GKN says automotive arm will deliver £153m of annual benefits by 2020

GKN has outlined its plans for the future of its automotive division in its latest attempt to scupper its hostile takeover by turnaround specialist Melrose.

The foundation of the plans is the so-called Project Boost reorganisation strategy, which underlines the aim of delivering significantly improved margins and cash flows for the business.

By implementing Project Boost within the Driveline business, GKN expects to deliver £153m of recurring annual cash benefits from the end of 2020.

In line with the overall group strategy, savings are expected to be realised through four key levers – manufacturing excellence (representing £55m of the total cash benefit), functional excellence (£30m), direct procurement cost savings (£35m) and indirect procurement cost savings (£33m).

In a presentation today, the GKN Driveline team will outline how the acceleration of Industry 4.0, including both automation and digitisation, will drive improvements in productivity, quality and safety across Driveline’s global manufacturing footprint, which includes a strong presence in China and Eastern Europe.

Through its Chinese joint venture – Shanghai GKN Huayu Driveline Systems (SDS) – GKN has a market leading position in driveshafts and all-wheel drive modules in China and will be implementing a separate SDS Boost programme focused on maintaining its strong margins.

The SDS joint venture, which has recently received a 50-year extension agreement, will be GKN’s route to market for eDrive Systems (electronic axles).

GKN said that with a £2bn order book from global OEMs, Driveline was leading the way in contemporary and electrified drivelines. The eDrive Systems operation is expected to deliver revenues of approximately £500m by 2022.

The presentation comes amid speculation that the Driveline operation could be sold to US-based Dana, a long tome collaborator with GKN.

If such a deal was to take place it would seriously undermine Melrose’s £7.4bn plan to acquire the Redditch-based group.

Commenting, Anne Stevens, chief executive of GKN, said: “Our Driveline business is perfectly positioned to take advantage of the changing automotive market.

“With our world leading technology we have successfully pre-empted the needs of our customers and we will continue to do so.

“We will continue to develop and deliver the technologies that will enable our customers to succeed while realising the full value of our business.”

Meanwhile, Unite members from Jaguar Land Rover and other car makers joined workers at GKN Driveline in Erdington to protest against the Melrose approach and urge the Government to block the takeover.

The union said workers at Driveline, along with their colleagues in the aerospace and defence divisions, were fearful that a takeover by Melrose could jeopardise their pensions and lead to the business being sold off, with jobs shipped abroad.