from an SUV point of view. It's still a very small segment of the market, it's an important one we expect to see that continue. The shift away from passenger cars to SUV is a big positive driver for Adient in the future in our industry. Lastly, I would point to content growth. If [Kubish] in Detlef's presentation, he'll do a better job explaining content growth and content growth that we expect to see longer term associated with autonomous vehicles. For now, if you think about content growth, what we mean by that, say, in the next five-year horizon, we're talking about things that are in higher-end seats that migrate down to lower-end seats.
It used to be things like power seats were in the top end of the market, now power seats are pretty mainstream. Heating in seats used to be at the high end of the market, now it's kind of migrated, it's fairly mainstream. The things that are out there right now are many more dimensions of power seats. I think the new Lincoln Continental has a 32-way power seat. You'll I think see more power migrating into the market. I think cooling seats is probably in the early stages of migrating down the market. Those are some of the features when we talk about content growth in the short term. Around autonomous vehicles, it gets to be really interesting with some of the content that'll migrate into the seat, you can listen up for that in Detlef's presentation.
In terms of where we sit in terms of tailwinds, I would characterize a tailwind. We got industry growth like everyone else does. We have mix benefit coming from SUVs, and we have content growth associated with the short term with high-end features migrating into the mass market and long term with automotive autonomous vehicles content moving into the seat. Just as a takeaway before I hand things over here to Byron, I mean, I touched on a lot of the thesis in my presentation, but market position. We're unique. We're number one in our industry by a long shot. We're number one in each geographic territory, and Byron will take you through those in his slides. We have unparalleled customer diversity. In terms of earnings growth, we're on an upward trajectory with 200 points in our gun sights that we control.
We're a strong cash-generating business, and I think you'll see that we're going to be able to really quickly de-leverage our balance sheet and produce shareholder value for our new shareholders. With that, I'm going to bring Byron Foster up to the stage. Byron.
Thanks.
You got that?
Good morning, everybody. As Bruce mentioned, I've been with our automotive business for just over 19 years. I was introduced to Johnson Controls' automotive business as a management consultant with Booz Allen, and three years later, I joined the company. I was really drawn to the company because of the culture, the real desire to work closely with our customers, and to pursue growth. If you remember the chart that Bruce showed you in terms of the growth of the automotive business, I was here during that time, and it's been quite a ride. As I think about our future going forward as Adient, I'm just as excited about the future to continue to grow the business and partner with our customers to help them win.
What I want to do today is talk to you in a little bit more depth about how the business really works. Bruce used this slide to kind of give you an overview of the current position of the company, $17 billion in consolidated revenue and a huge position in China, as well as a market-leading interiors joint venture, YFAI, supplying and supporting our customers across over 230 locations, and one seat kind of coming off the line every second, if you will, across the globe. Really supported by 75,000 highly engaged, motivated employees that come to work every day to help us win and help our customers win. Let's talk about what's underneath that and how that all works.
The first part of the business I want to talk to you about is our complete seat business, or a business we commonly refer to as our JIT business, or just in time. This is really the part in the process where the seat comes together and becomes a system and gets supplied to our OEM customers' assembly plants. You'll typically find our plants, we have over 100 just-in-time plants around the world within a pretty close radius of the OEM assembly plant, which allows us to minimize inventory and to supply on a just-in-time basis to our customers. In these plants, winning at JIT is really about global supply chain management. If you think about the amount of material that we have coming in at a component level to these plants, both within region and many times from other regions around the world.
It's around managing that global supply chain. It's around efficient assembly processes. It's about quality. Most of all, it's about delivery. Because if we miss delivery, then our customers can't build vehicles, and we shut down a major OEM assembly plant. That's really what happens in these locations every day around the world. They're very efficient operations, and it's really the front line in terms of our interaction with the customer. The next part of the business is our trim business, there's really kind of two segments within trim, I'll start with our fabric business. Roughly five years ago, we vertically integrated into the fabric business through an acquisition of a company called Michel Thierry out of Europe.
That really gave us a capability from a design standpoint to talk to our customers much earlier around what we can do with them to help differentiate the interior. It also helped drive craftsmanship and other opportunities in terms of efficiency between the fabric business and our cut and sew business. We were able to take that acquisition and really drive efficiency within the operations as well as take that capability globally, expand our position in fabrics in North America, as well as begin to establish a position in China in the fabric business as well. On the other side of the trim business is our cut and sew operations. This is really a business that is labor-intensive, so this business has migrated to best-cost countries around the world. You'll see our operations in places like Mexico, Eastern Europe, China, et cetera.
In that business, it's about efficient material utilization. It's about efficiency in our cut and sew operations, as well as managing logistics, because we tend to ship these trim covers to our JIT assembly plants. Managing that supply chain, again, is another critical success factor in that part of our business. Our foam business. This is a business that's really where the comfort solution comes from. Our capability relative to helping our customers find the right kind of balance between comfort and craftsmanship is really where this capability comes to bear. We deliver that capability through, here you'll see a set of regional plants because this business is about scale. It's also about managing logistics because foam is expensive to ship.
We tend to have foam plants in regional hubs that can support both our JIT plants as well as competitors where we're sourced at a component level. It's about scale in our operations. It's about logistics management, and it's also around scale in our purchases of polyurethane. There we have a huge advantage over our competitors as the largest foam manufacturer in the world. Next is our metals and mechanisms business. Bruce made reference to this earlier. This is a business where the seat system starts. It is arguably the most critical part of the actual system itself. If you look at the sourcing patterns and how the seat is actually sourced by our customers, it all starts here. Here, the play is about driving commoditization.
Many of our customers have developed core structure platforms that they proliferate across their vehicle lines, and they look to add in to supply mechanisms and structures that allow for that proliferation around their product lines. We really doubled down in this business and acquired world-class capabilities roughly five years ago with the acquisitions of Keiper and Hammerstein. As Bruce mentioned earlier, we're around the fourth inning, I think he said, of continuing the integration of these businesses. What you'll see over time is the legacy Johnson Controls products and platforms will begin to build out, and our new technologies will begin to make their way onto the market. We think as that happens, we'll continue to see great improvement in this business and continue to drive our leading position in the industry, in the metals and mechanisms business. Lastly, our RECARO business.
This is a business that came to us as a result of the Keiper acquisition back in 2012. I think this is a great example of a huge opportunity that we have yet to be able to leverage fully, given some of the constraints that we've put on the business over the last three or four years. As we look forward, we see this as a fantastic platform to create new growth opportunities, to bring new solutions to our customers, to help them differentiate their vehicles. RECARO is the number one recognized brand in automotive seating in the world, and you're going to see more of that opportunity as we go forward in the marketplace. Just to give you a little bit of a sense about the brand and what it brings to the market, I've got a short video that I want to show you here.
If we can roll the video. We're excited about RECARO. If you look at just the brand's performance, if you will, relative to other specialty seating brands, it is by far the most recognized brand out there from a consumer standpoint, as well as from an OEM base. We're really looking to leverage this brand, reinvest in this brand, and use it as another platform for growth as we go forward. Again, in summary, if you step back and you look at the capabilities that we bring, the market share charts that Bruce shared, and I'll go through that a little bit with you as well, is really built on a foundational position that we have at a component level, which is really where the company started, and we evolved into a complete seat or system solution provider as well.
We've built this position over time, and we're really looking to leverage that as we go forward and bring these capabilities to our customers to help them solve the challenges that they face to win in the marketplace. When you combine that with our position on the interior side, Eric will talk a little bit more about our joint venture, Yanfeng Automotive Interiors, and the capabilities that we have there at an instrument panel, door panel, floor console level. We really have the suite of products and capabilities to help our customers get the interior right for their vehicles. We know that's a critical success factor as they continue to compete globally. Okay. That, the set of capabilities and how we're positioned in the market is really what's gotten us to the level of market share that Bruce referenced earlier.
We're at 34%, nearly double the next nearest competitor. When we look at the marketplace, we still see opportunity. If you see this slice of kind of the donut here that we've identified as other, what you'll find in there is some level of seating that's still in-house that we think there's still going to be opportunity as that business migrates and becomes outsourced. There are still a number of smaller players, more fragmented players in regions like Southeast Asia, that we believe that the global capabilities that we bring, the product portfolio that we bring, still will present opportunities for us to grow share as we go forward. If you look at that in a little more detail by region, this shows you Adient's market share by region.
You can see the Americas there, where we enjoy 36% market share, and then that second block there, our traditional kind of other tier 1 competitors. Then at the top, the gray space there, you can see where there's still opportunities, either where business is currently in-house or where there are smaller regional players, where we think we really have a shot at gaining share there. If you go across that chart, you can see really market leading position in Europe as well. Then in China, Eric will go through that in detail, but you can see we really have a dominant position in China. The good news there is both the width of the bar is going to continue to increase as we will continue to see very strong growth rates in China.
The gray space there is the largest of most of the regions there. There's still going to be a lot of opportunity for us to expand our position in China. Southeast Asia, you can see, is the one region where we are underrepresented, if you will, relative to the other geographies. There, too, we see huge opportunities in Southeast Asia to grow aggressively in that part of the world and to have a similar position as we do in the other regions.
At a component level, if you look at our position, and I walked you through those various segments, but again, from a market share position, clearly the largest player, and this has given us the opportunity, obviously, to drive scale, to drive cost efficiencies, and to continue to invest in the business from a product standpoint, from a footprint standpoint, to maintain that lead. Really a market leading position, both at the complete seat system level as well as across the major components. Bruce hit this chart, so I won't spend too much time on it, but if you look at the geographic diversity in our business, we've really benefited from first mover advantage, if you will, relative to the stake in the ground that we put into China and the position that that has grown to.
If you look at our willingness to follow our customers to small regions that have growth potential, be it places like South America or India, what have you, we've been there first, and we're positioned to take advantage of those markets as they grow. From a customer standpoint, again, this gives you just a little bit more flavor, but very simply, we have always picked this challenge up first with, how can we best serve the customer? We've organized in that way, and we've really looked at our customer relationships to guide where we take the business and how we can best serve them. I think that focus on the customer has really served us well and allowed us to be a key partner with all the major OEMs.
We'll talk a little bit later about some of the emerging OEMs and the investments we're making today, so that as this landscape continues to evolve and change, that we're positioned well to serve the OEMs of the future as well. Detlef will talk in more detail about our engineering capability. Just a couple points here is that it's all rooted in our ability to develop products that meet cost targets, that are manufacturable, and that meet the stringent safety requirements of our customers. If you look at our capabilities that we've developed around the world from an engineering standpoint, our product planning, our testing, our prototyping capability is really world-class. I'll show you kind of the global footprint here of where we're able to deliver those capabilities, and we can do it globally.
