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, the 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. Or 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. And except as required by law, Adient assumes no obligation and disclaims any obligation to update such statements to reflect events or circumstances occurring after the date of this document. In addition, this document includes certain projections provided by Adient with respect to the anticipated future performance of Adient's businesses.
Such projections reflect various assumptions of Adient's management concerning the future performance of Adient's businesses, which may or may not prove to be correct. The actual results may vary from the anticipated results and such variations may be material. Adient does not undertake any obligation to update the projections to reflect events or circumstances or changes in expectations after the date of this document or to reflect the occurrence of subsequent events. No representations or warranties are made as to the accuracy or reasonableness of such assumptions or the projections based thereon. 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 3 or 4 hours talking about our company and the exciting future that we have. In terms of our agenda today, I'm going to start things off and just give an introduction of the company and really talk about the rationale for the spin off and things like that. Then I'm going to be joined next will be Byron Foster. Byron is a long time executive in John's Controls, been in the auto business for many, many years.
So he's one of my 2 Executive Vice Presidents. Eric Mitchell, another Executive Vice President, is going to 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. And then we have Jettliff Juris.
Jettliff is our Head of Technology Engineering, again, based in our technical campus in Germany. So Detlef's been in our organization a long time. And then last but not least, Jeff, Stifel, our CFO, he'll come up and go through a lot of the financial details and our sort of future business projections. So with that, I thought I'd just start with kind of a recap. So for many years and for those of you that are familiar with John's Controls, I mean automotive really was the growth engine of John's 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. So that's how we got into the automotive business. It was a business that had a couple of different business lines and made some metal components. So that's how we got into the business.
And 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 I mean, just really put breathtaking growth rate here? Over the course of the last 3 or 4 years, however, our strategy at Johnson Controls has sort of pivoted and we want it to become more of a multi industrial. And so we sold off our automotive electronics business.
We constrained our capital investment to automotive and we sort of flat lined it from a growth perspective. And that was really the reason why we decided that it didn't make sense for John's Controls to own the automotive business anymore because we weren't willing to make the investments that we had historically made in this business and running it sort of in a cash cow type mode, was just going to damage the business over time. And so 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 went and said about the automotive spin off, we tried to do something a little bit different. So we kind of went into this process with a view that we wanted to set up 2 strong companies. And so when what that meant was we wanted to set up automotive to be successful. And so 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. So our leverage acts 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. So we have a very low financial risk associated with pensions. And then we also said that from a corporate perspective, Adient, you take what you need and that we will deal with the stranded costs back at Johnson Controls. So we haven't so 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 costs in front of us.
Most of those are behind us. Secondly, on terms of TSAs, and this is kind of why our spin off has taken the amount of time it's taken. We announced this back last July. So if you think about the 15 month period here, really the timeline and that's really been separating the IT systems. So we have very minimal TSAs going backwards and forwards.
I think it's a net number of less than $10,000,000 in terms of TSA. Most of the heavy lifting in terms of the investment separating our systems and things like that is behind us. Here's, I think just a 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? So as I said in my opening comments, initially we were part of obviously a multi industrial company and so 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. So from a setting up of our corporate overhead, we will have a leaner cost structure than John's controls. In terms of our business, and you can see this even on our 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 from things that we have 100 percent control, self help. So a bit of it, it's 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 3rd or 4th inning of integrating our metals operations. That drives a significant amount of margin expansion opportunity for us. Then lastly, kind of what we're doing to lean out, I would say, our SG and A structure. In terms of our cash flow, this is a very strong cash flow business. And 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. So we've largely been reinvesting at the same levels on depreciation. We'll be ticking that up a little bit to get our business back on a growth trajectory. So 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 expected to here on Friday, September 2nd. The new Johnson Controls Board met in Ireland on September 8 and approved the spin off transaction. So that's a big milestone for us. We've all the regulatory approvals and things like that are behind us. The Jobs Controls Board has approved it.
We're obviously here today having our official coming out, you could say, from a new company perspective. And over the course of now until we begin trading here at the end of October, we'll 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 19 and our 1st day of trading or when the shares are actually distributed be October 31. When issued trading, we expect right now to commence a couple of days before the record date on my managed my extended my management my extended management team will be ringing the opening bell at the New York Stock Exchange on Halloween morning. In terms of kind of a business overview, this is Adient.
So think about our company, we're the largest automotive seating supplier in the world by a considerable margin. And I really like to think about our business in 3 distinct pieces. One, we have a $17,000,000,000 automotive seating operation in North America, Europe and Asia. In China, we're unique. We have about a $7,000,000,000 collection of joint ventures that we don't consolidate.
But if you sort of look at the unconsolidated revenue of all of our joint ventures, that's about another $7,000,000,000 And then in addition to that, we have our 30% investment in Yangtze Automotive Interiors. That's a global automotive interiors joint venture. That's the largest automotive interiors supplier in the world. It's about $8,500,000,000 We have a 30% share of that business. Our Chinese partners, Yanfeng, have a 70% share.
So those are the 3 sort of distinct pieces to our company. When you sort of flip to now our seating business, we have about 2 30 locations globally as this slide suggests. We make about 25,000,000 seats sets a year or about one every second. And we have about 75,000 men and women around the world. Again, these numbers exclude our China operations and Eric will sort of do a deep dive on the comparable figures for China.
So anyway, that's kind of the way you kind of think about the business. In terms of our Board of Directors, we're targeting having a Board of 8 individuals. So far, we've got 7 of them named. So there's a couple of people that we're talking about sort of in the pipeline. And 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 was our manufacturing as a minimum. And here's kind of what we've accomplished. So from the Johnson Controls Board, Julie Bushman, who's Executive Vice President at 3 ms Ray Connor, 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 on to the Adient Board.
So we have good continuity of leadership at the Board level from those three individuals. In terms of then people that we brought in from the outside, we asked John Barth, who was John's Control's Chairman and CEO from 2002 to 2 to 2 to 2 to 2 to 2 to 2 to 2 to 2 to 2
to 2 to 2, 2
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. And I asked him if he would sort of 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.
So 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 was in the financial downturn was Chief Executive Officer. And then we have Barb Smarzczyk on the team. Barb is recent she's retiring from Ford actually at the end of this month.
She's right now Chief Operating Officer for Ford Europe has been a big part of the automotive turnaround in Ford's European operations. So 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. So 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 I got 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.
So but a lot of automotive experience on the 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 2 people. We brought Neil Marchuk as our Head of Human Resources. Neil held a similar role at TRW Automotive.
And then we brought Jeff Dafayo in as our CFO. And prior to this assignment, Jeff had been CFO at Visteon. So 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 spin off process, we 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 reflected on the fact that we're really being given the opportunity of a lifetime here and to set up a brand new company. And not just a brand new company, but a $30,000,000,000 brand new company.
And 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. And 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. But we're going to be a different company. We're going to be a single industry company. So there's also some things that we wanted to make sure that we did differently.
And so really starting that journey with what is our mission, what's our vision statement. And 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, 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.
