GKN has announced that it will cut a further 1,200 jobs over the next two years, following a loss of £16m for the first half of the year.

The automotive and aerospace parts manufacturer reported underlying sales down by 31 per cent to £904m and a drop in trading profit to £23m, down £138m, as the group's end markets weakened amid the recession.

GKN’s aerospace division saw a modest increase in underlying sales of five per cent. However, automotive sales were down 41 per cent and off-highway reported a £2m trading loss, with underlying sales down by more than 50 per cent compared with the same period last year.

As a result, the company has announced that 3,600 employees will leave the group by 2011, representing a loss of 1,200 more staff than previously planned.

The cuts are in addition to an extensive restructuring programme implemented last year, but the group claims that aggressive cost reductions are starting to have an impact on the automotive division, which returned to profit in June.

A spokesperson for GKN said that job losses will be made throughout its global operations, however, no redundancies will be made in the UK.

He said: 'All of the job losses will go by the middle of next year. This will involve the closure of five facilities, which we expect will be in North America, Continental Europe and Asia.’

Despite a loss in profits, the group has seen new orders for commercial aircraft this year, posting a trading profit of £79m ahead of expectations, with additional revenues on the Joint Strike Fighter and A350 programmes.

According to GKN, the outlook for its markets remains mixed with second-half demand in off-highway markets and business jets likely to remain weak and automotive set to stabilise in the second half.

Sir Kevin Smith, chief executive of GKN, said: ‘Looking forward to the second half, in our automotive and powder metallurgy businesses we expect demand in the third quarter to remain at similar levels to the second quarter due to a quiet August, and improvements in September [to] carry through to the fourth quarter.

‘Aerospace sales are expected to remain strong in the second half, with any further weakening in large commercial aircraft production schedules now unlikely before 2010.

‘Off-highway sales are expected to remain more than 50 per cent lower in the third quarter. A more stable operating environment is expected in the fourth quarter, with some recovery in demand as inventories continue to reduce.’