We have rich capabilities in some of our mature markets, like North America, where our head technical center is in Plymouth, Michigan, or Germany, where we operate out of Burscheid, Germany, just outside of Cologne. We invested very early in developing engineering capabilities in low-cost countries. We have really, I would say, a benchmark technical capability in China as well as Trenčín, Slovakia, as well as India. You can see the other locations around the world. We're really able to face off with our customers wherever their technical centers are and to leverage this global network to develop solutions that meet our customers' requirements and are cost effective. In summary, global market leadership in North America, Europe, and China with great opportunities to continue to grow share. Again, remember the gray part of the market share chart that I showed you by region.
We really see those as great opportunities for us in Southeast Asia and China. We believe we'll continue to grow in our core markets as well. Long-standing customer relationships with all of our major OEMs. The seat system is a critical module of the overall vehicle. It gets the attention of the CEOs, the top engineering leaders at all of our OEMs, and getting the seat system right, getting it launched effectively at the quality and craftsmanship and cost targets, is a key priority for any vehicle in the marketplace. Our customers turn to Adient for their most critical projects where they have to get it right. Global manufacturing footprint and expertise, 230 manufacturing plants across the various components and complete seat operations that I walked you through. Detlef will expand on our global development network.
Really seating and interiors, Eric will briefly give you a little bit more of a look at our interiors business. We really have the total interior capability that we can bring to bear to support our customers. If you have the chance to join us at the Auto Show in Detroit in January, you'll see that. We have a shared booth with our interiors joint venture as well as our seating business, and I think it'll really bring to light this capability that we have on the total interior. Positioned to capture a full range of OEM seat sourcing strategies. Our customers think about how they source this business slightly different. Some source it as a system, some source it at component levels. Irrespective of that business model, we're really positioned to win and support them. Market share and margin growth.
Again, I'm as excited today as when I joined the company 19 years ago relative to the growth opportunity that we have and the ability that we have to continue to support our customers going forward. With that, I'm going to hand it over to my colleague, Eric Mitchell, who'll talk in more depth about China. Before I do that, we're going to roll a video.
Please welcome Executive Vice President, Eric Mitchell.
Good morning. I don't know about you guys, I love that video, and I love it for a couple reasons. Number one, it shows how dynamic China is. It's a fast-paced market, and us being there, where we are right now, it's really exciting to just be a part of that. The second thing, though, if you saw there, is the pictures of the people, of our employees, 31,000 employees, passionate about what they do, really engaged, and really supporting our customers for us to win in that marketplace. Just a little background on China, where we are today. Both Bruce and Byron mentioned this. We're about $7 billion in sales in China, which represents about 45% market share. That's only part of the story.
I think when we unravel the onion a little bit more and go look at it, the thing that I'm really excited about is just the great strong foundation that we have in the marketplace. You look at our technical capability that we have, three world-class technical centers there, comprised of 1,300 engineers. The footprint that we have, the manufacturing capability that we have on the ground, which is second to nowhere in the world. Just a great setup that we have. You can see, again, all the dots on the map, where we're able to serve our customers where they are located throughout all of China. This looks like a complicated and complex graph, actually, this is our simplified view of the Chinese market.
If you think back at how the Chinese automotive market has developed over the years, in the early to mid-'90s, you had local or regional Chinese domestic OEMs, state-run companies, go out and form joint ventures with global OEMs. Over the years, they became more successful, and they actually grew beyond their locality that they were strong in, or that they were headquartered in, and expanded beyond throughout all of China. Creating more complexity in the market because then there became overlaps. The other thing that happened was Chinese law allows or allowed it at the time that foreign OEMs could have two joint ventures with domestic OEMs. You could get a dynamic where you could have a foreign OEM have joint ventures with domestic competitors. That just creates as well a lot of complexity.
As we were going in and we were a first mover into the China market, we very much went in with the mindset of we need to go in with a joint venture setup to help us navigate through all this complexity. That's really been the crux of how we developed there. Really, we've been really successful, and it's really been based on a couple things. Number one, we were a first mover in the marketplace. The second thing was we set up the joint venture structure. Even beyond that, because I think you can see on here, a lot of companies have joint ventures in China. I think the real big difference as well was how we set up our joint ventures and how we manage them.
We really manage them in a win-win mentality, and we manage them for the benefit of the joint ventures. We've come to agreement when we set up these joint ventures with our partners, and our partners are the customers, that we're going to manage it for the benefit, not of the individual partners, but of the joint ventures. That's been, I think, a key reason for why we've been so successful. Because what can happen and what typically happens in joint ventures where that doesn't happen is you get one partner managing a joint venture for their own benefit or the other way around, and that ends up creating conflict, creating problems. Us managing it for the joint venture really has been a winning proposition.
Traditionally, what we do is Johnson Controls and now Adient, we bring the technology, whether that's product technology, process technology, or management technology, if you will, or know-how. We also bring in global business. Obviously, we have the lead relationship with global OEMs, and we're able to bring that, particularly when there's global platforms. The Chinese partners, obviously, they bring local know-how. They bring, as well, local market and really how we can run the business in China. That's been a winning proposition. I'm not going to go through this slide. It's in the deck for your reference. This is just a highlight of some of our major joint ventures that we have, who they are, what markets they serve, what customers they serve, and what our equity structures are. Please refer to that as reference.
One of the things I'll just highlight is on the bottom here, last fiscal year, just to give you some frame of scale, these joint ventures contributed nearly $300 million in equity earnings for Johnson Controls and as well, $200 million in dividends. That's kind of the structure, but you always say, the saying is, the proof of the pudding's in the eating. One of the things, again, we have a 45% market share, 44% market share. Here you can see how those market shares are represented in the major OEMs in the region. You can see some that they're quite high. Others, we still got some room for opportunity to grow. This is really showing that the JV model has worked in terms of our ability to get into the market at very high market shares. We're not done.
We really see growth in the marketplace, not only from the market growing. Even though we are showing that market rates are going down to the mid-single digits, from a volume perspective, because the China market is so big, it is still a high growth rate when you look at it in comparison to the globe. We also see opportunity to grow in our market share. You can see we actually have a goal out to grow our market share to 55% from 44% here in the next five years. We have a pathway to get there, and you can see we've highlighted some of these. There is white space with our global OEMs who are continuing to grow in the market.
As well with Japanese and Korean and other Asian customers as well, where we're less represented in the China market. As well with the domestic players who are also growing in China, another proof point is financials. Jeff's going to go through this slide much more in detail when he's up. One thing I just wanted to highlight is since we've been in China over 20 years, we've invested $150 million into China, and we've been able to dividend out more than $1 billion. That's on top of how much money we've been able to reinvest in China to fuel all this growth. From a financial perspective, it's been very lucrative as well, in addition to the market share. There's some trends that are happening in China. Some of these are consistent globally with what Bruce had mentioned.
We are very well-positioned due to our presence that we have and our capability to take advantage of these in a good way. This is also going to help fuel our ability to grow from 44%-55% market share in the next five years. One of those is that, traditionally, China, the economy grew along the coastal areas. When Deng Xiaoping opened up the communist economy to more capitalists in the early 1980s, that's where the economy was really growing. China, over the last years, has been trying to push that growth into the more inner part of the interior of the nation and also beyond what they call Tier 1 cities. Basically Beijing, Shanghai, Guangzhou. You can see from the map that we showed you, we have a footprint that spans throughout the geography.
We feel we're well-positioned to be able to take advantage of the growth rates that are happening beyond the coastal areas. The second thing is on SUV and MPV growth. In volume numbers, it hasn't been that big, but in terms of growth rates, it is. This is a trend that we are seeing that's going to be happening more and more. Another interesting factor in this is now China has softened their one-child policy. They're now allowed to have two children. We feel that there's going to be a greater emphasis on SUVs going forward. We are very well-positioned to grow in this marketplace, not only due to our JV structure, but also due to our product portfolio.
In particular, on our metal mech, which we have great product, great technology, which enables access from the second row into the third row that happens on SUVs. We feel we're really well-positioned there. The third thing is on the premium market, and you would think, okay, China's a developing country. Maybe that's not as big. Maybe it's more on the cheap cars. That's actually not really the case. There certainly are the cheaper cars there, but the premium segment in China is very well alive, and we have a very good position with all the premium players out there, and you can see some of the names there. This is also going to give us an opportunity to apply some of our technology that Detlef's going to show you later in terms of being able to provide more content on these vehicles.
The other thing is, as the China market matures, the growth rates go from double digit to mid-single digits, competition's going to increase. You probably have heard there's a discussion about pricing pressures on the supply base and all that. We actually feel that we're very well-positioned in this to be able to take advantage of that due to our capability, the amount of scale that we have, the level of localization that we have. When I say localization, that goes beyond direct material and how much product we actually make from a vertical integration perspective in China. I'm also talking about tooling and engineering. That just gives us a unique capability and a unique opportunity that we have to actually take advantage of this. The other big advantage that we have is our JV structure.
We need to remember, we JV with our customers, and because of that, we're able to also use ways to make sure that we're able to have win-win scenarios in terms of coming up with a commercial agreement to offset the price down pressure. Want to give you just a couple examples of our joint ventures in a little bit more depth. This one is our joint venture with SAIC. This was formed in 1997. We call it YFJC, Yanfeng Johnson Controls. This is our biggest joint venture for the domestic market. You can see it's $4 billion in sales, 64 subsidiaries. You can see the footprint. This is one where, again, with SAIC, they've branched out into other markets. 17,000 employees, 31% of the market share.
This is also a joint venture where we have one of the best tech centers that we have in the world, located in Shanghai. I don't know if anybody ever goes to Shanghai, but if anybody is interested in seeing that tech center, we'd be more than happy to arrange that for you. I'm sure we can get you with Glen Ponczak or Mark Arswald to make that happen if you're interested. The other joint venture, Byron mentioned this, is our interiors joint venture as well with Yanfeng, with SAIC. We call it YFAI, Yanfeng Automotive Interiors company. This is a global joint venture, and it was formed last year, and it's already proving the worth of what we thought it was when we put it together.
That's taking a Johnson Controls global interiors business, combining it with a very strong Yanfeng Chinese business, really creating a global juggernaut. It's incredible what the team has been able to do here in a very short amount of time, the reaction that we've seen from the customer base of this joint venture. You can see here on the left that actually over the last 10, 11 months or so, they've been able to book almost $11 billion in lifetime sales in the new joint venture. It's just very exciting. I've gone over our past and where we are today. The question is, what are we going to be doing tomorrow? You can see we've broken out the way China is developed into three phases.
I'd say, look, the phase 1 is really in the beginning, the inception of the auto industry back in the mid to late 1990s and early 2000s, where it was very foundational. It was foundational for the auto industry in total, but also for Johnson Controls, that's when we set up our core joint ventures, okay? Which really set the foundation for us to be able to go after the phase 2, which was high growth. That's really from, let's say, the early to mid-2000s up till a couple of years ago even, where we had high single-digit, double-digit growth rates. This is also a time when we were able to expand our footprint beyond those coastal areas and tier 1 cities and really add all those dots that you saw on the graph or on the map that we showed.