But 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 it from bodily damage. So it's a critical component to the vehicle and the driving experience. And so that statement, I think, gives us the right to participate not just in the automotive sector, but in other seating opportunities around the world. So that's kind of how we came up with our vision statement. When you when our 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.
And 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 the technology field, we can all think of a few companies that you might put in that bucket. And so for us being the best, it really means being a leader in cost. So 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 the industry.
So that you'll see is in our mission statement here. Quality and launch execution are 2 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'd 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. And so 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 new vehicle architecture when something's going on. If we have a hiccup, we cause our customers to have a big hiccup. And so launch execution, making sure we launch well is critical.
And then lastly, customer satisfaction. And that really means doing what we say we're going to do with our customers. And then you can see this last sentence and we put this second sentence in very deliberately is we said, look, we're 1st and foremost automotive seating company and we're always going to be 1st and foremost automotive seating company. We didn't want to run jump out of John's controls where we've constrained investment to automotive seating business and invest elsewhere. But we do have opportunities outside of automotive seating.
I would say it's in seating in some adjacent markets. And so what we're talking about here and 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, and I won't sort of go on to these, but values really set the tone for the culture we want to have at our new company. And 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 can see one that says pick up the pace.
So 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's how these folks found teamwork and doing things for the team. So anyway, those are the values that are going to drive our culture at Adient as we go forward. And then lastly, in terms of the type of company we want to be, I mean, this is a long document and it's probably easier to read in there, but this is something that we called our 5 year marker.
And we had a 10 year marker at Johnson Controls. And what this really means is when you look at our mission statement, our vision statement, and we say, what tangibly do you mean? And so this document really says, hey, in 5 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 we're in some cases we're throwing out a gauntlet to the rest of the organization.
I just reflect on a few of the things that are in our 5 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. So that will be and that is how we grow our business by operating new, interesting, must have features to our customers. And so 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 up in our game and innovation.
In terms of our operating system, we've talked at Johns Controls about Johns Controls operating system and how it's going to deliver a significant margin expansion opportunity for Johnson Controls. But when you really look at the genesis of where did it all come from, most elements of the Johnson operating system have come from our automotive operations. And so we are carrying on what the Johnson Controls Automotive or the Johnson Controls operating system will call the Adient operating system. But it really is making that we have all our plants at level 5 capability. It's rolling out low cost, SG and A functions across the world, standardizing our IT global infrastructure, those kinds of things to be cost leaders.
So operational excellence really is the 5 year mark that drives our cost leadership. And then in terms of global growth, you can see we talk about we already are number 1, 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 the Chinese homeroom. GM's 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.
So for years years 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 and European markets. And I think we're really well positioned to lead that charge. And then lastly, I would 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 of from a volume perspective. And so we will be very heavily focusing here on the initial few years of getting our balance sheet in shape, getting back to like 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. So anyway, that's just a rundown of kind of what we mean. But this is when we're doing something, it'll and we're talking to the Street about it, 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 investment opportunity in our company.
1st of all, market share. So this chart shows Adient's global market share at about 34% and we're at least 50% bigger than our next closest competitor. So clear market share leadership. If you look at our sales by geography, we are, I would say, very unique in that we are about and this is sales in the territory that we do business in, okay? So we have about 1 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. But 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. And I think the other takeaway, there's some concern, quite rightly so, about what stage we're 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 3 or
4 years. Europe
is quite honestly, it's just bouncing off the bottom here. So 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 is operating at a level that's fairly depressed if you look at where it was back in 2,007, 2008. Then China, I think we see that market slowing to mid single digit type growth. Uniquely, we're only 1 third here positioned in North America.
So some of the concerns around downturn planning, what's the sort of impact if North America falls off a cliff, that's only affects about a third of our revenue stream. So I think that makes us highly 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. And obviously, we're well positioned with the strong European and North American players. So industry leading diversification, and you can see in our largest customers, about 14% of our sales. We don't have any platform that we're super exposed to.
So excellent customer diversification, the envy of the industry. China, we talked about China and Eric will take you through a deep dive here. But we got into China first and that's really what's the key to our success is we got in early. Our first joint venture was formed in 1996. That's about 20 years ago.
And we went in, in a minority joint venture structure. Those are the 2 due difference that we did. And it has served us exceptionally well. The chart here on the bottom just shows what our growth rate has been and 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 $7,000,000,000 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 bomb the country in terms of manufacturing locations.
So 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. So 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 customers. So we've had a lot of questions about, well, what do the customers think about the spin off? And this chart, I think, really shows the month the proof is in the pudding. So what we've done on this chart here is over the last 3 years, this is the amount of net new orders that we've won. So this is a combination of not just new programs, but also replacement business.
And then you can see here that over the last 3 years, while we've been in a capital constrained mode, we've booked somewhere between $3,000,000,000 $3,800,000,000 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. And on a year to date basis, you can see we've all through August, we've got one more month to go here. We've already booked $5,100,000,000 of net new business or nearly 50% more than we have on the average of last 3 years.
And we expect to have about another nearly $1,000,000,000 here of stuff to come through in the month of September. So 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. And now we put the oxygen mask back on. We haven't lost our ability to flex those growth muscles and our winning ways.
What this will do is it translate into top line growth, not next year, not 2017, not in 2018, but you 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 is important to sort of say, hey, we're not starting from scratch here. This is the automotive profitability in the 1st three quarters of this fiscal year. So the quarter ended in June 30.
So on a year to date basis and here I've cleaned up the deed consolidation of interiors. But on a year to date basis, if you just look at our consolidated seating business, adjusting for foreign exchange, we're up about 2%. So 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%.
So our margins 2016 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 and A initiatives that we have globally, that will benefit this. And the metals improvement opportunity, that will benefit this.
And Jeff will sort of spend a bit more time deep diving each one of those 3. So, upward profitability trajectory. In terms of our market, and what do we have from an industry point of view? Is it a headwind or a tailwind? So, let me first really break this down into 3 components.
If you think about the industry, we expect to see about a 2% compound annual growth rate in industry production here between now 2020. China, we think will grow quicker than that about 4.2%. So 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% is nice. So we got that as a tailwind.
We have mix. And here, I would point to really 2 things. 1, the amount of content that is migrating into seats. So 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. And then the shift to SUVs. And this one quite honestly, doesn't really get a lot of publicity. But for those of us that are in the seating business, we love SUVs.
A lot of them have the seats are much bigger, I. E. They sell for more and a lot of them have 3 rows of seats instead of 2 rows of seats and we really like that. But the SUV mix has shifted from a fifty-fifty here in North America 3 years ago to a little bit north of 60. And I think when you look at SUV and I'm including CUVs in here as well, we see that trend continuing to migrate upward.
And I think if you look at IHS projections, they have North American market shifting to a 30% passenger car, 70% truck SUV and CUV. So 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, but it's an important one and we expect to see that continue. So the shift away from passenger cars to SUV is a big positive driver for Adient in the future in our industry.
And then lastly, I would point to content growth. And if Kobi should 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. But for now, if you think about content growth, what we mean by that, say, in the next 5 year horizon, we're talking about things that are in higher end seats that migrate down to lower end seats. And so it used to be things like power seats were in the top end of the market and now power seats are pretty mainstream. Heating in seats used to be at the high end of the market and now it's kind of migraine, so it's fairly mainstream.
