GKN shifts operations to low-cost economies

GKN has unveiled plans to shift more of its automotive parts operations to low-cost economies.

The UK engineering giant will move an additional 20 per cent of the production capacity of its constant velocity joint (CVJ) business to lower-cost regions in a move designed to save it £40m a year from 2007 onwards.

The move underlines the growing perception of the world’s big automotive groups that countries such as China and India are becoming key car markets in their own right, as well as attractive venues from which to manufacture vehicles and components for export.

CVJ products for use in light vehicle sideshafts account for 75 per cent of sales by GKN Driveline, the group’s automotive components business.

Light vehicle production has stalled in the traditional automotive markets of the US, Western Europe and Japan, but forged ahead in emerging economies in Asia, South America and the former eastern bloc.

The relocation plan will eventually result in more than half of GKN’s CVJ production taking place in low-cost markets, the group said.

GKN has not yet released detailed plans for the shift in operations, which it expects will rack up a maximum of £150m in one-off costs before the benefits of the savings begin to kick in during 2007.

The engineering group also plans to make changes to its Powder Metallurgy division, and said further details would be released later in the year.

The announcement came as GKN unveiled a four per cent fall in pre-tax profits to £173m for 2003, mainly due to the need for a hefty injection of cash into its pension scheme. Sales increased slightly to £4.6bn.

Aerospace, GKN’s other major area of operations, delivered the now familiar contrast between a buoyant military sector and a less healthy civilian market.

GKN Aerospace Services, which manufactures assemblies, components and systems for aircraft and engines, saw most of the decline in civil orders offset by extra demand from the military.

GKN said its expertise in key technologies such as advanced composites had helped it gain a role in every significant new aircraft being developed in both Europe and the US. These include the Joint Strike Fighter and the Airbus A380.

Along with Finmeccanica of Italy, the UK group also owns half of the AgustaWestland helicopter business.

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