It's also a time when we are really able to step up our capabilities and really make them to a world-class level. Now, as we go forward with, again, the Chinese growth rates going down as well, the Chinese OEMs as well, they're looking beyond their borders. This gives us a different perspective now in terms of how we view China, in terms of how we can grow, not only within China, but leveraging China beyond the China market itself and using all that capability that we have. One example of this is, again, the Chinese OEMs are looking to grow outside, and you can see some on here. In the initial look, they're very much looking in their backyard, into India, into Southeast Asia. This is something that, this is new for them. They're new in going in global.
They're looking for partners that they trust, that they know, that's done business with them for a long time to go to these places and help them in terms of growing. We're well-positioned to do that. Again, the other way how we feel that we can leverage China is as China's matured, the capability of the China market has increased. The global OEMs as well are using China as a base to develop their programs. Bruce referenced General Motors, but that's just one example. More and more are doing that.
We think that we're going to be able to actually use our capabilities in China to not only grow with those OEMs in China, but also work on being able to do reverse sourcing, if you will, and by being sourced in China, to be able to be sourced elsewhere around the world for global programs. I think that's going to become more and more of a trend. That's another big area for us to grow. Another one is how we can untap what we have in China for our global needs that we have, whether that means for engineering or for tooling or for direct material, how we can leverage all the scale and the low cost that we have there and being able to apply that elsewhere in the world.
We're really excited about where we can take this now in phase 3 of our development in that market. Can you please go back? Oh, okay, it's here. Some key takeaways. Number 1, we have a proven track record, and you saw the graph since 1997, 26% annual growth. We're really confident about the future, being able to leverage that history and going forward. We do see strong growth. Again, the growth rates for the market are going to be less than they were before, mid-single digits. Again, from a volume perspective, still very significant, and particularly when you compare it to other global markets. In addition to that, we feel that we have the ability to go out and actually increase our high market share and grow even more.
Thirdly, using China as a platform for us to grow beyond the borders of China, growing within Southeast Asia, the broader Asian rim, and then globally as well. From a profitability and cash flow perspective, again, I mentioned how much we've been able to dividend out. Jeff's going to talk about this more, but you can conceptually think about it. As growth rates moderate, as we have our foundation pretty much set in place, the reinvestment ratios in China are going to be less than what they have been in the past, which is going to allow for more dividends to be paid out. Lastly, we haven't really touched on this too much, but the balance sheet that we have of our businesses in China is very robust.
They've been able to fund the growth through basically the proceeds from the business over the years. Really, they really don't have much debt worth to speak of. Great foundation for us to proceed going forward. I think with that, we have a break now for 15 minutes, we'll come back with Detlef. Thank you.
[Break]
Ladies and gentlemen, our meeting will reconvene in five minutes. Please take your seats and silence your cell phones and electronic devices. Thank you.
All your joy, and all your pain. Until my moment comes, I'll say. I did it all. I did it all. I owned every second of this world you gave. I saw so many places, the things that I did. With every broken bone, I swear I lived. I'd like to teach the world to sing. With every broken bone, I swear I lived. With every broken bone, I swear I lived. I'd like to teach the world to sing. I'd like to see the world in conversation. I'm searching for a song tonight. I'm changing all of the stations. I'd like to think that we had it all. We drove off to a better place. I got caught in the downfall. Baby, why did you run away? I was there for you in your darkest times.
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When I was down on my knees. You said behind my back. I wonder where were you? When I was just looking after me. I'm following the map that leads to you. The map that leads to you. Ain't nothing I can do. The map that leads to you. I'm falling, falling to you. The map that leads to you. Ain't nothing I can do. The map that leads to you. Oh, oh. Oh, oh. Yeah, yeah. Oh, oh. Oh, I was there for you in your darkest times. Oh, I was there for you in your darkest nights. Oh, I was there for you in your darkest times. Oh, I was there for you in your darkest nights. I wonder where were you?
When I was down on my knees. You said behind my back. I wonder where were you? When I was just looking after me. I'm following the map that leads to you. The map that leads to you. Ain't nothing I can do. The map that leads to you.
Please welcome Group Vice President, Global Engineering, Detlef Juerss .
Welcome back, everybody. We're a little bit ahead of time, so I think we can just come back. Detlef Juerss , 22 years with the company, obviously an engineering background. Good old German engineer bringing the precision into Adient. Today, I'm probably most excited to share with you how Adient will actually improve the experience of a world in motion. The world in motion, we actually chose this vision statement very deliberate. Our world is changing, and obviously also the automotive industry is changing at a never-seen pace and speed. We all know about the global industry drivers, the mega trends, right? We're all looking at urbanization, just looking at the traffic out here in N.Y., things will change. They cannot stay as they are.
We have the CO2 regulation, the overarching connectivity, being connected everywhere with everybody at any point in time. Even mega trends like an aging society will change how the vehicles, how automotive industry will look today, tomorrow, in five, and probably in 15 years. Let's have a look at some of these very major industry drivers and technology drivers that we have to take a look at when designing the interior, the seats and the interior of the future. Byron, Eric, Bruce talked about it. The entire safety discussion will continue at an ever-increasing pace. When I started as an engineer, product safety was the number one line item. We don't want to wake up in the morning and have Adient's picture on the news for unsafe products. Whatever we do, product safety has to be on top of everything. Other industry drivers, like global platforms.
It sounds very easy, but to really develop Seats and interiors for vehicles that are being manufactured on a platform level all over the world in the exact same manner is a huge challenge. You have to have in-depth knowledge of materials, processes that are specific to a certain country to enable a global product that works all over the world the same way. Going forward, other topics like individualization. Below the surface, we're seeing standard platforms. Above the surface, the trend to individualization is ongoing. I'll be talking to a certain extent today how Adient can provide individualized solutions for fleets, for even individuals down to a lot size 1, which is definitely a trend. Not only once when you buy a vehicle, but maybe two or three times, opening up totally different markets. Bruce alluded to it in detail.
The trends of additional content in the product is something that we have to look at in a very good detail. Bruce talked about SUVs and CUVs. Just the difference between a second row that slips, folds, provides easy entry, ingress and egress to the third row is a totally different revenue stream as something which is very simple and just a piece of foam. We also enjoy the piece of foam, of course, but we like to have and like to see the complicated flip fold structure, where Adient has a unique selling position with the products that we have in the market today. The other drivers on content increase will be things today, like heating, like massage functions. Outside, we have on display, by a coincidence, a Volvo XC90 seat, Truck of the Year this year.
It is fully equipped with massage functions, with heating, with cooling, with ventilation. Going forward probably even with infotainment systems. The contents of the seats are increasing significantly. Even though we're anticipating only a mild growth in vehicle volumes, the market size that Adient is serving so well will increase significantly. Then, I'll talk about it later, leapfrog when we come to autonomous driving. Before we come into the fancy new world, let's start with the basics. Byron already told us about the engineering network. We have today over 4,500 skilled, very experienced engineers in our network, engineers and designers in our network. They are totally globally diverse. There's over 38 different nationalities in that engineering community that speak the customer language. Some of them are even physically co-located with our customers, or at least very close to our customers. They speak the customer language literally.
They understand the customer requirements. They even understand the customer requirements in different regions. Even for our global OEMs, the requirements that we have to fulfill on the safety, on the specification, even on the comfort, is different between the regions. Adient, with their global reach, understands that. These 4,500 engineers also understand and anticipate the needs of our customers going forward. They're located in over 40 satellite offices. Some of them you saw in the previous slides that Byron showed. We have 12 fully mature tech centers. Eric told us about the Shanghai one. It is by far the most impressive. It is, of course, also by far one of our newest. The pictures you saw in the China video of the capabilities that the China tech center has, it is 100% aligned with all the other 12 tech centers that we have around the world.
You will be able to see the exact same capabilities and simulation all over the world. That global network is really the enabler for all the capabilities that Adient has provided and the former Johnson Controls has gathered so well over the last 20 years of being in the automotive business. Capabilities that start with fascinating designs. We saw the capabilities in terms of product safety, capabilities in terms of comfort and craftsmanship that are recognized by J.D. Power in the latest results. With these capabilities, they are providing these great designs to a network of global manufacturing plants that we have between the different metals, foam, trim, fabrics, engine businesses all over the world. All of that pasted together with a world-class IT system.
I would love to invite you to see what we call virtual showrooms, where teams can collaborate globally, seeing the same product, the same CAD data, even the same 3D simulation in one screen at the same time over three different regions. Global collaboration. These world-class capabilities also mean that we have to anticipate those mega trends. Let me start with one, CO2 emissions. In our business, CO2 emissions, fuel efficiency translate into weight reduction requirements. Adient has a track record of a generation over generation, reducing weight in seating and interiors. With ingenious designs on the one hand, that make the best use of the latest state-of-the-art technologies like laser welding, like bonding, even very new forms of riveting that don't even need a rivet anymore. These assembly technologies enable great design with less parts to reduce the weight.
On the steel side, the steel manufacturers are providing fantastic high-strength steel year over year. Adient is fully capable to manufacture these ever-improving material steels year over year, creating great new lightweight product, mostly, of course, on the inside of the seat. We at Adient say the race is on for lightweight. It's not only the steel guys and the intelligent designs that are driving weight reduction, also other materials and material mixes are picking up the race. At Adient, we are taking that challenge. We're also looking at magnesium, aluminum design that would further enhance in a material mix kind of design, leveraging new technologies like bonding and gluing and creating all these great new lightweight products. Not only steel, aluminum, and magnesium in design will drive lightweight solutions.
I personally did my Ph.D. on plastics processing and composites, this one is especially dear to my heart. We have a award-winning design technology and product, our CAMISMA backframe, which by the way, is also displayed outside in the coffee area. It's an award-winning technology design, which would take out another 25% of weight in those back frames. On top of that, it reduces the thickness of the back frame by 20 millimeters. That might not sound like a lot to you, but it is actually a difference between a Toyota Camry and a Mercedes E-Class. It is really that kind of weight and size that we're looking for. Normally, composite materials are very, very difficult to manufacture at a large scale that we are so used to in automotive.
We have, for example, experience, and you saw it in the video, with composite parts for race cars and for professional sports cars in our RECARO teams. Those volumes are small, the technologies don't really enable large-scale manufacturing. We actually took manufacturing technologies from our interiors partner, YFAI, injection molding, and placing the fibers, which actually come from a door panel manufacturing process, and applied it to this back frame using carbon fibers, glass fibers, and injection molding to be able to create this low cost and low weight seat back structure. With that, Adient is fully prepared even for future CO2 emission targets and fuel efficiency requirements. That were the basics, but where is all of this heading? All of this might actually head to totally new interior and seating solutions. We at Adient believe these very, very different interiors will come.
