GKN Business Report FY2008

Business Highlights

Financial Overview (in million pounds)
  FY2008 FY2007 Rate of change(%) Factors
Sales 4,376 3,869 13.1 -
Trading profit 201 277 (27.4) -
Automotive Business (Driveline and Other Automotive)
Sales 2,207 2,031 8.7 1)
Trading profit 69 146 (52.7)
Powder Metallurgy Business
Sales 618 602 2.7 2)
Trading profit (2) 29 -

Financial Overview by Business
Automotive Business
<GKN Driveline>
-Driveline's sales in the year totaled 2,123 million pounds compared with 1,922 million pounds in 2007.
-The positive impact of currency translation was 262 million pounds so that the underlying decrease was 61 million pounds(3%).
-This decrease arose entirely in the second half, with sales in the first half 7% ahead on a constant currency basis.
-Second half sales on the same basis were 137 million pounds lower than the comparable period last year.
-Demand fell across all regions and customers, with North America and Japan being particularly affected.

<Other Automotive>
-Sales in the year were 84 million pounds compared with 109 million pounds in 2007.
-Excluding the UK cylinder liner manufacturing operation closed in 2007, sales of 84 million pounds were 3 million pounds (3%) below 2007.

Powder Metallurgy Business
-Sales in the year were 618 million pounds compared with 602 million pounds in 2007.

-The underlying sales decline, after the currency translation benefit of 68 million pounds, was 52 million pounds (8%).

-The North American Powder Metallurgy business experienced difficult trading conditions throughout the year, with the impact of weak sales to General Motors and the prolonged American Axle strike in the first half being followed by the steep decline in overall US automotive builds in the second half.

-The European Powder Metallurgy business achieved good growth in the first half of the year with sales 5% ahead of 2007, but experienced a steep decline in the second half such that full year sales were 16% below 2007 at constant exchange rates.

-In Jul. 2008, the Company announced that its electronically-controlled torque vectoring technology for the four wheel drive has made its debut on the new BMW X6 sports utility vehicle.

-Independent transaxle Four Wheel Drive (4WD) and front sideshafts are featured in the Nissan GT-R.

-In Jul. 2008, the Company announced that it will begin supplying its new electronic locking differential to Ford's 2009 F-150 FX4 pickup trucks later in 2008.

-The Company will supply driveline components, including an upgraded power transfer unit (PTU), for the 2009 Mitsubishi Lancer Evolution RS.

-In Oct. 2008, the Company announced that it is providing the latest generation of its all-wheel drive (AWD) coupling to the new Infiniti FX.

-The Company provides electric drive axle for new PSA Peugeot Citroen HYbrid4 Technology.

Automotive Business
-In total around 1,700 people left in the year. Further restructuring will be carried out in 2009 recognizing continuing weak automotive markets.

Powder Metallurgy Business
-In total around 1,200 people left in the year. Additional actions to reduce the fixed cost base are also in place for 2009.


R&D Activities
Automotive Business
-GKN Driveline invested 63 million pounds in the year on research and development focused on advanced driveline products including ultra low-cost driveshafts and active torque management devices.

-GKN Driveline launched the first production ETV product for BMW, providing exceptional levels of agility and driving dynamics, and a lightweight FDU and 4WD torque control for the new Nissan GT-R.

-Work continues with three customers on developing active front LSDs and FDUs for hybrid vehicles.

Powder Metallurgy Business
-New business wins related to emerging technology trends continued with a particular focus on applications to improve fuel efficiency and reduce emissions, such as variable valve timing in engines and high performance gear sets in automatic transmissions.

Product Development
Electronically-controlled Torque Vectoring Technology for 4WD
-In Jul. 2008, the Company announced that its electronically-controlled torque vectoring technology for the four wheel drive has made its debut on the new BMW X6 sports utility vehicle. The new technology jointly developed with ZF is making it possible for the new 4x4 model to overcome the tendency to understeer when cornering under power at speed and offer higher driving performance and feeling. A pair of vectordrive units assembled into right and left rear axle systems help control vehicle position. Each unit consists of a planetary gear set, wet clutch and ball ramp mechanism. It is the technology to ensure driving dynamics required of sports utility vehicles by electrically controlling wet clutches for delivering necessary amount of torque instantly. The technology also better controls the tendency of 4x4 vehicles to consume too much fuel by offering lower drag torque. GKN's torque vectoring hardware units are supplied to ZF, who is responsible for the final assembly and supply of the Vectordirve rear axle system for BMW. (From an article in the Nikkan Jidosha Shimbun on July 9, 2008)

Investment Activities

Capital Expenditure (in million pounds)
  FY2008 FY2007
Overall 204 192
Automotive Business 108 94
Powder Metallurgy Business 33 38

Investments outside UK
-In Apr. 2008, the Company announced that GKN Driveline plans to open a major new production facility in Wuhan, China, in 2009. GKN will build a 44,000-square-metre plant scheduled to open during the first half of 2009. The facility in Wuhan initially will supply driveshafts for Dongfeng and Dongfeng's joint-venture programmes with Honda and Citroen. Expected to provide more than 600 jobs, the plant will have an annual production capacity of more than 1,000,000 driveshafts. (From a press release on Apr. 22, 2008)

-In Oct. 2008, GKN Driveline Torque Technology has started volume production of transmission differentials at its new facility in Pudong, Shanghai, China. (From a press release on Oct 15, 2008)

-In Feb. 2008, the Company announced that it has built a new production facility in Oragadam in Tamil Nadu, India, and started operations. The Oragadam plant located at an about 10,000 square meter site having an annual production capacity of 660,000 sideshafts for constant-velocity joints, was built by moving and expanding the former Gummidipundi plant near Chennai investing 12 million pounds (approx. 2.5 billion yen). (From an article in the Nikkan Jidosha Shimbun on Feb. 13, 2008)

-In 2008, a new sideshaft facility in Eskiesehir was completed.