The things that are out there right now are many, many more dimensions of power seats. I think the new Lincoln Continental has a 32 way power seat. So I think you'll see more power migrating into the market. I think cooling seats is probably in the early stages of migrating down the market. So 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 will migrate into the seat and you can listen up for that in Detle's presentation.
So in terms of where we sit in terms of tailwinds, I would characterize a tailwind. We've 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. So 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 have we're number 1 in our industry by a long shot. We're number 1 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 sites that we control and we're a strong cash generating business. And I think you'll see that we're going to be able to really quickly deleverage our balance sheet and produce shareholder value for our new shareholders.
And so with that, I'm going to bring Byron Foster up to the stage. Byron?
Okay. 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 the real desire to work closely with our customers and to pursue growth. And 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.
And 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. So what I want to do today is talk to you in a little bit more depth about how the business really works. And Bruce used this slide to kind of give you an overview of the current position of the company, dollars 17,000,000,000 in consolidated revenue and a huge position in China as well as market leading interiors joint venture, Wi Fi, supplying and supporting our customers across over 2 30 locations and one seat kind of coming off the line every second, if you will, across the globe and really supported by 75,000 highly engaged motivated employees that come to work every day to help us win and help our customers win. So let's talk about kind of 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 Jif business or just in time.
And 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. So 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. So in these plants, winning at JIT is really about global supply chain management. So 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. So it's around managing that global supply chain.
It's around efficient assembly processes. It's about quality. And most of all, it's about delivery because if we miss deliveries and our 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. Next part of the business is our trim business and there's really kind of 2 segments within trim and I'll start with our fabric business.
Roughly 5 years ago, we vertically integrated into the fabric business through an acquisition of a company called Michel Terrier out of Europe. And that really gave us the capability from a design standpoint to talk to our customers much earlier around what we can do with them to help differentiate the interior. Acquisition and 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. And this is really a business that is labor intensive.
So this business has migrated to best cost countries around the world. So you'll see our operations in places like Mexico, Eastern Europe, China, etcetera. And so 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 just in time assembly plants. And so managing that supply chain again is another critical success factor in that part of our business.
Our phone business. This is a business that's really where the comfort solution comes from. So 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. And 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.
So we tend to have foam plants in regional hubs that can support both our GIP plants as well as competitors where we're sourced at a component level. So 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.
And then next is our metals and mechanisms business and 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. And if you look at the sourcing patterns and how the seed is actually sourced by our customers, it all starts here. And here, the play is about driving commoditization.
And so many of our customers have developed core structure platforms that they proliferate across their vehicle lines, and they look to adding and 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 5 years ago with the acquisitions of Kuiper and Hammerstein. And as Bruce mentioned earlier, we're around the 4th inning, I think he said, of continuing the integration of these businesses. And 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. And we think as that happens, we'll continue to see great improvement this business and continue to drive our leading position in the industry in the Metals and Mechanisms business.
And then lastly, our RECARO business. This is a business that came to us as a result of the Kuiper acquisition back in 2012. And 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 3 or 4 years. And 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.
But 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. So 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. So we're really looking to leverage this brand, reinvest in this brand and use it as another platform for growth as we go forward.
So 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 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 seed or system solution provider as well. So 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. And when you combine that with our position on the interior side, and Eric will talk a little bit more about our joint venture, Yangfeng Global 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. And we know that's a critical success factor as they continue to compete globally. Okay.
And 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. So we're at 34%, nearly double the next nearest competitor. And when we look at the marketplace, we still see opportunity. So 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. And 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.
And if you look at that in a little more detail by region, so 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. And 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. And if you go across that chart, you can see really market leading position in Europe as well.
And then in China, Eric will go through that in detail, but you can see we really have a dominant position in China. And the good news there is both the width of the bar is going continue to increase as we will continue to see very strong growth rates in China. And then the gray space there is the largest of most of the regions there. And so there's still going to be a lot of opportunity for us to expand our position in China. And then Southeast Asia, you can see is the one region where we don't we are underrepresented, if you will, relative to the other geographies.
And 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. So really a market leading position both at the complete seat system level as well as across the major components. And then 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 1st 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. And 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. And then from a customer standpoint, again, this gives you just a little bit more flavor. But very simply, we have always picked our 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.
And 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. And 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. And then Detlef will talk in more detail about our engineering capability. But just a couple points here is that it's all rooted in our ability to develop products that meet cost targets that are 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. And 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.
And 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 Verscheid, Germany just outside of Cologne. But also we invested very early in developing engineering capabilities in low cost So we have really, I would say, a benchmark technical capability in China as well as Trenton, Slovakia as well as India. And you can see the other locations around the world. So 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 are cost effective. So 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 charts that I showed you by region. We really see those as great opportunities for us in Southeast Asia and China, and we believe we'll continue to grow in our core markets as well. Long standing customer relationships with all of our major OEMs. The C system is a critical, 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 and 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. And really Seating and Interiors, and Eric will briefly give you a little bit more of a look at our interiors business, but 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 capability that we have on the total capability that we have on the total interior. And in position to capture 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. But irrespective of that business model, we're really positioned to win and support them. And then market share and margin growth, again, we still see I'm as excited today as when I joined the company 19 years ago relative to the growth hand it over to my colleague, Eric Mitchell, who'll talk in more depth about China. And before I do that, we're going to roll a video.
Please welcome Executive Vice President, Eric Mitchell.
Good morning. So
I don't know
about you guys, I love that video. And I love it for a couple of reasons. Number 1, it shows that how dynamic China is. I mean, it's a fast paced market and us being there right where we are right now, it's just 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.
So just a little background on China, where we are today. Both Bruce and Byron mentioned this. We're about $7,000,000,000 in sales in China, which represents about 45% market share. But 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.
And you look at our technical capability that we have, 3 world class technical centers there, comprised of 1300 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. Complicated and complex graph, but actually this is our simplified view of the Chinese market. And 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.
And 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. So creating more complexity in the market because then it became overlaps. The other thing that happened was Chinese law allows or allowed it at the time that foreign OEMs could have 2 joint ventures with domestic OEMs. And so you could get a dynamic where you could have a foreign OEM have joint ventures with domestic competitors. And so that just creates as well a lot of complexity.
And so as we were going in and we were a 1st 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. And so that's really been the crux of why how we developed there. And really, we've been really successful and it's really been based on a couple of things. Number 1, we were a first mover in the marketplace. The second thing was we set up the joint venture structure.
But 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. And we really manage them in a win win mentality, And we manage them for the benefit of the joint ventures. So 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
joint ventures. And 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. So 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 it's product technology, process technology or management technology, if you will, or know how.