I talked about certain enablers, connectivity, electrification. All of these will need to be there in order to fulfill these new ideas that we might be seeing very, very soon. We believe the interior and the seating, the products will change so significantly that we will be seeing designs like this going forward more and more. The entire interior space could provide room for working, for sleeping, for relaxing, or just for being transported from one area to the other. This new space could enable totally different ways of how we perceive transportation going forward, improving the experience of a world in motion. That's what we're seeing going forward. We will have different modes of what the vehicle is being used for, right? For pure working, pure driving, transporting, or even for the fun of it.
These different ways of perceiving and enjoying transportation could be cars that are owned by an individual or cars that we would see in fleets or in the new mega trend of a shared ownership. Not necessarily does cars that can transform like this owned individually, they can also provide the basis for shared ownership businesses. Talked about how the interior space can look like with all these different opportunities and how we perceive this space. Talked about technology drivers like lightweight, like connectivity, but also the business models and the players are changing. A lot that Adient will be able to provide. Only the topic of the business model change towards shared ownership will drive differences in how the products will look. A shared vehicle that is being used 24/7 will have a different wear and tear, will have a different requirement for the interiors.
We might even want to see seat cover that can be exchanged, that you as an individual want to take with you in your shared vehicle. We anticipate that those vehicles that are being used 24/7 might even go through a renewal, like the aircraft seating business is used to. That they're being overhauled every 70,000, 100,000 miles, which would open up a totally new business model for Adient to replace those seats or to replace the seat covers or to replace the, what we call top hat of the seat, which is the business model for aircraft seating, for example. Keep aircraft seating in the back of your head there. These new business models might change, will change how we want to run the businesses at Adient. That brings in, of course, new players.
Byron, Eric, and Bruce showed you the big pie chart of all these OEM customers. There were a few missing. The new players from the West Coast, the new players from China were still missing there. The good news is we have them on our radar. We are opening a satellite front office in Palo Alto. Actually, we just have co-located with our YFAI colleagues to serve these new players, to be at their front door, to learn how they want to run the business, and to maybe adapt and change the way we have worked in the automotive industry before. I can tell you from personal experience, meeting those guys, it's a totally different tone, it's a totally different speed, and it's a totally different way of asking questions and really questioning the way the traditional automotive players have run the business. Adient is ready.
We're there in front of them. We have the products. We know what's coming, and we are picking up the pace to be ready to serve those customers. Let me talk about, a little bit, the steps towards autonomous drive. We talked about mega trends, we talked about the connectivity. There's different wordings out there in the industry. The first step is definitely connected drive, that we're seeing lots of data flowing inside and outside the vehicle. A huge industry will gather around that whole portion of connectivity, but it is an enabler. Number two, all the assist systems, radar, cameras, also businesses that will come in and help us provide this dream of being autonomous driven. The other one is also electrification. The entire body-in- white in vehicle architecture will change with an electrification of the vehicle.
The entire drivetrain that normally runs underneath the body-in- white will go away. We will see space for the batteries in the floor of those vehicles. We will see flat floors that enable totally different configurations of the interior. Maybe not immediately as ingenious as I showed you in the slides before, but definitely much higher flexibility on how to design and how to play with the interior of a vehicle. We're anticipating that change in architecture. We will show you at the Detroit Motor Show. Again, the invitation is there. You will be able to touch and feel what that means for the product. It will look a little bit like that. You can already take that as a sneak preview. What does it mean for the interior space? It means we can move around the seats because of the flat floor much better.
It means that also the whole energy that is available in those vehicles is less. There is no free heating anymore because it has to be provided by the battery. That means most of the heating and cooling features that today could be provided through the instrument panels and in blowers will probably walk into the seats. A little bit like the XC90 seat we're seeing downstairs, just to be more energy efficient on how we heat and cool the passengers. We will also see different architectures in the seat because if the floor moves up, the seat has to become a little less higher, it has to shrink. There has to be ingenious design and our mechanisms portfolio to enable those lower height seats. It might be not visible to you, but Adient is ready to provide those seats. We are in front of our customers doing that.
Autonomous drive. This picture, our industrial design chief, Tom Gould, found that. It's a 1956 picture. It already shows that in those days, the people had the dream to drive autonomously. The great thing about this picture is it already shows us what kind of opportunities we're seeing inside vehicles that are either heavily assisted in driving or fully autonomous. The seats will swivel. We will be able to communicate or play with each other. We will be able to work with each other. You already see rounded cushions on the back that would enable a more lounge function. Already then, people were dreaming about relaxing, sleeping, working in a vehicle. The good news is Adient is ready.
We have been ready together with our partners from YFAI already last year, showing in our industrial design, interior design demonstrator from the fiscal year 2015, some features of what we will reveal also in next year's Detroit Motor Show. We talked about content. Just imagine the seats are moving around in the vehicle. The seats are swiveling. You, as a passenger, are laying flat down. What has to happen? The safety system has to move with you. There will be no airbag anymore or there can be, but it doesn't help you if the airbag in the steering wheel is there and you're swiveled around to the back. The safety system have to walk into the seat. The same thing or at least be able to float around the seat somehow.
The whole control systems of your vehicle will have to somehow move around with you. I've been talking about heating and cooling. Those features will have to somehow float around with the seat or, in an ideal state, even be at the seat. I won't dwell on legislation was probably one of the even more difficult things for autonomous drive. Coming from an engineer, that's easy to say. For example, today, we would still be required to somehow take control of the car, even if you are in a sleeping or swivel position. Some kind of control has to also be floating with you in the vehicle.
What I want to say is, lots of content shifts, lots of increased content, because if a seat is not anymore just a seat, but it is a bed, it is a relaxed lounge, and it is a control center, I'm not thinking about Kirk's Enterprise space seat, but definitely something like that. These things have to be engineered in. Also there, the message here today is Adient is ready because we have all these components, these ingredients, that knowledge, that capability already in-house today. We have proven industry solutions for reclining, almost flat reclining, slouch seats in the second row, which are fully safe. They're still only located in the driving position, but at least they can provide safety and comfort in a relaxed, almost sleeping position. Almost like you know these things from aircraft seating from your long-haul business class flights. Keep that in mind.
On the structure side, we have the technology today to have integrated seat belts, even moving around, swiveling around. We have those technologies today, and they meet the customer requirements. Today, we have solutions of armrests, tray tables, control mechanisms that would be attached to the seat or would float around with the seat like a floating armrest and a floating tunnel console like provided from our partner, YFAI. The solutions are there today. We have the ingredients. Adient is ready for autonomous drive. Adient is also ready for the individualization down to a lot size one. What does that mean? It could physically mean you would want to have the picture of your house or garden printed on your seat covers. It could mean you have your favorite tie design on your seat covers.
Adient today has the supply chain know-how to then deliver that seat cover on your vehicle and is being delivered to you already today. The most problematic portion is not the printing. That's the easy part. The complicated part is printing it in such a manner that later on, if you cut and sew the cover, then later on, put that on your seat, and later on, put that in the vehicle, have that logistics supply chain rolled out. Adient has that technology today, and we're offering that to our OE customers today. It doesn't necessarily have to be lot size one, but it can also be lot sizes that are significantly lower than the 100,000s we're looking at today. A special series of 20, a special series of 100 can be manufactured very easily. Additional technologies like CNC stitching.
We can provide stitches and even write your name and provide perforation and stitchings that will be able to also customize your seat. The same thing with one layer down. If there is harder foams or softer foams that will require individualization, Adient is prepared to do that. There's almost no boundary to the creativity of our industrial designers, but the technology is there to provide all of these great looks and designs. With those capabilities, understanding safety, understanding ergonomics, understanding craftsmanship, understanding supply chain, being operationally excellent to be able to provide hundreds and thousands of seats, all of them different to OEM customers today, we believe we are ready for using those capabilities, that capacity, that capabilities to go outside the traditional automotive industry. I already talked about the new West Coast players, it's probably a give and take.
We're learning on their way of doing, we're telling them how we can provide value to those new players and provide value to those new players also going outside of the markets, because we know how the business works in China. We know how the business works in Europe. We're very well set up to provide all the value for these new players, and I talked about it. The other side of the business is commercial vehicles. This business side is especially interesting, we already have a good market share in Europe with these commercial vehicle seats. We believe that the autonomous drive or highly assisted drive topics will come first in the truck fleets. We're in that market already today to understand what that means for the comfort, for the safety, in this case, of a truck seat driver.
We have a partnership with our colleagues from SJA up in Shenyang in China to reach out to that market also with our truck capabilities. We're displaying the new generation of mid-level truck seats at the Hanover IAA Commercial Vehicles. It's a special truck motor show on September 22nd. If you make your way to Europe, you'll be invited to see that fantastic new truck seating business. Going further out into other businesses, if you're understanding comfort, if you're understanding safety, if you have the supply chain, if you have the operational excellence, there's nothing that can prevent us from also tapping into railway seats and aircraft seats. On the railway side, Johnson Controls, in this case, the former RECARO business, already have a legacy business in a Shinkansen high-speed train in Japan. It's the first-class seats that already are there. We are tapping into that industry.
We're learning the players, we're learning what the requirements are, we're ready to tap into that market. Aircraft seating. I talked a lot about that in between. We believe this is a $4.5 billion market. We have the appetite to significantly participate in that market. We have the know-how in terms of craftsmanship design, we're really looking forward to being able to provide value in that market as well. Summarizing. At Adient, we are ready not only for the new markets, for the new business models, for the new players. We are excited about the great additional opportunities this growing business is providing for Adient and really improving on the experience of a world in motion. With that, I'll like to hand over to Jeff Stafeil, our CFO, to tell us how all of that translates into dollars and finance. Jeff.
Good morning. Thanks, Detlef. As Detlef said, I'll try to walk you through and give you an idea of what all this means financially. We have lots of things we've talked about, try to put that into context for you from a financial standpoint. First, talking a little bit about our metrics. If you look at our metrics, as we start out, our net leverage, it will be about 1.9 times. We'll look to improve that's going to be our starting position. Cash on the balance sheet, $610 million, give or take. That'll move a little bit as we get towards our ending time, the spin on October 31st. We have a favorable tax rate. We've talked about our taxes, our domicile in Ireland. We also have the way that our JV income comes in, our JV income is quite substantial.
It comes in already taxed, our effective tax rate looks quite low. We show a 10% to 12%, we're estimating a 10% to 12% effective tax rate as you move forward, you can use that for cash taxes as well. From a capital expenditure standpoint, Bruce mentioned that we would step up our capital expenditures going forward from what we've experienced the last several years, it's still fairly modest as it relates to automotive. You're talking a little over about 3%, up 3.1%. It'll be a little bit more this year. We'll talk about it as we have some of the startup standalone cost in putting in that infrastructure for Adient. You can think around $500 million to $550 million per year. From a dividend standpoint, we do see ourselves paying dividends really right out of the gate.
