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5. GKN Plc Business Report FY ended 2014

Factors
1) Driveline
-In 2014, organic sales increased by 8% year-on-year compared with global vehicle production which was up 3%. However, there was adverse effect of currency translation and of the impact from business disposal.
-Constant velocity jointed (CVJ) systems accounted for 60% of the sales, and non-CVJ sales were 40%. 

2) Powder Metallurgy
-In 2014, organic sales increased by 5% year-on-year. Good growth was achieved in North America, China and Europe but sales in South America fell due to weaker automotive and industrial markets.

Market Share

Driveline
-GKN Driveline Japan Ltd. in Tochigi-shi, Tochigi Prefecture, aims to raise its Constant Velocity Joint (CVJ) market share in Japan to 20% by 2019 from current 15%. In order to achieve this goal, the company intends to win new orders by taking advantage of its high share in the global CVJ market and by proposing high-value-added CVJs that contribute to better fuel economy of vehicles. In 2011, its parent company, the GKN group in the U.K., has dissolved its joint CVJ sales subsidiary with JTEKT Corporation. Since then, GKN Driveline Japan has been supplying CVJs to automakers other than Nissan Motor Co., Ltd as well.  (From an article in the Nikkan Jidosha Shimbun on June 25, 2014)

Divestiture

Emitec
-Continental AG has acquired 100% ownership of Emitec. Until now, it was a 50/50 joint venture with Continental and GKN. The acquisition will take effect on July 31, 2014 for a cash consideration of GBP 46 million, and Emitec will become part of the Powertrain Division of Continental. In the future, Emitec will form the Exhaust Management Segment of the Fuel & Exhaust Management Business Unit in the Powertrain Division. (From a press release on July 31, 2014)

Restructuring

<USA>
-GKN Automotive announced it has moved into a new regional headquarters for the Americas in Auburn Hills, Michigan, USA. The new facility is home to the company's GKN Driveline and GKN Sinter Metals divisions. In addition to serving as regional headquarters for GKN Driveline and GKN Sinter Metals, the new site also houses employees from GKN's Land Systems and North American Services groups. GKN has more than 350 employees at the new location. The 168,000-square-foot facility is located on an 11.2-acre site. The new facility provides the company with an additional 20% more space for engineering and testing activities. (From a press release on December 1, 2014)

Contracts

Driveline
-The Company supports a number of ground breaking and commercially successful eAWD programs, including the Mitsubishi "Outlander", Porsche "918 Spyder" and BMW "i8". (From a press release on March 10, 2015)

-The Company announced that it has produced the industry's first two-speed eAxle. The technology has entered production on the BMW "i8 plug-in hybrid" sports car. (From a press release on November 10, 2014)

-The "RC F", Lexus' all-new high-performance coupe launched by Toyota Motor Corporation, comes with optional Torque Vectoring Differential (TVD) produced by the Company. The RC F is the world's first rear-wheel drive vehicle equipped with the TVD. TVD is an electronic system that controls left and right rear wheel drive power, and optimizes vehicle behavior when the vehicle is cornering. By delivering more torque to the outside drive wheel, TVD helps the vehicle to turn corners and enhances traction performance. (From an article in the Nikkan Jidosha Shimbun on October 24, 2014)

Acquisitions

Electric flywheel systems
-GKN plc announced that it has acquired the entire issued share capital of Williams Hybrid Power Limited (WHP) from Williams Grand Prix Engineering Limited. WHP specializes in the design and manufacture of composite flywheel-based energy storage systems, initially exploring options for the bus, truck and tram markets. The consideration payable for the acquisition comprises cash consideration of GBP 8 million (USD 13.3 million) payable at closing. (From a press release on April 1, 2014)

-The Company and Alexander Dennis Limited (ADL) have signed a deal that will see the introduction of 250 greener, cleaner vehicles to transport fleets across the UK during the next two years. As part of the agreement ADL - Britain's biggest bus and coach manufacturer - has chosen GKN Hybrid Power as a preferred partner and committed to the purchase of 250 of its Gyrodrive electric flywheel systems. ADL will focus initially on the introduction of the low emission technology to bus fleets in London and Oxford but anticipates rapid deployment across the UK in the next few years. It will also be working closely with the Company to develop the technology for international markets. ADL's Euro6 Enviro400 bus, the UK's best-selling double deck - fitted with the Gyrodrive system - recently achieved Low Carbon Emission Bus Certification, which acknowledges a 30% reduction in greenhouse gas emissions. (From a press release on November 24, 2014)