And we also bring in global business. So 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. And 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. So 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 $300,000,000 in equity earnings for Johnson Controls and as well $200,000,000 in dividends. So that's kind of the structure. But I always say the saying is the proof of the puddings and the eating. And 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. But 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. But we're not done. I mean, we really see growth in the marketplace, not only from the market growing and 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 big, it is still a high growth rate when you look at it in comparison to the globe. But we also see opportunity to grow in our market share. And you can see, we actually have a goal out to grow our market share to 55% from 44% here in the next 5 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, but as well with Japanese and Korean and other Asian customers as well, where we're less represented in the China market and then as well with the domestic And Jeff is going to go through this slide much more in detail when he's up.
But one thing I just wanted to highlight is over the since we've been in China over 20 years, we've invested $150,000,000 into China and we've been able to dividend out more than $1,000,000,000 That's on top of how much money we've been able to reinvest in China to fuel all this growth. So from a financial perspective, it's been very, very lucrative as well in addition to the market share. There are some trends that are happening in China. Some of these are consistent globally with what Bruce had mentioned. But we are very well positioned due to our presence and that we have and our capability to take advantage of these in a good way.
And this is also going to help fuel our ability to grow from 44% to 55% market share in the next 5 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 is 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, so basically Beijing, Shanghai, Guangzhou. As you can see from the map that we showed you, I mean, 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. And in total in volume numbers, it hasn't been that big, but in terms of growth rates, it is. And 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 and allowed to have 2 children.
And so 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. And in particular, on our metals mix, which we have great product, great technology, which enables access from the 2nd row into the 3rd row that happens on SUVs. So we feel we're really well positioned there. The third thing is on the premium market.
And you would think, okay, China is 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 Detle is going to show you later in terms of being able to provide more content on these vehicles. And then the other thing is, as China as the China market matures, the growth rates go from double digit to the mid single digits, competition is going to increase. And so you probably have heard there's 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. And when I say localization, that goes beyond direct material on how much product we actually make from a vertical integration perspective in China.
But I'm also talking about tooling and engineering. That just gives us a unique capability and unique opportunity that we have to actually take advantage of this. But the other big advantage that we have is our JV structure. And 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.
I 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. It's called we call it YFJC, Yanfeng Johnson Controls. This is our biggest joint venture for the domestic market.
You can see it's $4,000,000,000 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. And 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.
And I'm sure we can get you with Glenn Ponczak or Mark Araswal to make that happen if you're interested. The other joint venture, and Byron mentioned this, is our interiors joint venture as well with Yanfeng with SAIC. This is we call it Wi Fi, 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.
And that's taking Johnson Controls Global Interiors business, combining it with a very strong Yanfeng Chinese business and 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 have seen from the customer base of this joint venture. And you can see here on the left that actually over the last 10, 11 months or so that they've been actually booked been able to book almost $11,000,000,000 in lifetime sales in the new joint venture. It's just very exciting. So I've kind of gone over our past and where we are today. The question is what are we going to be doing tomorrow?
And you can see we've kind of broken out the way China is developed into 3 phases. And I say, look, the Phase 1 is really in the beginning, the inception of the auto industry back in the mid to late 90s and early 2000s, where it was very foundational. It was foundational for the auto industry in total, but also for Johnson Controls, where we 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. And that's really from, let's say, the early to mid-2000s up to 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. But 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. And so 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. So one example of this is, again, the Chinese OEMs are looking to grow outside and you can see some on here. So in the initial look, I mean, they're very much looking in their backyard into India, into Southeast Asia.
And this is something that this is new for them. They're new and 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, and we're well positioned to do that. But again, the other way that how we feel that we can leverage China is as China has matured, the capability of the China market has increased. The global OEMs as well are using China as a base to develop the programs.
And Bruce referenced General Motors, but that's just one example. More and more are doing that. And so 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 being able 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. So 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. So we're really excited about where we can take this now in Phase III of our development in that market. So can you please go back? Oh, it's Kate here. So 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 market the growth rates for the market are going to be less than they were before mid single digits. But again, from a volume perspective, still very significant, particularly when you compare it to other global markets.
But 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. And then thirdly, using China as a platform for us to grow beyond the borders of China, growing within Southeast Asia, 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. And then lastly, and we haven't really touched on this too much, but the balance sheet that we have of our businesses in China is very robust.
So they've been able to fund the growth through basically the proceeds from the business over the years. And really, they really don't have much debt worth to speak of. So great foundation for us to proceed going forward. Okay. So I think with that, we have a break now for 15 minutes and then we'll come back with Detlef.
Thank you.
Let's make some history tonight. There's a child inside is wild. Even if we fall and make mistakes, we live, we learn, we change. Gotta keep on going every day, and it will Ladies and gentlemen, our meeting will reconvene in 5 minutes. Please take your
Please welcome Group Vice President, Global Engineering, Detlef Viewers.
So welcome back everybody. Just trying to get we're a little bit ahead of time, so I think we can just come back. Dettler Fears, 22 years for 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. And the world in motion, we actually chose this vision statement very deliberate.
The world is in motion and in 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 megatrends, right? We're all looking at urbanization, just looking at the traffic out here in New York, things will change. They cannot stay as they are. We have the CO2 regulations, the overarching connectivity being connected everywhere with everybody at any point in time.
And even megatrends like an aging society will change how the vehicles, how automotive industry will look today, tomorrow, in 5 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. So 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. So below the surface, we're seeing standard platforms. Above the surface, the trend to individualization is ongoing. And I'll be talking to a certain extent today how Alliant can provide individualized solutions for fleets, for even individuals down to a lot size 1, which is definitely a trend, and not only once when you buy a vehicle, but maybe 2 or 3 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 and ingress to the 3rd 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 pole structure, where Adient has a unique selling position with the product 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 coincidence, a Volvo XC90 Seat Truck of the Year this year. It is fully equipped with massage functions, with heating, with cooling, with ventilation and going forward probably even with infotainment systems. So the contents of the seats are increasing significantly. So even though we're anticipating only a mild growth in vehicle volumes, the market size that Adient is serving so well will increase significantly. And 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, 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, 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 where it's different between the regions.
Adient, with their global reach, understands that. And these 4,500 engineers also understand and anticipate the needs of our customers going forward. They are 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. But the pictures you saw in the China video of the capabilities that the China Tech Center has, it is 100 percent aligned with all the other 12 tech centers that we have around the world. You will be able to assist the exact same capabilities in simulation all over the world.
And that global network 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 and 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 last results. And with these capabilities, they are providing these great designs to a network of global engine businesses all over the world.
And all of that pasted together with a world class IT system. I would love to invite you to see what we call virtual OBEA rooms, where teams can collaborate globally, seeing the same product, the same CAD data, even the same 3 d simulations in one screen at the same time over 3 different regions. Global collaboration. These world class capabilities also mean that we have to anticipate those megatrends. Let me start with 1, CO2 emissions.
In our business, CO2 emissions, fuel efficiency translate into weight reduction requirements. Adient has a track record of a generational 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, right, 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. But we at Adient say the race is on for lightweight.
So 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 designs 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. But not only steels, aluminum and magnesium in design will drive lightweight solutions. I personally did my PhD on plastics processing and composites, so this one is especially dear to my heart.