Logistically, that will really begin probably in our Q3, so in the spring of next year. We see ourselves paying at a competitive rate to our peer group. From a financial profile standpoint, you've heard the numbers. We're a $17 billion supplier from a consolidated operation standpoint. We also have a lot of unconsolidated operations. On the consolidated side first, you'll hear a bunch of themes, you've heard a bunch of themes, I'll talk a little bit more about them. We're talking about a 200 basis point opportunity to improve our margins, really on a flat sales environment the next several years. Because of some of that lack of investment, the previous few years before we announced the spin and separation from Johnson Controls, our order book is probably flattish for the next few years.
With that, we have lots of opportunity to self-help to improve our margin. It's going to be driven by a number of things, but you can think of SG&A. I'll give you some examples of that as we go forward. If you compare our SG&A profile to some of our peer group, there's an opportunity. We started to address that. You can see that in our 2016 numbers. You'll see more of it in our 2017 and continuing forward. Our metals business is another big opportunity. Byron mentioned the metals acquisitions that we did in 2011 and 2012. Those businesses, there's still some integration, there's still some reduction of capacity, and there's some key launches to come through. The result of that over the next couple few years will be a nice steady increase in contribution to our overall margin of the company.
There's a couple of interior operations that are winding their way through, that will help from a margin perspective as well. The unconsolidated side, China. China's a big opportunity. You've heard that in the numbers. From just the numbers that you saw in 2015, roughly a $295 million contribution in equity earnings. You'll see our guidance is more towards around $380 million of contribution from our equity income. That reflects our interiors business, YFAI coming. It also reflects growth in those markets and our continued success and continuing gain of share in China. It also reflects a number of the trends that Eric talked about earlier as well. Looking at our history, this isn't just a performance story of what we've done the last or what we're going to do the next few years in increasing our margin.
We have had nice success in what we've done in the past, too. The company has operated well. It's trending well. We have the opportunity to continue those trends. The top left gives you a view of what our consolidated revenue has been over the last several years. I will point out that in 2015, after the third quarter of 2015, we deconsolidated our interiors business. That was about a $4 billion business in annual sales. About three quarters of it left us, or it was in the business in 2015. It's since been excluded. We contributed that together with Yanfeng to create the YFAI business that you heard Eric talk about. We've roughly had fairly stable top line performance, but you can see on an EBITDA margin standpoint, as well as an adjusted EBITDA less CapEx margin, you've seen some nice improvement.
We have opportunity to continue to improve that as we go forward. That bottom left chart, as you're looking at our EBITDA minus CapEx and what that margin's been, is a reflection of the cash flow components and characteristics of this business and the opportunities we have to really generate a lot of capital, and you'll hear that as an investment thesis over and over as we walk through. The bottom right is another metric that helps us from a cash flow standpoint, and that's working capital. You think high level in this business, the JIT business has a turnover of less than two days. It's constantly pumping out real time, just in time to our OEM partners. If you add all of our components in, you're talking maybe about a 10-day type of total working capital or investment in inventory.
Meanwhile, we get paid by our customers in 45 days or so. We pay our suppliers in roughly 60. As the earnings go, and as you look at our working capital investment, very little working capital investment just by the nature of the business that we're in. Carrying that theme of that we have made a lot of progression, this is a look at what we've done in 2016 through 3 quarters. Our revenue, and Bruce shared this earlier, is up 2% once you factor in the exclusion and the deconsolidation of that interiors business. More importantly, our earnings are up 13%. This is a drive we'll continue to have. It's a focus on SG&A. It's a focus on operations. It's a focus on the fundamentals. Lots more opportunity here. We'll talk about it.
From a future driver, kind of summarizing some of these points, our volume trend and backlog are both positive for us. If you look back at some of those market share charts we showed you earlier, you'll see that the China market, in particular, it's the biggest from a volume perspective, it's actually the smallest, or it's smaller than both North America and Europe in a total dollar perspective. That's going to change. China's been moving. A couple of trends will help us. One, the market's obviously increasing. It'll grow the market, just as a cost for a share per vehicle will increase as well. It'll increase as SUVs continue to grow. There's more content on an SUV. It's going to help us on top line. It's going to help us on the growth.
You're also going to see a larger investment for safety reasons, for premium luxury feature reasons. You're going to see a greater content per vehicle in those cars as well. You're seeing that trend elsewhere in the world as well. We'll continue to benefit as people put more money because it is a selling point. It's a differentiator of the vehicle. We'll continue to experience that even if top line vehicle plateaus in regions like the U.S., we think we'll still have some opportunity to grow in a content per vehicle standpoint for that reason. We've talked about our position in China. It's really second to none. We've been there since the beginning of the real launch of the supply base in the industry in China. We have partnerships. Really, I'd say the best partnerships.
If you look across the auto space, you won't find a better group or a more embedded group of partnerships than what we enjoy from the Adient side. We'll continue to leverage that as we move forward. Operational efficiencies, I mentioned those, SG&A and metals. I'll talk about those a little bit more. You'll also hear us talk about restructuring efforts. There has been a fair amount of restructuring in the business in the last year or two. There will be an elevated amount this year and probably the next year as well. It will fall down.
We think it'll fall down fairly materially in a couple of years, but you can think of a relatively elevated level of cash restructuring expenditures, and we'll talk more about that in the guidance standpoint as we take out some capacity, primarily in our metals business, and we take and tackle some of the SG&A opportunities we talked about. From what all that should mean, we're estimating really 200 basis points of margin improvement between now and roughly 2020. From a bridge of how we're going to get there on that earnings, this is going to help you get there a little bit. The first thing I'd say is if you look at ourselves, and I'll show you a page in a moment that compares us to Lear, probably our most comparable competitor in this space that you can probably line up against our financials.
You'll see a 2% gap on our SG&A profile. We've looked, we've done studies. We've had consultants come in. We see where those opportunities are. We know where they are by function. We're out there. We have teams who are addressing those. It's going to take a little bit of time, but there's good opportunity to make meaningful improvements really year-over-year on our SG&A footprint. I will say we probably won't get to or if we get to the benchmark, we're really going to be beating the benchmark because we do carry some additional SG&A burden in the company to support our JV network. We have lots of people, lots of SG&A in China, primarily looking over, looking out for our investments and our interest in China.
That will always be a little bit of a headwind on some of those metrics you look for us on. Factoring that in, it's about 0.5%. As you look at the metals business and the metals opportunity, and I'll have a slide here in a second to go in that in just a little bit more detail, we see really a 1%-2% opportunity to increase Adient's total margin with tackling some of the issues in that metals business. Everything you just heard from Detlef, everything you heard from our team, from growth standpoint, from new business standpoint, there is going to be some investment we're putting back into the business, some growth capital, and we factor that down a little bit of what that means to us from a margin perspective.
There's probably a little bit of hedge in that number too, such that we really come out, and we see a 2% margin opportunity, again, not in one year, probably not in two years, but by that 2020 timeframe. I think you can model it, fairly steady increase on our path to get there. This is the chart I mentioned a moment ago relating to Lear. It just takes an average of our last three years of SG&A. It takes an average of Lear's last three years of SG&A. The numbers don't look that much different. If you look at the individual years, Lear's probably crept up just a little bit. We've made some improvements. We certainly have opportunity to go here, and this is the effort that I talked about.
Given our scale, given our size, one would think we might be able to be a little bit under that benchmark. We'll continue to focus on that, and you'll see more reports as we move forward. Importantly, as we move from being a division within Johnson Controls to being our own separate stand-up Adient, we will take some immediate cost out. We previously were allocated corporate costs. We've now, and we've had this process over the last year to build our own corporate infrastructure, to build our systems, to build our capabilities, and that corporate structure that we've built is cheaper than the allocation we were previously getting. That will help us about 25 basis points out of the box, so you'll see that in our numbers.
The rest of it will be us driving efficiency, having some headcount reduction, having some external purchase reduction, and driving that to 150 basis points net of SG&A opportunity through to the bottom line. This slide addresses our metals business. Our metals business came together from three pieces. You can think of three pieces, and that's what you see here on the chart. Our old embedded metals operation, we had metals operation as part of the business, and then we bought Keiper and we bought Hammerstein. Those three acquisitions, I would say, came together at a time when the company was somewhat taking their focus away, or at least some of their investment dollars away, from what they were allocating to automotive. Some of the necessary restructuring, some of the capacity reductions that were necessary have been slow to happen.
Although, one of the reasons, and I talked about our elevated level of restructuring, it's we're addressing that now. There are a number of facility closures in there, primarily in Western Europe, but also some in the U.S., where we're taking out some capacity, and that will have some nice impact on our bottom line as we move forward. We've also built and positioned ourselves in Eastern Europe, and we'll say Mexico and southern parts of the U.S., to accommodate with a lower cost manufacturing base. As you look at another topic that I think Byron and Detlef and all mentioned, is a standardization or an increasing standardization of metal platforms across our competitors' platform products. As they're building new vehicles, trying to leverage that metal structure, those metal mechanisms across more than one vehicle, across large parts of their fleet. They've been doing that.
We've had three kind of mega launches that we've been in the process of. We've been putting all the engineering dollars, we've been putting all the investments to support that. That's another reason here, as those go through the development cycle and get into launch, you should see some of that margin. This is going to help enable some of that margin roadmap that I mentioned before. This is roughly a $3 billion business combined. It's eliminated, it's embedded within our whole operation. It's effectively EBIT is, we'll say, next to nothing, but it has an opportunity. Significantly, it should make, and as we've looked at it will make quite a bit more. If we compare it to our JV that does the same thing in China, it's a double-digit margin business.
The opportunity here that we've mentioned has us getting nowhere near that double-digit margin we experience in China, but a very realistic single digit type margin, which should increase the overall margin of Adient by 1%-2%. A little bit more on our seating ventures and unconsolidated ventures within China, or mostly within China. If you look at our financial statements, all you see is equity income. You see it. You don't see the sales. You don't see all the expenses. You don't see the taxes. You just see one number, and it's our equity income. It's really net income. It's our share of their net income. This allows you to see through that a little bit to actually see what the underlying fundamentals of these businesses are earning.
On the China seating side, it's an operating income of roughly 10.1%, but if you look at it from an EBITDA perspective, it's closer to seven. One of the opportunities, and as we're looking here, we're talking about moving up 200 basis points. Our China operations are a bit more profitable than that for lots of good reasons. They have certainly a low cost base. They have great growth. We have great partnerships. The opportunity within our consolidated business certainly is there to increase the margin. If you look at our competitors, some of our competitors here are several points above us on a margin perspective.
All these efforts that we've been talking about, that I've just been talking about, are aimed at closing a lot of that gap. If you look on the interior side, this is the YFAI business that we created with our partners, Yanfeng, a little over a year ago. The margins are 4.1% today. This business is actually quite exciting for us. I think probably even more exciting than when we started the whole venture. We've seen, as we've put these businesses together, really record order books coming from it, and we'd say improving profitability. The new programs we're winning are more attractive than the programs that they're replacing. We see big opportunities for that business to continue to grow and continue to succeed as we move forward. Lots of opportunity, lots of growth, lots of potential from our China JVs, and really makes us a bit unique.
