GKN plc builds 40 percent of the world's supply of a key drivetrain component. The British supplier produces three times more constant velocity joints than its next largest competitor.
In powder metallurgy, GKN is similarly dominant. And the merger of its helicopter business this year is expected to create Europe's largest producer.
Investors have taken note.
A $1,000 investment in GKN in January 1997 would have brought $1,963 three years later, according to the PricewaterhouseCoopers Automotive Shareholder Value Index. That 96.3 percent rate of total shareholder return placed the company No. 1 among the world's leading publicly held parts suppliers.
The rate, which also takes into account stock gains and dividends reinvested, was well above the 16.8 percent average for automotive suppliers in the period.
But GKN, of Redditch, England, and the industry average both slipped several notches in 1999.
Last year's top performer was NSK Ltd. The Tokyo-based company produced an 83.9 percent total shareholder gain from its relatively low-margin business of supplying bearings, chassis parts and seat belts.
NSK benefited from a strong run-up in Japanese company share prices last year.
Despite the gains of such companies as GSN and NSK, the shareholder returns of auto suppliers were substantially below those of automakers. Creating shareholder value is difficult for the parts industry. Fully 24 of 42 suppliers showed declining shareholder value over the three-year period.
Parts makers are under pressure by automakers to assume complicated new responsibilities, such as design, without being fully compensated for the higher risk and cost. Analysts, too, are concerned over whether consolidating suppliers will become loaded with debt and bureaucracy.
One of those busiest of those consolidators, Federal-Mogul Corp. of Southfield, Michigan, USA, ranked dead last in the 1999 ranking. Its shareholder return was listed as a minus 65.6 percent.
