DETROIT (Jan. 23, 2 p.m. ET) -- Despite improved net income for its latest quarter, supplier Johnson Controls Inc. saw a significant fall in its European profit margins -- setting the stage for more supplier struggles on the continent and more jitters on Wall Street.

JCI on Jan. 19 said its net income for the quarter ending Dec. 31 increased 9.3 percent from the same quarter last year. But European profit margins fell to 1 percent -- down from 2.9 percent during the quarter ending Sept. 30. The company lowered its earnings projections for the rest of the year, in part because of Europe.

JCI, which makes auto interiors, plastic parts, and batteries, says its fiscal first quarter net income was $410 million, or 60 cents a share, up from $375 million, or 55 cents a share, a year ago. Sales rose 9 percent to $10.4 billion. The results included the company’s building efficiency systems business.

Vehicle production in Europe is expected to be 18.5 million units in 2012, down 7.9 percent from expected final numbers for 2011, said Mark Fulthorpe, Europe vehicle production forecast analyst for IHS Automotive.

Fulthorpe said European demand is going to continue to be under significant pressure due to long running sovereign debt and expects demand for new vehicles will continue to become strained.

“Supplier’s exposure to the major money operations in Europe will be better or worse based on who their business is with,” Fulthorpe said in an interview. “We see that there are still those brands or manufacturers that have a strong export profile which can be a positive, but if you heavily export to customers that largely build in Europe for European consumption, that would be more of a concern.”