I don't think you'd find, like I said, the level of partnerships, but also the level of materiality of what our China JVs mean to our bottom line within Adient. From a cash flow profile, this is another theme. I've talked about it a bit, but I'll hammer it in a few more times. The cash flow characteristics of this business are very strong. It produces a strong cash return, and why is that? Well, one is we have a low tax rate. We're talking about an effective tax rate between 10%-12%. We talked about minimum working capital needs. We also talked about while we're increasing our CapEx investment relative to our sales, here's 3%, 3.1% on a go-forward sort of steady state, very capital efficient business. That opportunity should be growing.
As we look at the margin opportunity, as we look at what we're doing in China and what those dividends will continue to do, I'd say from a cash flow standpoint, you're going to see more opportunity and more growth and contribution from China as we move forward. All that will allow us to deleverage pretty quickly as you look out. Free cash flow guidance. I'm going to talk about guidance in a few minutes. As you look at our overall guidance for free cash flow, I wanted to spend one slide to just give you some perspective on it. We came out with a number. We talked about a number of $250 million. That includes a lot of things, so I want to unpack that a little bit for you. First thing, it includes $280 million of cash restructuring expense.
Cash outflow to support some of those efforts I talked about on the metal side, on the SG&A side, and footprint side. It also includes, and Bruce said, and it's very true, that we have put most of our IT infrastructure in place. We've done most of the things to set ourselves up to become Adient and to be on our own. There is a little bit more. There's $500-some million spent there as we've prepared over the last year. There is going to be some element of it into 2017. We estimate about $100 million. That's reflected in that $250 million guidance, but it won't repeat. We also have some CapEx. Our CapEx is a little bit higher than the range that I told you would be more normalized level. Includes about $75 million of those type of items, which we'd say are more one-time.
There are some facility CapEx, and there's some IT CapEx embedded into that number, approximately $75 million, we'd say. Finally, our dividends for YFAI. It's a little lower in 2017 because the dividends we receive in 2017 really reflect the earnings of calendar year 2015 on that business. Calendar year 2015 was only half a year for the YFAI business. As we move forward, those dividends should pick up, the earnings should pick up. All those should contribute to greater dividends from YFAI as we move forward. I'd say as you look out a couple of years, all the things that I mentioned from growing margin, et cetera, will continue to grow that cash flow number and support the strength and what I talked about in this being a good cash flow business. Eric showed this chart earlier. I'll show it again.
This is the last five years of equity income versus dividends paid from our JV partners. You can see it's been pretty consistent. Some years are a little higher, some years are a little bit less where there's been some significant investment. Overall, we've done about 65% or received about 65% of the equity income we've reported back in actual cash. We call this EBITDA. If you think about it, we take our equity income and we call it EBITDA. I'd say this is probably high-powered or super octane EBITDA. Most EBITDA still has to have CapEx being spent on it. It has whatever working capital. It has all your other items, including restructuring, et cetera. This is after all of it. We're turning close to 65%, 70% of it back into cash.
As we look forward, as Eric mentioned, if we do start to see an ebb in the China growth rate, the amount that we have to reinvest back into those businesses would be expected to ebb as well. You could expect to reasonably see that number increasing if you start to see some lower opportunities in the growth side in China. Finally, I just want to stress, and Eric mentioned it, but the balance sheets of our joint ventures themselves are very strong. In the back of our Form 10, we publish the financial statements for YFJC, our largest contributing equity venture at the moment. That operation, because it met the significance test, we had to put its financials in the back. You'd see, if you translate it out, you'd see something around $600 million in cash against about $10 million in debt. Very solid financials.
Gives us even more comfort and probably flexibility as we move forward, knowing that those dividends are in probably reasonable assurance that they'll continue to come. We've been busy this summer out in the debt markets. Some of you saw us there. We went out, and we raised the capital structure for the new company. Markets were good. I think the results were good. The story was well-received. This is a view of what our capital structure looks like. We will have somewhere between five and, let's say, $650 million or so of cash, depending on where things sit on October 31st when we separate. It'll be around there. We'll have an untapped revolver for $1.5 billion. We'll have a funded term loan A of $1.5 billion, LIBOR plus 175, and we have two notes. We have a EUR note for 1.1 billion U.S. equivalent at 3.5% fixed, eight-year.
We have a 10-year note in the U.S., $900 million at four and seven-eighths. We have a little small piece of other debt. You'd see the maturities are fairly far out. Our cash flow profile will allow us to address and to pay down that term loan as the operations move forward. A very comfortable capital structure, a very reasonably priced capital structure. Additionally, I think this is actually a point that would set us apart from a lot of our peers. If you look around at $17 billion companies, plus when you count in all our unconsolidated ops, you'd see our pension and OPEB liability probably on the lowest, one of the lowest, if not the lowest, of the peer group that you'd see. In summary, we have about $109 million of unfunded liability. Only 3% of that's in the U.S.
Why is that? A lot of that liability stayed behind with Johnson Controls. For the business here, the amount of money that we'll have to dedicate to our pension and OPEB liabilities is very small. The amount of sensitivity we have to interest rates, interest rate movements, is also very small as it looks at that. Turning to some summary pieces of our financial policy. As you guys are putting your modeling together and thinking about how to look at Adient as you move forward, this page hopefully will help you give a little bit of clarity to some of those points. I said we're starting at a 1.9 times initial leverage. Our leverage target is to get something closer to our peer group. There's certainly an advantage to leverage when it comes to the financial returns.
There's also a disadvantage to leverage if it goes too high from a customer concern. Balancing that somewhere around where our peer groups are sitting has always been sort of the goal and the intention of the team. I'd say that's somewhere around a one times number today. Gives us plenty capacity. It actually gives us quite a bit of excess if you think of really the strength and the comfort we have from those equity earnings that I talked about a moment ago. From a cash and liquidity standpoint, say $500 million we'd always kind of look to have on our on-balance sheet cash. Then we also have that $1.5 billion liquidity relating to the revolver. CapEx funding, we've mentioned a few times, but approximately 3%. Dividends paying at a competitive level.
I'd say, as you look, it's a little difficult to know without knowing what our share price is, but we can afford certainly whatever that competitive level would be, we think. As you look at share repurchases, or as we look at share repurchases, we think certainly out of the gate, those would be modest. To the degree that we do them, I would probably model in that we just sort of solve for management dilution on equity or equity comp. From a debt service standpoint, this is a focus for us. We're obviously going to put the money we need to on a capital, and you've seen that in there. We're going to put the money into our engineering department, and you see that in there.
We will have excess, we believe, and debt service will be a primary focus as we look to move closer to that leverage target. Pension and OPEB, I mentioned, are quite small. From an M&A perspective, we have a footprint that we are the number one player in this space, really in every region. We're the number one player in this space and in every component. There's not a lot that we necessarily need, but we would look for opportunistic things that would enhance our profile, would enhance our capabilities. I wouldn't expect anything terribly large from us in the short term, but we will always be looking at the market, and if there is something that makes a lot of sense, we will have fiscal discipline, but we will look at it. Bringing us to our guidance.
Our guidance for 2017 for revenue is roughly $16.8 billion-$17 billion. That's our consolidated revenue. Our adjusted EBIT, and you'll see us move away from when we were part of JCI, we used something called SINC, segment income. You'll see us probably talk more about an EBIT or an adjusted EBIT. The number there is $1.15 billion-$1.2 billion, and that does include approximately $380 million, I mentioned that number earlier, of equity income. About $400 million of depreciation. Our interest is fairly modest, but we see about $145 million on that $3.5 billion roughly of total debt. Effective tax rate, 10%-12%. Our adjusted net income, between $850 million and $900 million. And CapEx between $545 million and $575 million, remembering that does include approximately $75 million of, we'll say, standup type of cost relating to the formation of Adient.
Free cash flow of $250 million, remembering a couple of slides ago, the restructuring and becoming Adient and some of those expenses or some of those cash outflows that are embedded into that $250 million. You look at a framework to value us, I've been in this industry for a while, I've watched most of you write, I've seen how most of us think. It's an easy measure to say EBITDA and to think of the EBITDA metric and what value or what multiple of EBITDA are we trading. I would say in a lot of cases, that works pretty well. I would say in our case, I don't think it works as well. I mentioned the equity income being such a large component of our total, that's really, I call it super octane EBITDA, but it's really net income.
It really probably deserves more of a PE framework in one's head. On the right-hand side, one multiple, not to sort of give you a view of how to value the business, but the way we look at it, that would be one way. I'd say even a better way for us, and something we'll probably steer you towards as we think about it, is a net income basis and a PE type of basis to look at the company because that does not only capture the benefit we have from all that equity income, it also captures our tax rate, which we think is somewhat of a differentiator. Just a plug for how you think of your modeling and how you think of us going forward.
Finishing off just with one last slide before I invite everyone and Bruce back up to do a couple of comments in our Q&A. This is our investment thesis. You look at it, the market position of the company, we are different. We're unusual. If you look, most auto suppliers have a heavy concentration in one geography or one customer. You see we're balanced by geography. We also have no customer over 15%, and our top nine customers are pretty much over $1 billion a piece. We are really embedded and institutionalized across the auto cycle. We're an incredibly important supplier into this space. We have the opportunity from what you've seen in China, we have the opportunity from what you've seen from the technology to continue to grow that.
From an earnings standpoint, we do have the opportunities I mentioned for self-help to improve that story. It all should lead into cash, it should lead into deleveraging, it should lead us into more opportunity to increase our value as we move forward. With that, I'll invite Bruce up for a couple of closing comments. I guess just on behalf of the team here, we're going to open things up for Q&A in a minute, but I'd just like to take a minute to sort of thank everybody for their interest in the company. I think we have a very compelling and a unique investment proposition as we come to the market, and we provide an opportunity to invest in a company that has some of the characteristics that we've talked about: China leadership, globally number one, opportunities for growth.
Hopefully, you took away that not only do we know how to grow this business, not only are we already winning in the marketplace, now that we sort of turned our philosophies around, but some of the interesting things like the RECARO brand offers us. That's just a hidden gem that I think in a high-margin, really truly differentiated product that we can invest in. We only put that one up kind of as one example of, those are the kind of things that coming out of Johnson Controls, those are the kind of opportunities that we have, and I think those, some of the opportunities we have in adjacent markets, truck seating, aircraft, train seating, those kinds of things, I think real high-margin opportunities, and those are things that we're going to be able to pursue to create value for our shareholders.
With that, I'm going to ask the rest of the team here to come up and join me on the stage. I'm going to open things up for Q&A. I think we plan on spending about half an hour here, or, well, 45 minutes in terms of Q&A, and then I think we'll have a meal outside afterwards. I see Matt Stover here. Up at the front, we got a couple. Oops, someone grabbed it on the way down here, Matt. Thanks. You want to
I think so.