We have our award winning design, technology and product, our Commissima back frame, 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, experienced and you saw it in the video with composite parts for race cars and for professional sports cars in our Recaro teams, but those volumes are small. And so the technologies don't really enable large scale manufacturing. We actually took manufacturing technologies from our interiors partner, Wi Fi, 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 seatback structure. So with that, Adient is fully, fully prepared even for future CO2 emission targets and fuel efficiency requirements.
That was the basics, but where is all of this heading? And all of this might actually head to totally new interior and seating solutions. We at Adient believe these very, very different interiors will come. Again, 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 product 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 this 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 we are owned by an individual or cars that we would see in fleets or in the new megatrend of a shared ownership. So 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. So 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 20 fourseven will have a different wear and tear, We'll have a different requirement for the interiors. It will be we might even want to see seat covers that can be exchanged that you as an individual want to take with you in your shared vehicle. Or we anticipate that those vehicles that are being used 20 fourseven might even go through a renewal like a small like the aircraft seating business is used to, right, 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. So these new business models might change, will change how we want to run the businesses at the end.
And 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 Wi Fi 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. But Adient is ready. We're there in front of them.
We have the product. 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 megatrends. We talked about the connectivity.
So 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 2, all the assist systems, radar, cameras, also businesses that will come in and help us provide this dream of being autonomous driven. But the other one is also electrification.
The entire body and 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. So 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 invitation is there, and you will be able to touch and feel what that means for the product.
It will look a little bit like that, so 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 4 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 batteries.
That means most of the heating and cooling features that today could be provided through the instrument panels and then 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, 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, and we are in front of our customers doing that. Autonomous drive.
This picture, our industrial design chief Tom Gold 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. So 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 Wi Fi already last year, showing in our industrial design, interior design demonstrate from the fiscal year 2015, some features of what we will reveal also in next year's Detroit Motor Show. And 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 systems have to move with you. There will be no airbag anymore in the 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. So the safety systems have to walk into the seat. The same thing with the oar, at least be able to float around the seat somehow.
The whole control system of your vehicle will have to somehow move around with you. I've been talking about heating and cooling. Also 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, but legislation will probably be one of the even more difficult things for autonomous drive, because coming from an engineer that's easy to say. But 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.
So 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. And these things have to be engineered in. And 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 2nd row, which are fully safe.
Yes, 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 flight. Keep that in mind. On the structure side, we have the technology today to have integrated seatbelts, even moving around, swiveling around. So we have those technologies today, and they meet the customer requirements.
Already 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 Wi Fi. So 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 1.
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. And 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 and 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 1, but it can also be lot sizes that are significantly lower than the 100,000 we're looking at today. So 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. And 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 100 and 1000 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 and it's probably a give and take. We're learning on their way of doing and 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 market because we know how the business works in China. We know how the business works in Europe. So we're having 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 and 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 fleet. So we are 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 FJC up in Changshong 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 motor show. It's a special truck motor show on September 22.
So if you make your way to Europe, you'll be invited to see that fantastic new truck business. And 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 legacy business in a Shinkansen high speed train in Japan. It's the 1st class seats that are already there. We are tapping into that industry.
We're learning the players. We're learning who, what the requirements are, and we're ready to tap into that market. Aircraft Seating. I talked a lot about that in between. We believe this is a $4,500,000,000 market.
We have the appetite to know how in terms of craftsmanship design and 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 and for the new players. We are excited about the great additional opportunities this growing business is providing for Evian and really improving on the experience of a world in motion. With that, I'd like to hand over to Jeff Dafyel, who'll tell us our CFO, to tell us how all of that translates into dollars and finance. Jeff?
Good morning. Thanks, Juergen or thanks, Detlef, sorry. And as Detlef said, I will 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.
As 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, so that's going to be our starting position. Cash on the balance sheet, dollars 610,000,000 give or take. That'll move a little bit as we get towards our ending time and the spin on October 31. 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, and our JV income is quite substantial. It comes in already taxed. So our effective tax rate looks quite low. We show a 10% to 12% and we're estimating a 10% to 12% effective tax rate as you move forward, and you can use that for cash taxes as well.
From a capital expenditure standpoint, Bruce mentioned that we would step up our cash our capital expenditures going forward from what we've experienced the last several years, but it's still fairly modest as it relates to Automotive. You're talking a little over about 3%, up 3%, 3.1%. It'll be a little bit more this year. We'll talk about it as we have some of the start up standing standalone cost and putting in that infrastructure for Adient. But you can think around $500,000,000 to $550,000,000 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. But we see ourselves paying at a competitive rate to our peer group. From a financial profile standpoint, we are as you've heard the numbers, we're a $17,000,000,000 supplier from a consolidated operations standpoint. We also have a lot of unconsolidated operations.
But on the consolidated side first, you'll hear a bunch of themes. You've heard a bunch of themes, and I'll talk a little bit more about them. But 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. But 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 and A. I'll give you some examples of that as we go forward. But if you compare our SG and 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 20112012. 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 of few years will be a nice steady increase in contribution to our overall margin as a company.
As we also there's a couple of interior operations that are winding their way through. That will help from a margin perspective as well. On the unconsolidated side, China. China is a big opportunity. You've heard that in the numbers.
From just the numbers that you saw in 2015, roughly a $295,000,000 contribution in equity earnings, you'll see our guidance is more towards around $380,000,000 of contribution from our equity income. That reflects our interiors business, Wi Fi 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 in 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 Q3 of 2015, we deconsolidated our interiors business. So that was about a $4,000,000,000 $4,000,000,000 business in annual sales. About 3 quarters of it lapsed us or was in the business through in 2015. It's since been excluded. We contributed that together with Yan Feng to create the Wi Fi business that you heard Eric talk about.
So we've roughly had fairly stable flat line or 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. On 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. On the bottom right is a real 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 2 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. But meanwhile, we get paid by our customers in 45 days or so. We pay our suppliers in roughly 60. So 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.
And it's 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. But more importantly, our earnings are up 13%. This is a drive we'll continue to have. It's a focus on SG and A.
It's a focus on operations. It's a focus on the fundamentals. Lots more opportunity here, and we'll talk about it. From a future driver and 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, has it's the biggest from a volume perspective, but it's actually the smallest or it's smaller than both North America and Europe in a total volume in a total dollar perspective.
That's going to change. China has been moving. A couple of trends will help us. 1, the market's obviously increasing. It'll grow the market.
But 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 in 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 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, the real launch of the supply base and the industry in China. We have partnerships. And 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 enjoyed from the Adient side.
We'll continue to leverage that as we move forward. Operational efficiencies, I mentioned those SG and A and Metals, and 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 2. There will be an elevated amount this year and probably the next year as well.
It will fall down. We think it will 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 and 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, and you'll see a 2% gap on our SG and 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.
We're 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 and A footprint. I will say we probably won't get to well, if we get to the benchmark, we're really going to be beating the benchmark because we do carry some additional SG and A burden in the company to support our JV network. So we have lots of people, lots of SG and 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.
But 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% to 2% opportunity to increase Adient's total margin with tackling some of the issues in that Metals business. And then 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 out or factor that down a little bit of what that means to us from a margin perspective. It's probably a little bit of hedge in that number too, but such that we really come out and we see a 2% margin opportunity, again, not in 1 year, probably not in 2 years, but by that 2020 timeframe.
