GKN - left out in the cold?
In 1905 the business landscape in Great Britain was rather different to today; there were just three industrial groups big enough to rank in the top 15 British companies, the remainder being what we now call service and retail industries. The only one of those three is still in business today is GKN, and the automotive, aerospace and defence supplier is struggling to resist a hostile £7 billion ($9.68 billion) bid by Melrose Industries. Melrose styles itself as a ‘manufacturing investor’ and is renowned for turning around failing businesses and selling them on at a profit - there is no talk of corporate raiding and asset-stripping by a ruthless venture capital company - but there is little doubt that the dismantling of GKN would be bad for Britain’s industrial base, and of course, for employment in the UK.
GKN has got into this situation through a classic case of great British innovation and technology combined with poor management. Anne Stevens, the new Chief Executive, who was an Executive Vice-President and Chief Operating Officer in Ford US for 16 years, has said that GKN has been focused more on growth than margins and cash.This is borne out by the figures; according to the company’s own figures, 2017 Group profit before tax was down 16% to £572 million but its Driveline division showed organic sales growth of 9%. While there are concerns that both the company and the UK government want to break up GKN, its management has said it aims to demerge the aerospace and automotive divisions and both Dana and American Axle have made bids for the automotive division.
Recently, while visiting GKN’s Wintertest facility at Arjeplog, in northern Sweden, I caught up with GKN Driveline CEO, Peter Moelgg. While enthusiastic engineers proudly showed off the supplier's new SUV technology research vehicles, highlighting its work in eDrive, All-Wheel Drive (AWD) and systems integration, Moelgg spoke quite openly about the part that the company’s Driveline (and automotive in general) division could play in trying to save the company from falling into the hands of a ‘raider’. Moelgg pointed out that GKN is some 260 years old and has faced many challenges over the years and that the Driveline management team has posted a defence plan with impressive new products. He said that relationships with OEMs are stronger than ever with lots of them approaching GKN but that his team has to be very selective because demand is so high that the supplier could run out of resources to satisfy the OEMs’ thirst for new conventional and EV driveline products.
The mismanagement of Britain’s last FTSE 100-ranked automotive supplier (and also the UK’s only prime supplier to the world’s largest aircraft and engine makers) and the break-up and foreign sell-out of a truly innovative supplier surely cannot be ignored by the UK government particularly in the wake of the recent Carillion debacle. GKN is a company whose history is at the heart of the first Industrial Revolution and cannot be allowed to die just when it has such exciting automotive technologies, that the market is literally crying out for.
Simon Duval Smith
Simon Duval Smith
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