Yeah. Oh, go ahead. Can we maybe dim the lights a little bit? Is it on?
Is it on? Oh, okay. Colin Langan in UBS.
Yeah, I see you there.
Yeah. On the 200 basis points of margin expansion that you're forecasting, how should we think about that between the core consolidated business and joint venture equity income growing? When you get to that 200 basis points, where does that really put you relative to your direct competitors on an apples-to-apples basis? Also, should we think of you being able to do better than your direct competitors since you're more vertically integrated?
Yeah.
The second question I have is on free cash flow.
Sure. Well.
I'd like to remember that.
Yeah, I'll start on the 200 basis points of margin expansion is not counting the fact that we would anticipate our Chinese equity income to grow. It's our core margin improvement in our base business is where we're looking to get that, Colin. As the China equity income becomes a bigger and bigger piece of the pie, that's upside to the EBITDA type expansion that we talk about.
Our gap to our
Probably will say the best of our competition from an earnings standpoint is probably a little larger than the 200 basis points. I think to your point, given our size and scale, we won't stop there. We've put that out as a target, but you could imagine that we'll aspire to do quite a bit better than that as we move forward.
Structurally, how is your vertical integration compared to your peers? Because you mentioned, talking about metals, that could be a double-digit business. Shouldn't that mean that your apples-to-apples should be a lot better? Any color there on the degree?
Yeah, I think what's hard to know exactly the answer to your question, because some of our peers have things that we don't have, like maybe leather would be a good example, and I think that tends to be richer margins, and we don't have 100% clarity on the individual pieces. Our metals footprint should definitely be on the high. It's capital-intensive business, and because of that, it needs to have margins that are accretive to the rest of our business, and that's what we would expect. We're very comfortable just spending a few minutes on metals because obviously we've talked about it for several years, what we're doing here.
Our metals business, it's just turned out to take a lot longer to get to the sort of promised land than we anticipated at the time of making some of these acquisitions four or five years ago. We are kind of in the midst of a shift from what was three different manufacturing processes, three different manufacturing footprints, and three different product portfolios. If you look at our Chinese metal business, we weren't in metals in China at the time we made these acquisitions. We invested in our 2B product portfolio with our 2B product process technology, and we're enjoying margins in China at nearly 20%. Okay. Now, the Chinese margins in our metal business are unusually rich because we're competing against people that are importing some of the recliners, especially on the mechanism side.
We have 100% local content in terms of our recliners, there's a market price that reflects some import duty. We're making higher than average returns. If you kind of were to adjust that out, Colin, I think we're pretty comfortable that if you look at some of our plants that we have in low-cost countries where we're launching our new product and look at the margins that we're making on those, they're in good shape. We've got kind of old Western plants. To give one as an example, in Germany is a plant that we're losing $40 million a year here as it's sort of winding down. That plant won't shut until the end of 2018.
We very clearly see the building blocks to get there, we're highly confident because we know where we've got to the fence for the promised land, that the returns are there to justify the investment.
My second question is on free cash flow. The free cash flow conversion based on your guidance looks like it's only 30%, if I take all the adjustments that you have, it seems to be north of 80%. Is that how we should be thinking about free cash flow conversion longer term?
Yeah, it's a good question, Colin. I think the one thing I would caution you on is that while we have elevated levels of restructuring in the plan for the next couple of years, as I mentioned, I would say that the nature of our business probably won't bring restructuring to zero. I would say a reasonable number to think about and probably $100 million, give or take, is probably a reasonable level of restructuring. There'll always be sort of those little sort of areas that require some element of modification from facility footprint, et cetera. Maybe $100 million less than that. Overall, the business should produce strong cash flow.
Okay. Up to the front here. Oh, sorry.
Mike Ward with Seaport Global.
Yeah.
Just to follow on the mechanisms on the metals business. Is that included in the 200 basis point reduction or improvement of margin you're looking at?
Yeah.
Yeah.
Yeah.
Now I've heard mixed signals. Is it a strategic business?
Absolutely.
It is.
Absolutely. Yeah. I think metals is something that is transforming our industry. It's something that really is the backbone for driving global common architectures. I think it is a carrier. It gets us in the door in the most safety critical, highly engineered product. Getting in early and getting the metals business definitely provides us with an opportunity to get the foam jet and fabric business. The other thing I'd say is when we look at some of the new technologies, like the CAMISMA seat that's out there, right now, the metal frames is something that you can kind of pick and source at the component level. I think as you go forward with some of these lightweight solutions, you're going to see that's not necessarily going to be the case anymore. I think the right decision was to get into metals.
It's certainly taken us a lot longer than we thought. When we sort of talk about metals, we're talking about the Western part. The Chinese metal operation, I mean, that's a business that's making nearly $75 million a year. We have 20% of the market there. When we made these acquisitions, we had 2% or 3%. It's paying off there. It's just taking a little bit longer. It's definitely core.
growth from? It sounds like some of the capital that you were not able to put into the business because of less focus cost you some growth. Was that growth from content? Was it growth from additional joint ventures in China?
Yeah.
As we go forward, how do we think about it? It is not from conquest, right?
No.
It is more from new opportunities?
Yeah. I will give you a couple of good examples that are even different this year. As part of Johnson Controls, we allocate a certain amount of capital to the auto business, roughly around the depreciation level. When we looked at, okay, well, how are we going to allocate that within automotive? We did not constrain China because of the industry growth there. It got the capital that it needed, and our joint venture is largely self-funding. We did not have any of that capital constraint problem there. If you look at this year, Ford announced that they are moving a lot of their small car production down to Mexico. We have that business, and it requires a new footprint. Daimler announced that they are going to open up a facility, a shared facility in Mexico. That requires a new footprint. We won that business.
Toyota announced they are going to put extra pickup truck capacity in Mexico. We won that business. Under the, I would say, the JCI regime, those are three pieces of new business that required a new footprint and startup costs and things like that. I would say in the old days, we would have taken those pieces of business all day long. Over the last two or three years, we would have not been able to take them all. That is a very tangible example of what we are talking about.
Two questions. Matt Stover, SIG. The first question is in the earnings growth bridge where you walk through the cost savings and the margin improvement, what's the benchmark starting period for that? Is that end of year last year, end of year this year?
Yeah. We definitely have some growth in 2016. We're probably looking at more of our LTM numbers at the end of June this past year.
The second question goes to the interiors business, the YFAI business, and thinking about that on a long-term basis. It is a 4% margin. It is a high CapEx business. You've indicated that that might be more interesting than you would've otherwise thought. I'm wondering, number one, is that because you see the restructuring that's taken place in the industry can bring better margin?
Yeah.
Is that sort of related to the relationship you have with a partner?
Yeah.
Why is it that that would be a strategic business long term?
Yeah, I think, well, there's a few things there. You're right in terms of the margins are about 4% right now. What I would point out is that business is one year old. You're seeing it running through there. They're investing in setting up treasury and tax and standalone IT infrastructure. There's a fair number of costs in there. The other thing is we don't really talk about our interiors new business, but we've had an unbelievably successful year here since we formed that joint venture in terms of booking new business. A lot of, I would say Porsche, BMW, Mercedes, new interior business. Our YFAI joint venture was just recently announced as Daimler's interiors integration partner for 2025. We've won an awful lot of new business, and there's a lot of investment relating to that there.
I think we see that business, Matt, as having something like 6% or 7% ROS. That's sort of be more like we would expect that business to trend up to. For now, it's definitely a core part of our portfolio. It's not something that we're looking to do anything with. Down the road, who knows? The other thing I'd point out about YFAI and our footprint that we have in interiors is to the extent some of these folks out west decide to enter the automotive market, I'd take the other side of this bet all day long. I don't think you're going to have some of these new entrants decide to source at a component level.
I think the opportunity that we have to say, "Hey, here is a complete interior solution," is something that we can really differentiate ourselves on because our largest competitor isn't in that space anymore. I like having the optionality on interiors as we migrate towards autonomous. When you look at the vehicle, if you happen to manage to get to the Detroit Auto Show and you look at the vehicles that we're going to show there, the marriage between the seating and how the interior's going to move around and things like that. Some floor consoles need to go away if you want to reconfigure the seats and how you sort of handle all that. I like having the real estate. Right now, we've got the same position where We expect it to churn out a lot of cash.
We don't have to put any investment in that business. It's got great pipeline of growth. We're pretty comfortable with it.
One clarification point, just the new business wins that we have, and we reported in there, do not include the YFJC
Right
new wins that Bruce was talking about.
Do not.
Do not.
Yeah.
John Murphy, Bank of America Merrill Lynch. Just a quick question on the backlog wins. It seems to have ramped up pretty dramatically this year. You're estimating about $6 billion versus a run rate of $3.5 billion. There's a lot of concern in the investment community that you might be very aggressive on pricing to ramp up those new business wins. I'm just trying to understand, if we think about that $3.5 billion run rate stepping up to $6 billion, really, what is the key driver? It sounds like it's a little bit more than just capital commitment.
Yeah.
I'm just trying to understand that.
Yeah. Well, Eric, do you want to comment on that one?
I think some of it is capital commitment and engineering commitment that we've been able to spend the money. If you look at what we have gone out for, we're getting pricing at reasonable margin levels. It's not like we're going out there buying business. We've just been more aggressive and not having to be as selective as we were before in terms of what we could go after. The other aspect to it, if you recall what, I think it was on Bruce's slide, what he showed, half of that growth was in China. Again, what I was saying before was, that's where we're really advantaged in the marketplace in terms of our cost structure, our level of localization, and our capability. It just helps us in terms of our ability to win.
Yeah. Is there any significant competitor you think you're taking market share from, or is this just-
I think it's across the board.
Across the board.
Yeah.
Okay. Jeff, just on your point of 1.9 times being a little bit on the high side versus where you ultimately want to be, what level do you want to get to? What's sort of your target, and is there a general timeframe for that leverage?
Yeah. 1.9 is where we are today. I'd say about 1.0, give or take, is probably where we'd aspire to be. I'd say we think we can get there before that 2020 timeframe.
Okay. Just one last one. Byron, you mentioned you had made an acquisition on the fabric side to vertically integrate there.
Right.
One of your biggest competitors made the Eagle Ottawa acquisition. Just curious why you guys passed on that. Are there other opportunities maybe to make another leather acquisition or other vertically integrating acquisitions?
Yeah. That's a great question. Again, I think it goes back to Johnson Controls' willingness to invest in the business, right? We made a series of pretty big acquisitions in the metal space and the fabric space, the appetite wasn't there to do more deals in automotive, quite frankly. As we go forward, we think there are going to be a number of interesting opportunities for us to continue to expand our portfolio and our capabilities.