And 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 3 years of SG and A. It takes an average of Lear's last 3 years of SG and 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've talked about. Given our scale, given our size, one would think we might be able to be a little bit under that benchmark, but we'll continue to focus on that. 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. So 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.
And then the rest of it will be us driving efficiency, having some headcount reduction, having some external purchase reduction and driving that to one 150 basis points net of SG and A opportunity through to the bottom line. This slide addresses our Metals business. Our Metals business came together from 3 pieces. You can think of 3 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 Kuiper 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. So some of the necessary restructuring, some of the capacity reductions that were necessary have been slow to happen, although one of the reasons that 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 to accommodate with a lower cost manufacturing base. As you look at another topic that I think Byron and Detlef and Al mentioned is a standardization or an increasing standardization of metal platforms across our competitors' platform products. So as they're building new vehicles, trying to leverage that metal structure, that metal mechanisms across more than one vehicle, across large parts of their fleet, They've been doing that. We've had 3 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. So that's another reason here as those go through the development cycle and get into launch, you should see some of that margin and this is going to help enable some of that margin road map that I mentioned before. But this is roughly a $3,000,000,000 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, 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 experienced in China, but a very realistic single digit type margin, which should increase the overall margin of Adient by 1% to 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 after 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 12%, 11.8%. You take that if you take our consolidated business and you strip out equity income and you think of what our actual EBITDA margin is, it's closer to 7%. So 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. But the opportunity within our consolidated business certainly is there to increase the margin. If you look at our competitors, some of our competitors here, 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 Wi Fi business that we created with our partner, Yanshang, 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 business 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. And we see big opportunities for that business continue to grow and continue to succeed as we move forward. So 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, you're 3%, 3.1% on a go forward sort of steady state, very capital efficient business. And 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. But 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 and we've talked about a number of $250,000,000 But that includes a lot of things. So I want to unpack that a little bit for you. First thing, it includes $280,000,000 of cash restructuring expense. So cash outflow to support some of those efforts I talked about on the metal side, on the SG and 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 1,000,000 spent there as we've prepared over the last year, But there is going to be some element of it into 2017. We estimate about $100,000,000 So that's reflected in that $250,000,000 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. It would be more normalized level. It includes about $75,000,000 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 $75,000,000 we'd say. Finally, our dividends for Wi Fi.
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 Wi Fi business. As we move forward, those dividends should pick up. The earnings should pick up and all those should contribute to greater dividends from Wi Fi as we move forward. And then I'd say as you look out a couple of years, all the things that I mentioned from growing margin, etcetera, 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, but I'll show it again. This is the last 5 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. But overall, we've done about 65 percent 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. But 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, etcetera. This is after all of it, and 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. So you could expect to reasonably see that number increasing if you start to see some lower opportunities in the growth side in China. And then 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 published the financial statements for YFJC, our largest contributing equity venture at the moment. That operation, because it met the significant test, we had to put its financials in the back. You'd see, if you translate it out, it's something around $600,000,000 in cash against about $10,000,000 in debt. So very, very, 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 $5,000,000 and say $650,000,000 or so of cash depending on where things sit on October 31 when we separate. It'll be around there. We'll have an untapped revolver for $1,500,000,000 We'll have a funded term loan A dollars 1,500,000,000 LIBOR plus 1.75. And then we have 2 notes.
We have a euro note for US1.1 billion dollars equivalent at 3.5 percent fixed, 8 year. We have a 10 year note in the US, dollars 900,000,000 at 4.7.8 percent. And then we have a little small piece of other debt, but 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, but a very comfortable capital structure, a very reasonably priced capital structure. Additionally, and I think this is actually a point that would set us apart from a lot of our peers.
If you look around at $17,000,000,000 companies and 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 $109,000,000 of unfunded liability. Only 3% of that's in the U. S. And why is that?
A lot of that liability stayed behind with Johnson Controls. But 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 movement is also very small as it looks at that. So 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 1.9x initial leverage. Our leverage target is to get something close 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.
So I'd say that's somewhere around a one times number today, gives us plenty of capacity. It actually gives us quite a bit of excess. 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 $500,000,000 we'd always kind of look to have on our on cash on balance sheet cash. And then we also have that $1,500,000,000 liquidity relating to the revolver.
CapEx funding, we've mentioned a few times, but approximately 3%. Dividend 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 engineering department, and you see that in there. But we will have excess, we believe, and debt service will be a primary focus as we look down to get or look to move closer to that leverage target. Pension and OPEB, I mentioned, are quite small. From an M and 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 $16,800,000,000 $17,000,000,000 That's our consolidated revenue. Our adjusted EBIT. And you'll see us move away from when we were part of JCI, we had something called sync, segment income. You'll see us probably talk more about an EBIT or an adjusted EBIT. The number there is $1,150,000,000 to 1,200,000,000 dollars and that does include approximately $380,000,000 I mentioned that number earlier of equity income, about $400,000,000 of depreciation.
Our interest is fairly modest, but we see about $145,000,000 on that $3,500,000,000 roughly of total debt. Effective tax rate, 10 to 12. Our adjusted net income between $850,000,000 $900,000,000 and CapEx between $545,000,000 and $575,000,000 remembering that does include approximately $75,000,000 of, we'll say, stand up type of costs relating to the formation of Adient. And then free cash flow of $250,000,000 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 $250,000,000 As you look at a framework to value us, and I've I've been in this industry for a while and I've watched most of you write and I've seen how most of us think, and it's an easy measure to say EBITDA and think of the EBITDA metric and what value or what multiple of EBITDA are we trading. And 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. And that's really, I call it super hot octane EBITDA, but it's really net income. It really probably deserves more of a PE framework in one's head. So 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.
But 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, but it also captures our tax rate, which we think is somewhat of a differentiator. So just a plug for how you think of your modeling and how you think of us going forward. And finishing off just with one last slide before I invite everyone and Bruce back up to do a couple of comments in our Q and A. This is our investment thesis. As you look at it, the market position of the company, we are different.
We're unusual. If you look, there is most auto suppliers have a heavy and our top 9 customers are pretty much over $1,000,000,000 and our top 9 customers are pretty much over $1,000,000,000 a piece. So 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 opportunity, as 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.
So with that, I'll invite Bruce up for a couple of closing comments.
So, I guess just on behalf of the team here, we're going to open things up for QA 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 1. Opportunities for growth. I mean, 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, I mean that's just a hidden gem that I think we can a high margin really truly differentiated product that we can invest in.
And we only put that one up kind of as one example. I mean those are the kind of things that coming out of John's 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. So with that, I'm going to ask the rest of the team here to come join me on the stage.
I'm going to open things up for Q and A. I think we plan on spending about half an hour here or 45 minutes in terms of Q and A. And then I think we'll have some a meal outside afterwards. I see Matt Stover here. Up in the front, we got a couple.
Hope someone grabbed it on the way down here, Matt. Thanks. You want to yes. Go ahead. Can we maybe dim the lights a little bit?
Is it on?
Is it on? Oh, okay. Colin Langan, UBS.
