Financial Overview

(in million pounds)

	FY2009	FY2008	Rate of change(%)	Factors
Overall
Sales	4,223	4,376	(3.5)	-
Trading profit	129	201	(35.8)	-
Automotive Business (Driveline and Other Automotive)
Sales	1,869	2,207	(15.3)	1)
Powder Metallurgy Business
Sales	512	618	(17.2)	2)

Factors
1)
Automotive Business
<GKN Driveline>
-Underlying sales fell 43% in the first quarter before seeing gradual improvements for the rest of the year.
-Excluding the favourable impact of currency translation of 352 million pounds, underlying sales reduced by 628 million pounds (24%).
<Other Automotive>
-Sales in FY2009 of 117 million pounds were 59 million pounds lower than FY2008, reflecting the significant deterioration in automotive markets.
-The impact of currency translation was positive at 12 million pounds.

2)
Powder Metallurgy Business
-Excluding the favourable impact of currency on translation of 87 million pounds, the underlying decrease in sales was 193 million pounds (27%).
-Sales fell acutely in Europe and North America, whilst in the Asia Pacific and South American operations headline sales improved by 5% compared with 2008, buoyed by strong second half performances in India, China and Brazil.
<GKN Sinter Metals>
-The most severe market conditions for GKN Sinter Metals were experienced in the first half of 2009 when lower automotive production levels were further depressed by extensive de-stocking throughout the supply chain.
-North American volumes in particular were adversely affected in the second quarter by the accelerated actions of General Motors and Chrysler to reduce inventories as part of their reorganisation plans.
<Hoeganaes>
-Hoeganaes' underlying sales were 31% lower. This decline reflected lower automotive end market sales and reduced raw material surcharge revenue, as average commodity input costs were lower than had been experienced in 2008.
-Against a backdrop of declining markets, Hoeganaes increased market share in the key geographic markets of North America and Europe.

Contract
-Followings are major contracts from a press release in 2009.

Maker/ Model	Products
Suzuki Wagon R	Viscodrive(R) coupling
Jaguar XKR	Electronic Torque Manager (ETM(R))
Jaguar XFR	Electronic Torque Manager (ETM(R))
Mazda3 MPS	Super LSD (Limited Slip Differential)
Toyota Passo Sette	Viscous coupling unit (VCU)
Daihatsu Boon Luminas	Viscous coupling unit (VCU)
Peugeot 3008 HYbrid4	Rear drive axle
Citroen DS5 HYbrid4	Rear drive axle
Ferrari California	Planetary pump
Tata Nano	Powder metallurgy part

Powder Metallurgy Business
-Increasing trends to improve fuel efficiency and reduce emissions, such as variable valve timing in engines, high performance gear sets in automatic transmissions and differential gears, are driving the demand for products made by powder metallurgy. Approximately 75 million pounds of new programme business was awarded in the period. In addition, a further 25 million pounds of annualised sales of existing programmes were won from competitors.

Recent Developments Outside UK

-GKN Driveline will start mutual supply of 4WD components between Japan and China. From the autumn of 2011 it will begin to supply drive force proportioning devices produced at GKN Driveline Tochigi, Tochigi City, Tochigi Pref., Japan to Brilliance Auto, China for small 4WD commercial vehicles. The volume is expected to be approx. 30,000 units per year. From China, differential units produced in Shanghai will be imported soon to Japan to supply to Nissan Motor Co., Ltd. for its large-size 4WD export model, the Patrol. GKN Driveline aims to increase its competitiveness by avoiding overlapping investments in production equipments such as molds and generating volume efficiency through role sharing as these cases. (From an article in the Nikkan Jidosha Shimbun on Sep. 15, 2009)

-GKN Driveline has decided to consolidate its four affiliated companies in Japan and establish GKN Driveline Japan on January 1, 2010. The integration is intended to improve the Group's development and operational efficiency in Japan, enhancing its competitive edge. (From an article in the Nikkan Jidosha Shimbun on Nov. 24, 2009)

-In Dec. 2009, Shanghai GKN Drive Shaft Co., Ltd. has opened a new driveshaft plant in Wuhan, China.
>>>See Investment for more details