Yeah. When the Eagle Ottawa came up out to the market, we didn't even ask for a book. I think when we sort of sat down, because the timing of when that came out, and I'll say our annual strategic planning process as part of JCI, we really used that as a proof point. Here's the kind of thing that makes an awful lot of sense, and we didn't even want to take a look at the book. It really was a proof point that Johnson Controls wasn't the best owner of the business anymore.
Right.
Maybe if I could just add on to that, to the leather topic. If you look at the leather business and then the whole value chain of the leather business, there's a significant portion of technology and capability that is part of the cutting of the hides, which we have in-house and which we're a leading source already today. Means we don't necessarily have to make the hides ourselves with all the processes that go along to create the value for our customers.
Don't you buy?
You just buy the whole
Yeah. A lot of leather is actually directed by our customer. I think it kind of transitions another point, we didn't really talk about M&A, I'm sure someone would ask about that. When you look at our footprint and what we have, we don't really have any strategic gaps. There's nothing that you would sort of look and say, "Geez, you really are weak here, and here, and don't you think you have to buy something to address that?" Or, "Don't you feel threatened because of this, that, or the other thing?" Well, we don't have that. As Byron put in his slide, we're much more vertically integrated than our competition. In every product group that we are vertically integrated in, we are globally number one. Some by a long shot, some sort of it would be close.
Sure, we have some opportunities to be bigger. I would maybe point to fabrics as one area where we're largely a European fabrics business, growing that business in Asia and North America would be interesting to us. There's nothing that is a must-have asset or property or product technology that we feel is strategically important. Even in the rest of Johnson Controls, we have some gaps in some of our businesses. Automotive's not like that. We got all of the capital. When we talk about the last two or three years being capital constraint, prior to that, automotive got most of the capital at Johnson Controls, and the other businesses got what was sort of left over. We were able to buy and add things to the portfolio for many, many years, and that's why we're in such a strong position today. Brian?
Brian Johnson, Barclays. A few years ago, you talked about some of the pressures on the JIT margins, it seemed like vertical integration was a way to move away, or at least to get higher margin business in. If you look at it now from the point of view of an OEM and maybe take flattish growth in North America with rising regulatory costs, okay in Europe with even steeper rising regulatory costs, continued 5%-6% showroom price pressures in China, why aren't seats, or are seats still high, will they be getting higher on the OEM's cost-cutting target list? Then how do you defend against those price downs, especially as it's clear that there must be margin in some of these vertically integrated components that's not lost on the OEMs. Will it be any different when you're Adient versus JCI?
Well, first of all, I would say seating has been at the top of the OE price-cutting list for a long time, because that's where the money is. Like I said, the seating suppliers are in the top one, two, or three production suppliers that they have. We probably are in that pole position at eight or nine different OEs. When they're out there looking for price downs, they're coming looking for $40 million, $50 million numbers from our businesses. They're starting at the top. I don't think the price pressure is going to be It's tough, but I don't see it getting any worse. I don't see the fact that we're an independent company versus a part of Johnson Controls being any different at all.
We never sort of gave them any building efficiency money before, that's not going to be a constraint. Very price competitive. I think the opportunities that we have in rolling out our operating system, Johnson Controls has talked about a $1 billion opportunity. Automotive is more than half of that. We've always had a strong BBP or best business practice culture where we internally benchmark our plants and where we know our gap is in terms of cost opportunities. That DNA is alive and well in automotive, and has served us well and let us respond to the pressures that they have today.
Joe Spak from RBC Capital Markets. Bruce, you preempted part of the M&A question, you said you don't have a lot of strategic holes, one of the other things that I noticed early on geographically, especially, I guess, in Southeast Asia, is that another opportunity for some bolt-on tuck-ins?
Potentially. If you looked at sort of that tower of the world, what you would tend to see is the largest players out there would be Toyota Boshoku, a Japanese player. It's a tough market to crack into because you've got some strong Koreans that really have a significant market presence in Korea, and same situation in Japan. What's our sales in Japan now, about $600 million? Something like that. Maybe $300 or $400 in Korea. We'd be orders of magnitude bigger than any other non-Japanese or non-Korean, we're way behind the larger players in our space in Korea and Japan. Outside of those two big countries, we've got a good position in Thailand and Malaysia. There's opportunities there. Same thing, I would put Indonesia and India.
Niche type, there's still some people that would be in the other category on Byron's global market share chart that are in those kind of territories. Yeah, for sure. Those would be things that we would definitely be interested in.
Jeff, on the China dividend, can you just, I guess, mechanically help us understand how that works? Is it still housed by a Adient Chinese entity? What's sort of your access to that cash once you get the dividends back from the JV?
It's a good question. We'll get it. After the audit is completed, it will be dividended out of China into our entity, and then onto wherever we want it. It's in our control as an Adient entity.
We've talked a lot about our tax rate being 10%-12%, but one of the biggest benefit is really around the fact that as being a foreign domiciled company, we don't have this penalty associated with bringing overseas money back to the U.S., like we have to do right now at JCI. JCI would bring that back and keep it overseas. We, as part of Adient, have 100% access to that money. We have much more. We'll never have this sort of trapped cash overseas issue. That's completely avoided.
Brian Sponheimer from Gabelli. Bruce, you mentioned it, Detlef, you mentioned it. You talked about adjacencies, one of them being aircraft. Not to put the cart before the horse, but is that something that you can develop within the core set of assets you have? Or given FAA regulations, you'd have to go out and actually buy into that business in order to get a toehold?
Well, I would say that we're highly unlikely to go and make an acquisition in an adjacent market until we're pretty comfortable we could win there. The things that we are talking are really things that we're looking to do organically. If we get to the situation where we think we have a better mousetrap and an acquisition is a way to sort of more quickly commercialize it, then that might be probably the way we would look at it, as opposed to saying, "Hey, aircraft seating is interesting. Let's go buy an aircraft seating company and see what we can do here." I think Aircraft in particular is a broken industry from the discussions that we've had with some of the people in the space, and it is ripe for a disruptor.
I'm pretty excited about that, and I think we have some things that are completely unique, I would say, in terms of the technical understanding we have around comfort. That goes without saying if you sit in an aircraft seat versus a car seat. Around logistics performance, around low-cost country sourcing, and I would say our ability to provide a product in China, which is 1/3 of the aircraft market. I'm actually pretty excited about the opportunity to organically enter that space.
Just to add onto that, from a capabilities perspective, if you look at the kinematics of the seats, we do believe we have these capabilities. By coincidence, one of our tech centers is already FAA certified for some legacy opportunities we had. We are very well aware of all these requirements. Yes, of course, it would need some additional investment. The foundation, like Bruce said, is absolutely there.
Hi, just a few, hopefully, quick financial questions. On the tax rate of 10%-12%, that is excluding the equity income? That is number 1. Number 2, the equity income of $380 that you are guiding to in 2017 is up pretty significantly from 2015 and the last 12 months. Is that a good go forward rate, or is there anything in there that would be making it look especially good? The last one would be returns on capital when you grow your business, when you spend capital, what types of returns are you looking for, and what is the payback?
Yeah. All good questions. The first one, the 10%-12%, one of the reasons that is so low is because our equity income is coming in already taxed. That 10%-12% does not include the tax that we pay in China related to those joint ventures, and that is just how it comes into the accounting. You can guess between 15%-20% for most of those ventures out there in China. Your second question was on the $380 and whether or not that was representative and why it jumped up. The biggest piece is the YFAI consolidation. If you remember, YFAI, which is our interiors joint venture, was formed in July 2015. You have your first full year results from that operation. Plus, we have grown.
If you look at the China market year-over-year, a year ago, we were all talking China and sort of slowdown. The 3rd calendar quarter of last year was certainly a challenge in China. If you have looked at the growth rate year-over-year in China, it has been very high. We have enjoyed that. I do not think we are thinking China is going to shrink next year. We think it is still going to grow, maybe at a lower pace, if they do get rid of that 1.6-liter incentive, which is in place until the end of the year. We would say that is a good number to start from, and we would continue to grow, and the trajectory would be the only thing that we would have to modulate.
As it relates to your last question, as we look at new programs and what kind of return on capital we look to achieve, I would say this is a business that probably a little bit like your businesses. We look at every program a little bit like a stock investment. We do very big financial analysis, big models that we look at, we have a review procedure as we look through all the dynamics of those programs, which would include all of our engineering, all of our materials, all of our labor, all of our big SG&A allocation, and we would look to make something north of probably 18% for a base program. That can modulate up if it is a little bit more of an out there technology or an out there product, we might demand a little bit higher.
If it's a bit strategic at the beginning, we might have a little bit lower initially.
Yeah. Something like those three examples that I quoted here in North America, those would be a brand new customer in a brand new country in a brand new facility. We wouldn't have on the first program an 18% IRR, obviously we're assuming that when we win the successor business, it's going to be much higher than that. That's where you kind of get the range.
Yeah. Hey, it's Rob Barry from SIG. Just a quick one from me on how you're thinking about commodities in the forecast. In particular steel, prices look like they're up a lot.
Right. We've talked about this as part of Johnson Controls before, especially on the metal side, we're fairly well hedged. In some cases, we're on our customer steel buy. In other cases, we've got sort of lagging, kind of rolling indicators and things like that. I would say over the last two or three or four years, ever since really got into the metals business, one way or the other, we've commercially managed to work our way around the fluctuations in commodity prices. I feel pretty good about our commercial teams to be able to do that again this year. You're right. We do see some element of higher steel prices coming in as some of these tariffs and whatnot are kicking in.
In a lot of cases, we have the ability to pass that on to our customers with how our contracts are set up.
Yeah. Yep.
Hi, Samik from JPMorgan. Can you share your growth outlook for the consolidated business out of the gate? Then as backlog ramps up, what's the outlook in more medium-term for that business?
The growth outlook for what business?
For the consolidated business.
For the consolidated. Yeah. We're coming out, and we'll do this again in January. In the January conference, we sort of talked through our three-year backlog, which was about $2.1 billion last year, and we'll update that this January at the auto show. Of that backlog, what it basically had was a negative number in for North America because we'd lost some business from some commercial disciplines, I'll say. We had negative in North America, small amount of growth in Europe, and all of the $2.1 billion effectively was in our non-consolidated businesses in China. That's what we said our backlog picture was like in 2016, 2017, and 2018. Now 2016's rolled off. We're coming out right now with. Because of the lead times in our business in terms of winning new orders, it's usually 3 years type out.
Our guidance that we're given for 2017 here is essentially flat-ish from a top-line perspective. 2018 will be similar. When we went through the step-up in new business bookings, you will see in 2019 that not only our China business will continue to grow at the rate it has been, but you'll see our consolidated seating business start to pick up and gaining share. Again, I gave a few examples of that in North America, but we've got a couple of those in Europe as well. The consolidated business, for us, will start to show top-line growth again in 2019. Absent what happens with the industry, absent with what happens with exchange, but just underlying volume, top-line growth comes back in.