The variable refrigerant flow (VRF) market in the U.S. just got a bit more interesting. Johnson Controls, Hitachi, Ltd., and Hitachi Appliances announced the companies have completed their global joint venture agreement and will immediately begin operations of Johnson Controls-Hitachi Air Conditioning.

The two companies have been partnering for a while, but this announcement solidifies that relationship. Simply put, Hitachi has a business built around HVAC, and they are carving that business out and making it a separate entity. Johnson Controls is buying 60 percent of that business and creating a joint venture with Hitachi Appliances retaining ownership of the remaining 40 percent. The new business is valued at around $2.8 billion.

“We believe this joint venture will put us in a great position to win in the VRF space and take that business globally. This is a big step for us,” said Bill Jackson, vice president and president, building efficiency for Johnson Controls.

In addition to the VRF technology, JCI is also excited about the residential RAC and chiller part of the Hitachi business. The company feels the Hitachi absorption chiller products — which Johnson Controls does not currently offer — will be a great complement to its chiller line.

But, make no mistake about it; VRF is at the heart of this deal.

“Hitachi has fantastic technology in the VRF space. That is obviously a growing market,” Jackson said. “JCI has a spectacular product portfolio, but one area we felt we did not have strength in was VRF. This now gives us a VRF position, and you have to be an owner in this space to be a winner in this space. Currently, VRF is going through our branches with the York brand. Longer term, we are looking at going through third-party channels and distribution with the Hitachi brand in North America.”

The joint venture encompasses 14,000 employees and 24 global locations dedicated to design, engineering, and manufacturing throughout Asia, Europe, and Latin America.

Franz Cerwinka and Shinichi Iizuka will serve as CEO and COO, respectively, of the joint venture’s management team. Cerwinka has 20 years of experience with Johnson Controls, including four years in Japan as vice president of finance with the company’s automotive business. He will work with more than 10 joint ventures. Iizuka has been with Hitachi for more than 35 years, having spent eight years in India as the president of Hitachi Home and Life Solutions India Ltd. He served as the leader of Hitachi’s air conditioning business since 2013.

“We’re very pleased to start operations and are anxious to serve our customers with an unmatched global network of channels and technology,” said Cerwinka. “Johnson Controls and Hitachi are a perfect match with our complementary product lines, unparalleled brands, and rich 100-year histories.”

Iizuka was equally excited.

“I’ve spent my career with Hitachi and know that combining with Johnson Controls will propel us forward to outperform the competition,” added Iizuka. “Just as Hitachi and Johnson Controls have each made innovation the foundation of their separate success, innovation will now be the cornerstone of Johnson Controls-Hitachi Air Conditioning’s success.”

Earlier this year, Johnson Controls unveiled its new VRF training facility in Dallas. The 12,600-square-foot education center helps contractors and sales professionals deliver VRF services through a multi-day training program featuring live, in-class demonstrations and application discussions.

“We’re taking this seriously, and I think we have a winning position,” Jackson said of the VRF market. “It’s clearly a growing market and will serve as a nice complement to our chiller business. We want to bring the best solutions possible to our customers. What we see is a mix mode. There is not a single solution. We don’t see VRF as the only solution, but we do see VRF and chillers being a combination that is a win-win for our customers.”

Publication date: 10/1/2015

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