Joint Ventures

-The Company and Shanghai Automotive Industry Corporation (SAIC) have agreed to extend their joint venture in China for another 50 years. The JV - Shanghai GKN Drive Shaft Company Limited (SDS) - was formed in 1988. (From a press release on Sep. 15, 2009)

Restructuring -The Company announced plans to consolidate its UK driveline component operations into its plant at Erdington, Birmingham. As a consequence, the forge facility at Hamstead will close by the end of 2009 and the car parts facility at Walsall by the middle of 2010. Also, 150 jobs will be lost at the auto structures plant at Telford in 2009. (From a press release on Feb. 17, 2009)

Automotive Business
-As part of the GKN Driveline restructuring programme, one factory in the UK was closed and two others will be merged during 2010.
-The joint venture in South Africa was ended and the Company sold its joint venture interest in Jilin, China, to allow it to concentrate efforts in that country on Shanghai GKN Drive Shaft.
-A plant closure was announced in Japan which will conclude around the end of 2010.

R&D Activities

Automotive Business
-GKN Driveline invested 57 million pounds in the year (2008 - 63 million pounds) on research and development focused on new applications of existing products and a range of new driveline products, including for hybrid and electric vehicles.

-Although new model launch activity was low during the period, GKN Driveline was successful in winning 85% of new driveshaft programmes for which it was invited to bid.

-GKN Driveline will strengthen its development activities for power transmission systems of hybrid and electric vehicles. The Company, which developed a drive unit for use in a hybrid model of PSA Peugeot-Citroen of France and will start its supply in 2011, will also engineer a geared system for the model, which will improve the efficiency of the electric drive unit and also function as a parking lock mechanism. The GKN Driveline Group intends to conduct major development activities for the product at its Japanese subsidiary, which will make the most of its know-how it has accumulated through developing drive units for all-wheel drive vehicles. Its technologies to be incorporated in the new geared system will include limited slip differentials. The Company aims to foster an electric vehicle drive unit as one of the new areas of focus by absorbing new needs and requirements. (From an article in the Nikkan Jidosha Shimbun on Nov. 24, 2009)

Product Development

Automotive Business
-GKN Driveline launched a number of products designed to help vehicle manufacturers to improve vehicle handling performance and reduce fuel consumption and emissions:
-Face Spline: a patented hub connection for CVJ sideshafts which offers vehicle manufacturers a cost-saving and more efficient alternative to the traditional stem design commonly used to secure CVJ sideshafts to wheel-hubs.
-Electric axles: provide allwheel- drive and fuel-efficient, emissionfree features for tomorrow's generation of hybrid and electric vehicles.
-Direct Torque Flow technology: a new design solution to connect the propshaft to the vehicle's transmission in a way that saves weight, assembly time, space and cost.
-Electronic Limited Slip Differential (eLSD): a rear axle differential with an integrated active coupling that provides vehicle traction and stability through high speed optimal torque allocation to the powered wheels.
-Low-cost vehicle sideshafts: specifically engineered solutions suited to the growth of affordable mobility in developing nations.

Capital Expenditure

(in million pounds)

	FY2009	FY2008	FY2007
Overall	153	204	192
Automotive Business	74	110	94
Powder Metallurgy Business	10	35	38

Investments in UK

-The Company will invest 7 million pounds over the next three years in upgrading the manufacturing capability at Erdington. (From a press release on Feb. 17, 2009)

Investments Outside UK

<China>
-Shanghai GKN Drive Shaft Co., Ltd. has opened a new driveshaft plant in Wuhan, China. The investment amounts to 230 million RMB (34 million USD). The facility will supply vehicle manufacturers in central China, including Dongfeng Auto, Dongfeng Citroen, Dongfeng Nissan, and Dongfeng Honda. The site is scheduled to produce 500,000 driveshafts in 2010 with production expected to increase to one million by 2011 and two million by 2012. Shanghai GKN Drive Shaft is a joint venture between the Company and Shanghai Automotive Industry Corporation (SAIC). This new facility is the Company's 11th plant in China. (From a press release on Dec. 1, 2009)