James Keyes, Johnson Controls

The Customer Advocate

Ask someone from the United Auto Workers for an opinion about the CEO of a largely nonunion automotive supplier and you'd expect to hear a few choice words. But the ones UAW President Ronald A. Gettelfinger chooses to describe Keyes, 62, are surprising. "He has lived up to every commitment," says Gettelfinger approvingly.

Keyes won that respect in June when workers at four Johnson Controls (JCI ) parts factories went on strike, charging the company failed to bargain with the union, which had won the right to represent them. In truth, the UAW wanted more than contracts at those plants. It also wanted to organize workers at the company's other factories.

Keyes was in a bind. He wasn't worried about higher labor costs, since his company already paid competitive wages. But he feared losing the flexibility he needs to compete with other, nonunion suppliers. Plus, he was under pressure from General Motors Corp. (GM ) and DaimlerChrysler (DCX ): They wanted him to settle the strike because it had shut down production of GM's Chevrolet TrailBlazer and Chrysler's Jeep Liberty.

The high price of not satisfying a customer weighed heavily on Keyes, who has been with Johnson Controls for nearly 37 years and has run it for the past 15. In 1997, his refusal to bargain with the UAW prompted Ford Motor Co.--which feared a walkout of its own union workers--to yank a lucrative seat contract. So Keyes flew from his office in Milwaukee to suburban Detroit to join John M. Barth, company president and the man who will take over from him on Oct. 1. The two met with union officials until 4 a.m. The resulting agreement was seen as a huge UAW victory, giving higher wages and benefits at the four plants and the right to organize workers at 26 other U.S. factories that supply the Big Three.

Analysts were shocked; competitors feared they were next. But Keyes says the move makes sense because it will help the company land more business from its three largest customers. GM, Ford (F ), and Chrysler, he says, will more likely award big outsourcing contracts to a unionized supplier, since doing so helps them maintain their own labor peace. Keyes has always been careful to consider his customers' point of view--even seeking their approval before making an acquisition. "Jim is very flexible in his way of thinking," says Fujio Cho, the president of Toyota Motor Corp. (TM ), who has known Keyes for 20 years.

Keyes's final trial as CEO will come in the handoff to Barth, 56. In 117 years, Johnson Controls has had only six chief executives. Keyes and Barth have been preparing for the transition for years. Barth, along with three other senior executives, will make up the office of the CEO. Keyes is expected to stay on as chairman for three more years. It's a plan designed to continue the superb performance the company achieved under Keyes: Over the past decade, sales have grown 17% a year and net income 20%.

By Nanette Byrnes, with John A. Byrne in NewYork, Cliff Edwards and Louise Lee in San Mateo, Calif., Stanley Holmes in Seattle, and Joann Muller in Milwaukee

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