Pressure on auto supplier

FKI faces choice of selling automotive division or finding a suitable acquisition

By Melanie Tringham

FKI, the engineering and architectural hardware conglomerate, will sell off its automotive division if it fails to find a suitable acquisition.

The company is being forced to make a decision because of pressures from the major automotive manufacturers to rationalise their supplier base.

`We’ll either double the size of the division or we’ll sell it,’ said Eric Bowers, FKI’s finance director. `We make brake control cables; the manufacturers are trying to match us with people who put things on the end of them.’

The most obvious candidate would be a manufacturer of brake shoes and drums, said Bowers. `We’ve got several potential acquisitions on the go.’

FKI will only make an acquisition if it finds a target with a suitable price tag. Despite its current £315m borrowing facility, FKI has a track record of spending little on its purchases.

The company admitted it tried to buy Rearsby, the drivers controls manufacturer, last summer, but was gazumped by Adwest Group because `they paid 20-30% more than it was worth,’ claimed Bowers.

One of four divisions, the automotive business provides just over 10% of the company’s £110m turnover.

The cable section is successful, the plastic components business less so, and analysts reckon that this part of the business is most likely to be sold.

David Larkam at broker Albert E Sharp said: `They’ve improved their margins, but it’s a fairly low tech business – if someone produces a component 2% cheaper, then they’ve lost their margin.’

FKI announced the latest round of restructuring in the engineering division, following the purchase of Hawker Siddeley Electrical Power Group from BTR.

It has made a £21m provision against restructuring costs, which include product rationalisation, redundancy of 225 staff at Loughborough and more than £5m investment in new machinery.

Adwest ready to buy, page 19