GKN warns on jobs and shutdowns as profits dive

The company, which shed 3,450 jobs during the year – the vast majority of them in the last quarter – said although sales were up 12% to £4.6 billion (2007: £4.1bn), pre-tax profit fell 35% to £167 million (2007: £255m). However, there was a strong performance in non-automotive business with aerospace sales up 22% and profit up 27%. In the off highway division, sales increased 32% with profit up 38%. Chief executive Sir Kevin Smith (pictured) said: "We entered 2008 with good order books across all divisions and expectations of continued growth for the group. In aerospace we have had an excellent year with double digit growth in both sales and profits and our off highway business achieved record results. Automotive sales, however, deteriorated rapidly in the fourth quarter as a result of the global financial crisis. We have taken swift action to reposition the business with 3,450 jobs cut during the year, 2,800 of which occurred in the fourth quarter. Further restructuring is already underway in 2009.” Smith added that GKN had been delighted to have completed the acquisition of Airbus’ UK facility at Filton in January; a move that would “provide excellent growth opportunities”. Smith continued: “This year our focus will continue to be on providing exceptional customer service, further reducing our cost base and preserving cash. The board has accordingly decided not to pay a final dividend. The quality of the group's businesses and the management action being implemented will position us strongly to benefit when markets recover." Looking ahead, GKN said the outlook in its major markets was challenging and uncertain as the global economic recession continued to severely impact demand in most of its markets. The outlook for automotive production was extremely uncertain with forecasters expecting weakness across virtually all regions with global light vehicle output to fall by up to 59 million vehicles - a decline of as much as 20%. The off highway markets had weakened over the last few months and forecasters now expected a substantial decline in demand for heavy construction, mining and agricultural equipment. In aerospace, markets were mixed. Military aircraft demand was expected to remain solid through the year. In the civil sector, regional and business jet demand had fallen sharply and some reduction in production rates for large civil aircraft was expected in the second half.