Yes, I
see you there.
Yes. 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? And 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? And also, should we think of you being able to do better than your direct competitors since you're more vertically integrated? And the second question I have is on free cash flow.
Sure. Well, let me
I'd like to remember that.
Yes. 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. So it's our core margin improvement in our base business is where we're looking to get that, Collin. So 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, we'll say, the best of our competition from an earnings standpoint is probably a little larger than the 200 basis points. So 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 can imagine that we'll aspire to do quite a bit better than that as we move forward.
And structurally, is the fact that you're more you are how much 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?
Yes. 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 so we don't have 100% clarity on the individual pieces. But the metals our metals footprint should definitely be on the 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. But 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 4 or
5 years ago.
We are kind of in the midst of a shift from what was 3 different manufacturing processes, 3 different manufacturing footprints and 3 different product portfolios. And so if you look at our Chinese metal business, we did not we weren't in metals in China at the time. We made these acquisitions. Products, our product portfolio with our 2B products 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.
So we have 100% local content in terms of our recliners and there's a market price that reflects some import duty. So we're making higher than average returns. But if you kind of were to adjust that out, Collin, then 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. But we've got kind of old Western plants to give one as an example. In Germany, it's it's a plant that we're losing $40,000,000 a year here as it's sort of winding down.
That plant won't shut until the end of 2018. So we very clearly see the building blocks to get there. And we're highly confident because we know where we've got to the Fin for the promised land, that the returns are there to justify the investment.
And my second question is on free cash flow. The free cash flow conversion based on your guidance looks like it's only 30%. But then 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?
Yes. 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 0. I would say a reasonable number to think about and probably $100,000,000 give or take is probably a reasonable level of restructuring. There'll always be sort of those little sort of areas that require some elements of modification from facility footprint, etcetera.
So maybe $100,000,000 less than that, but overall, the business should produce strong cash flow. Okay.
I'll put the front here. Oh, sorry. Seaport Global.
Just to follow on the mechanisms on the metals business, is that included in the 200 basis point reduction or improvement in margin you're looking at?
Yes. Yes.
And I've heard mixed signals. Is it a strategic business?
Absolutely. Absolutely. Yes. I think, I mean, metals is something that it is transforming our industry. It's something that really is the backbone for driving global common architectures.
I think it is a carrier, gets us in the door, the most safety critical, highly engineered product. And getting in early and getting in 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 Kemisma seat that's out there, right now, the metal frames is something that you can kind of pick and source at the component level. And I think as you go forward in some of these lightweight solutions, you're going to see that's not necessarily going to be the case anymore. So I think the right decision was to get into metals.
It's The Chinese metal operation, I The Chinese metal operation, I mean, that's a business that's making nearly $75,000,000 a year. We have 20% of the market there. When we made these acquisitions, we had 2% or 3%. So it's paying off there, it's taking a little bit longer, but it's definitely core.
On the growth front, 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? And as we go forward, how do we think about it? What are the it's not from conquest, right?
No. It's more from like new opportunities?
Yes. So I mean, I'll give you some a good a couple of good examples and sort of even different this year. So we were as part of John's controls, we allocate a certain amount of capital to the auto business roughly around the depreciation level. And 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.
So it got the capital that it needed. And our joint venture is largely self funding. So we didn't have any they didn't have capital constraint problem there. But if you look at this year, we have Ford announced that they're moving a lot of their small car production down to Mexico. We have that business.
It requires a new footprint. Daimler announced that they're going to push some open up a facility, a shared facility in Mexico. That requires a new footprint. We won that business. Toyota announced they're going to build a pick put extra pickup truck capacity in Mexico.
We won that business. So under the I'd say the JCI regime, those are three pieces of new business that required a new footprint and start up costs and things like that. We I'd say in the old days, we'd have taken those pieces of business all day long. Over the last 2 or 3 years, we would have not been able to take them all. So that's a very tangible example of what we're talking about.
Two questions. Matt Stover, SIG.
The first question is, 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?
Yes. We definitely have some growth in 20 16. We're probably looking at more of our LTM numbers at the end of June than the past year.
And the second question goes to the interiors business, the WiFi business. And thinking about that on a long term basis, it has a 4% margin. It is a high CapEx business, but you've indicated that that might be more interesting than you would have otherwise thought. And I'm wondering, number 1, is that because you see the restructuring that's taken place in the industry can bring better margin, that sort of related to the relationship you have with a partner, Why is it that, that would be a strategic business long term? Yes.
I think, well, there's a few things there. You're right in terms of the margins about 4 So you So you're seeing running through there. They're investing in setting up treasury and tax and stand alone IT infrastructure. So 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 Wi Fi joint venture was just recently announced as the interior Daimler's Interiors integration partner for 2025. So we've won an awful lot of new business and there's a lot of investment relating that there. I think we see that business, Matt, as having something like a 6% or 7% ROS. And it's that's sort of being more like we would expect that business to trend up to.
But for now, it's a core it's definitely a core part of our portfolio. It's not something that we're Down the road, who knows? The other thing I'd point out about Wi Fi 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 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 the source at a component level. And 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.
So I like having the optionality on interiors as we migrate towards autonomous. When you look at the vehicle if you can't manage to get to the Detroit Auto Show, when you look at the vehicles that we're going to show there, it's the marriage between the seating and how the interior is 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. So right now, we've got the same position where it churns out a lot of 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. And so 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 Wi Fi new wins that Bruce was talking
seems they've ramped up pretty dramatically this year. You're estimating about $6,000,000,000 versus a run rate of $3,500,000,000 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 $3,500,000,000 run rate stepping up to $6,000,000,000 really what is the key driver? It sounds like it's a little bit more than just capital commitment. I'm just trying to understand that.
Well, Eric, why don't you sort of you want to comment on that one?
Well, I think some of it is capital commitment and engineering commitment that we've been able to spend the money. But if you look at what we have gone out at for, we're getting pricing at reasonable margin levels. So 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 can go after. The other aspect to it, if you recall what I think it was on Bruce's slide that he showed, half of that growth was in China.
And 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.
And is there any significant competitor you think you're taking market share from? Or is this just
across the board? Across the board.
And Jeff, just on your point of 1.9x 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 time frame for that leverage?
Yes. So 1.9 is where we are today. I'd say about 1.0 give or take is probably where we'd aspire to be. And I'd say we think we can get there before that 2020 timeframe.
Okay. And then just one last one, Byron. I mean, 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 commissions to really drive?
Yes, it's a great question. And again, I think it goes back to Johnson Controls' willingness to invest in the business, right? So we made a series of pretty big acquisitions in the metal space and the fabric space and the appetite wasn't there to do more deals in automotive quite frankly. So 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.
Yes. That really the when the Eagle Ottawa came up for out to the market, we didn't even ask for a book. And so 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 use that as a proof point. Hey, this is 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. And so it really was a proof point that Johnson Controls wasn't the best owner of the business anymore.
