"There is a market, it is growing and we made a decision to get into it as soon as we can," Sherrill said.

The Milwaukee-based company, which already makes batteries for hybrid buses in Europe, has made significant research and acquisition-based investments to develop batteries for the hybrid market, Sherrill said.

Hybrid gasoline-electric vehicles could grow from a tiny fraction of overall production today to 3 million vehicles worldwide per year by 2012 and potentially double from there by 2015, he said.

That spending will help Johnson Controls better compete with the current hybrid battery makers, namely Panasonic EV Energy, a joint venture between Toyota Motor Corp. and Matsushita Electric Industrial Co Ltd, and Sanyo Electric Co..

"Clearly, there will be a need for more than two suppliers," Sherrill said. "We are working in development programs with numerous (manufacturers) and are quite willing to invest in a western footprint because so many of those vehicles are being manufactured here (in the United States)."

A J.D. Power study released in June suggested hybrid sales would more than double by 2012 with the number of models offered rising to about 44, from 10 in 2005 -- driving demand for the battery packs, which cost several thousand dollars.

Capturing part of that market could provide significant growth for Johnson Controls, which derived $2.3 billion of its $26.55 billion revenue in its last fiscal year from batteries.

BULLISH OUTLOOK ON WALL STREET

Johnson Controls sees the hybrid vehicle business as an addition to its current business, which is about 80 percent replacement batteries.

"When you see emerging markets that require battery technologies such as the hybrid-electric vehicles, it is an area we take extreme interest in," Sherrill said.

The outlook for hybrids, combined with Johnson Control's dominant position in the standard battery market, has some Wall Street investors bullish on the stock.

"They are covered on the low end of the technology scale, current technology and the next generation," said analyst David Siino of Gabelli & Co.

Acquisitions have given Johnson Controls, which also produces automotive interiors and heating and cooling systems for buildings, a formidable third leg, Siino said.

Shares of Johnson Control were off 0.2 percent at $58.71 in morning trade. The shares over the last 52 weeks have traded in a range between $52.60 and $63.98.

Hybrid vehicles such as the Toyota Prius, Ford Escape and Honda Civic models combine gasoline engines and electric motors to increase mileage. The electric motors run on large batteries that have a different chemical makeup than batteries that start cars. They also must have a much longer life expectancy because they serve as a fundamental part of a vehicle's powertrain.

Several hybrid car and SUV models are expected to hit the market in 2005, including a Mercury Mariner sport utility hybrid by Ford Motor Co. launched this week. General Motors Corp. also plans hybrid options for larger vehicles.

The market is mainly in the United States, but there is interest in Asia and Europe also, Sherrill said.

"How fast it grows depends on customer acceptance, how fast the total cost of the vehicle can come down and what regulations may or may not come to drive higher fuel economy," Sherrill said. "These are not inexpensive batteries, but we are all working on the cost equation as we ramp up volume."

Larger scale production and hybrid-specific designs will help cut costs, he said. Weight favors manufacturing the large battery packs locally for now, and most of the company's battery production is in the United States, Mexico, Brazil and Europe.