TREVOR BONNER is managing director for automotive and agritechnical products at GKN plc. His division had sales of £2 billion ($3.4 billion) in 1997 and achieved an operating profit of £208 million. In mid-1997 GKN acquired Sinter Metals Inc., the world leader in powder metallurgy. GKN has an 11 percent share of the $4.5 billion global powdered metals market. He was interviewed by Edmund Chew.
How is 1998 looking?
The year started strong in terms of our automotive schedules across western Europe and North America.
In South America, first-quarter demand is significantly lower than first quarter 1997, but rather higher than we anticipated when we put together our 1998 budgets. Mexico is looking strong. In Asia-Pacific outside of China, the demand picture is quite weak, but that only really impacts us in Malaysia. In Thailand and Korea and our second plant in China, we are in start-up mode. In China demand is not quite as high as we had hoped but is still at a reasonably good level.
We expect 1998 to be pretty awful in South Korea, but South Korea doesn't really impact us in any significant way this year. And we expect growth to continue in China, albeit in single digits.
Do you see an opportunity for GKN to strengthen its position in Asia during the period of crisis?
From a strategic point of view I would certainly not exclude the possibility that we would be willing to increase our position in those markets.
But obviously they would have to be moves that fit with our basic strategy. We are not looking for acquisitions that might just happen to be cheap.
Any material cost changes that are affecting your business?
We are seeing some steel price increases in Europe. Generally speaking, those are being held in single-digit numbers, and in terms of GKN's overall performance for 1998 we don't expect a dramatic impact from those developments.
Is there any move to outsourcing on drive-lines?
I think outsourcing in terms of drive-line components will continue but at a slow pace. In a number of the vehicle manufacturers, union agreements may well make out-sourcing difficult to achieve. However, if one takes a medium- to longer-term view, I still have the firm belief that other vehicle manufacturers will follow the example of Fiat, who have outsourced their Italian and Polish constant-velocity joint operations to us over the last couple of years.
Any other opportunities?
I think there are two other developments. The first is in light trucks in North America, where historically the penetration of CV joints has been low. There has been significant use of rigid axles and universally jointed propeller shafts. Increasingly large segments of the light-truck market are being used exclusively as on-road vehicles, and you are seeing consumer pressure for improved noise, vibration and harshness, and drivability.
This is creating increased utilization of CV joints in the propeller shaft, and also of independent front or rear suspension, and therefore the use of CV half shafts. That's potentially incremental growth for GKN that could be quite significant over the next five years.
How is the Sinter Metals integration going?
We've changed the structure and we've changed some of the people. We're looking at transferring best operating practice across the business, transferring North American technology into Europe and vice versa.
Business is growing organically between 6 and 8 percent a year. Of course it is not yet as globally positioned as our drive-line business. It has a strong presence in North America and western Europe, and we have a small presence through joint ventures in India and in China.
Are there any talks with Federal Mogul about the T&N powdered metals business?
I never comment on specific projects like that, but it is fairly common knowledge that we are prepared to entertain further acquisitions in the powdered metals business. Any good business that became available, we would look at very seriously. I think that's probably all I can say.
Which major applications of powdered metals are growing most strongly?
About 70 percent of all powdered metal parts worldwide are used in automotive applications. Within automotive there is a very wide range of applications from engine and transmission parts through to exhaust flanges.
There are probably 40 or 50 different potential applications within one of today's cars. The focus undoubtedly is in engine and transmission components.