Right. And then 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, right, we don't necessarily have to make the highs ourselves with all the processes that go along to create the value for our customers. You just stand by the whole
Yes. A lot of leather is actually directed by our customer. So I think I mean it kind of transitions another point. We don't really talk about M and A, but I'm sure someone would ask about that. But when you look at our footprint and what we have, we don't really have any strategic gap.
So there's nothing that you would sort of look and say, Jeez, you really are weak here, here, here and you got to don't you have to think you have to buy something to address that or don't you feel threatened because of this, that or the other thing. We don't have that. We're 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 1, some by a long shot, some sort of it would be close. Sure, we have some opportunities to be bigger.
I mean, I'm going to maybe point to fabrics as one area where we're largely a European fabrics business. And so growing that business in Asia and North America would be interesting to us. But there's nothing that is a must have asset or property or product technology that we feel is strategically important. So even in the rest of Johnson Controls, we have some gaps in some of our businesses. But automotive is not like that.
I mean you can we got all of the capital. When we talk about the last 2 or 3 years being capital constrained, prior to that, automotive got most of the capital at Johnson Controls and the other businesses got what was sort of left over. So 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 and it seemed like vertical integration was a way to move away or at least get higher margin business. And 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% to 6% showroom price pressures in China. Why aren't seats or are seats still high and will we be getting higher on the OEMs cost cutting target list? And 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?
And will it be any different when you're ADN versus JCI?
Yes. I don't well, first of all, I would say is seating has been at the top of the OE price cutting list for a long time because that's where the money is. I mean, we like I said, we tend to be the seating suppliers are in the top 1, 2 or 3 production suppliers that they have. And we probably are in that pole position at 8 or 9 different OEs. And so when they're out there looking for price downs, they're coming and looking for $40,000,000 $50,000,000 numbers from our businesses.
And so they're starting at the top. So I don't think the price pressure is anything 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 difference at all. We never sort of gave them any building efficiency money before. And so that's not going to be a constraint.
Very price competitive. I think the opportunities that we have in rolling out our operating system, I mean, Johnson Controls has talked about $1,000,000,000 opportunity. Automotive is more than half of that. We've always had a strong BVP or best business practice culture where we internally benchmark our plants and where we know our gap is in terms of 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 and A question, but one of the and you said don't have a lot of strategic holes, but 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. I mean that if you looked at sort of that tower of the world, what you intend to see as 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. We're around what's our sales in Japan now about $600,000,000 something like that and maybe $300,000,000 or $400,000,000 in Korea. So we'll be orders of magnitude bigger than any other non Japanese or non Korean, but 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, but there's opportunities there. Same thing I would put Indonesia and India. So niche type, there's still some people that would be in the other category on Byron's, the market global market share chart that are in those kind of territories. Yes, for sure, those would be things that we would definitely be interested.
And then 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? And what's sort of your access to that cash once you get the dividends back from the JV?
Yes. No, it's a good question. We'll get it. So after the audit is completed, it will be dividended out of China into our entity and then on to wherever we want it. So it's in our control as an Adient entity.
One of the benefits of us being I mean, we've talked a lot about our tax rate being 10% to 12%. But one of the biggest benefit is really around the fact that we don't 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 it right now at JCI. So JCI, we'd bring that back and keep it overseas.
We as part of Adient have 100% access to that money. So 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 that Dieter, you mentioned that you talked about adjacencies, one of them being aircraft, and not to put 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
halt? Yes. We 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. So the things that we are talking are already 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 some that's 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. So I'm pretty excited about that. And I think we with our we have some things that are completely unique in, I would say, in terms of the technical understanding we have around comfort.
I mean that goes without saying if you sit in an aircraft seat versus the 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 third of the market, aircraft market. So I'm actually pretty excited about the opportunity to organically enter that space.
And just to add on to that from a capabilities perspective, if you look at the kinematics of the seats, we do believe we have these capabilities. And by coincidence, one of our tech centers is already FAA certified for some legacy opportunities we had. So we are very well aware of all these requirements. Yes, of course, it would need some additional investment, but the foundation like Bruce said is absolutely there.
Hi. Just a few hopefully quick financial questions. On the tax rate of 10% to 12%, that's excluding the equity income. That's number 1. Then number 2, the equity income of $380,000,000 that you're 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? And then 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's the payback?
All good questions. The first one, the 10% to 12%, one of the reasons that is so low is because our equity income is coming in already taxed. So that 10% to 12% does not include the tax that we pay in China related to those joint ventures, and that's just how it comes into the accounting. But 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 Wi Fi consolidation. So if you remember, Wi Fi, which is our interiors joint venture, was formed in July 2015. So you have your 1st full year results from that operation. But plus, we've grown. If you look at the China market year over year, a year ago, we were all talking China and sort of slowdown.
We had the Q3, 3rd calendar quarter of last year was certainly a challenge in China. If you've looked at the growth rate year over year in China, it's been very high. We've enjoyed that. And I don't think we're thinking China is going to shrink next year. We think it's still going to grow, maybe at a less pace lower pace if they do get rid of that 1.6 liter incentive, which is in place until the end of the year.
But we'd say that's a good number to start from and we'd continue to grow on the trajectory would be the only thing that we'd 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, and 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 and A allocation, and we would look to make something north of probably 18% for a base program. And that can modulate up.
If it's 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. Yes. So something like those three examples that I quoted here in North America. Those would be a brand new customer in a brand new country with a brand new facility. We wouldn't have on the first program an 18% IR, but obviously we're assuming that when we win a successor business, it's going to be much higher than that.
So that's where you kind of get the range.
Yes. Hey, it's Rob Barry from SIG. Just a quick one for me on how you're thinking about commodities in the forecast, in particular steel prices look like they're up a lot.
Right. Well, we generally and we've talked about this as part of Johnson Controls before is on especially on the metal side, we're fairly well hedged. In some cases, we're on our customer's steel buy. In other cases, we've got sort of lagging kind of rolling indicators and things like that. But I would say over the last 2 or 3 or 4 years, a lot of us 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.
So I feel pretty good about us being able and our commercial teams be able to do that again this year. But 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.
Samik from JPMorgan. Can you share your growth outlook for the consolidated business out of the gate? And then like as backlog ramps up, what's sort of the outlook in more sort of medium term for that business?
The growth outlook for what?
The consolidated business.
For the consolidated, yes. So we're coming out, I mean, we and we'll do this again in January. In the January conference, we sort of talked through our 3 year backlog, which was about $2,100,000,000 last year and we'll update that this January at the auto show. But of that backlog, what it basically had was a negative number
in for North America because
we had lost some business that And all that so we had negative in North America, small amount of growth in Europe and all of the $2,100,000,000 effectively was in our non consolidated businesses in China. So that's what we said our backlog picture was like in 2016, 2017 2018. So now 2016 has rolled off. We're coming out right now with and because of the lead times in our business in terms of winning new orders, it's usually 3 years type out. We our guidance that we're given for 2017 here is essentially flattish from a top line perspective.
2018 will be similar. Now 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. And again, I gave a few examples of that in North America, but we've got a couple of those in Europe as well. So the consolidated business for us will start to show top line growth again in 2019. And absent what happens with the industry, absent what happens with exchange, but just underlying volume, top line growth comes back in