-The Company and UK transport operator The Go-Ahead Group have agreed a deal that will help reduce emissions in cities with the supply of electric flywheel systems to 500 buses over the next two years. The Company's system is based on Formula One race technology developed in the UK. Go-Ahead has placed an order for GKN Hybrid Power to supply 500 of its Gyrodrive systems to the transport operator. The Gyrodrive system uses a high speed flywheel made of carbon fiber to store the energy generated by a bus as it slows down to stop. It then uses the stored energy to power an electric motor which helps accelerate the bus back up to speed, generating fuel savings of more than 20% at a significantly lower cost than battery hybrid alternatives. The agreement covers the supply of the complete Gyrodrive system, including the GKN Hybrid Power flywheel as well as GKN's advanced EVO electric motor, a GKN designed and manufactured gearbox, and installation. Go-Ahead intends to utilize the technology in cities it serves across the UK, initially in London and Oxford. (From a press release on July 29, 2014)

Awards

R&D Activities

Driveline
-The Company has demonstrated a range of new hybrid all-wheel drive (AWD), AWD Disconnect and torque vectoring technologies at the Company's Wintertest proving ground in Arjeplog, Sweden. A plug-in hybrid with a GKN eAxle can improve fuel economy by 30-50 % at the same time as boosting performance. (From a press release on March 10, 2015)

-The Company announced that Porsche AG has awarded it "Technology Partner" status for its development of a high-performance eAxle for the "918 Spyder", a plug-in hybrid supercar. The module has maximum power of 95kW and can deliver up to 1500Nm of torque to the front wheels via a fixed gear ratio. A specially developed compact differential engages the torque seamlessly, giving the "918 Spyder" optimum power distribution at all times. The differential also disengages the module to minimize drag losses and maximize efficiency. At speeds above 265km/h (164mph), a clutch isolates the electric motor to prevent it from over-spinning. (From a press release on February 11, 2015)

Product Development

Disconnect All-Wheel Drive System for A-, B- and C-segment vehicle platforms
-The Company has developed the world's first Disconnect All-Wheel Drive System for A-, B- and C-segment vehicle platforms. The system responds to driver inputs and road conditions, connecting and disengaging drive to the rear axle on demand. By eliminating rotating losses from the driveline, during steady state cruising fuel efficiency can be improved by up to 4% compared to permanent all-wheel drive systems. The result is a tightly packaged all-wheel drive system, which replaces features such as the standard power transfer unit (PTU) with a monoblock housing that fully integrates the propshaft's constant velocity joint. The clutch system at the heart of the disconnect system is a development of the system used in the "Range Rover Evoque". (From a press release on October 7, 2014)

Investments Outside UK

Driveline
<China>
-The Company announced that it has nearly tripled its manufacturing capacity at its Chongqing plant to support the expansion plans of its car manufacturer customer base. GKN Driveshaft Chongqing (GDC), a joint venture between Shanghai GKN HUAYU Driveline Systems Co., Ltd. (SDS) and China Changan Automobile Group, has expanded the plant by 129,000 square feet as part of the USD 48 million (RMB 300 million) investment. The project brings the total size of the plant to 258,000 square feet and will enable it to produce an additional 1.5 million sideshafts a year, bringing overall capacity to 2.1 million sideshafts per annum. GDC currently employs 310 people, with plans in place to grow that to over 400 by 2017. The expansion also facilitates the localization of Constant Velocity Joint (CVJ) production for a number of car manufacturers in Chongqing, with SDS moving CVJ production from Shanghai to Chongqing for Changan Ford following the completion of the project. (From a press release on March 23, 2015)

<USA>
-The Company has announced it will expand its Newton, North Carolina, facility in the U.S. The Company plans to create more than 200 new jobs in North Carolina by the end of 2018 and invest more than USD 100 million in the location. GKN Driveline will increase the manufacturing floor space by over 25% square feet to accommodate additional business volume in geared components. GKN Driveline Newton employs more than 700 people, supporting machining and assembly of high precision products for demanding AWD applications. (From a press release on April 8, 2014)

<Russia>
-The Company is strengthening its global footprint with a new automotive manufacturing operation in the Russian market. GKN Driveline is to initially open a 5,000 square meter plant in Togliatti. The Company's production of constant velocity jointed sideshafts for a number of automotive customers is expected to commence in early 2015. (From a press release on January 15, 2014)

Powder Metallurgy
<China>
-The Company has signaled its commitment to the Chinese market with the expansion of its production facilities in both Danyang and Yizheng in Jiangsu Province. The Company is investing GBP 8.7 million to build a new facility at its Danyang site which will cover an area of 20,000 square meters when construction completes in September 2015. The existing Danyang facility, established in March 2006, produces highly engineered powder metallurgy parts primarily for automotive engines and transmissions. GKN Powder Metallurgy's new facility in Yizheng, which had its ground breaking in 2012, has now been officially opened. It produces small precision parts mainly for automotive applications in engines and body and chassis. By the end of 2014 about 80 people will be employed at the site. (From a press release on October 8, 2014)