LONDON - UK-based components supplier GKN will move production from the USA, Germany and Spain to low-cost countries like Poland and Slovenia in a bid to boost profits.
Although GKN recently announced a 10 percent rise in half-year pretax profits to $396 million, the automotive division's contribution to overall company fortunes fell from 57 to 52 percent ($221 million), the gap being filled by improved profits from the company's helicopter operations (up 31 percent) and industrial services (up 33 percent).
Encouraged by stronger automotive sales in North America, GKN aims to double revenue in that region over the next four years, but it will use cheaper manufacturing countries to gain a cost advantage.
The changes will see some GKN Spanish production moving to cheaper Slovenia where wages are at least 20 percent below westerm European levels. But the Zumaya plant near San Sebastian will start supplying North America.
Production at the GKN plant in Poland, which also has a low wage rate and currently concentrates on local Fiat supply, will be expanded to other automotive product lines.
As part of the rationalization, GKN, which has already shed 600 jobs in Europe this year, will close four sintering plants in the USA and Germany to reinforce consolidation plans.
Under chief executive C.K. Chow, who took charge in January 1997, the group has spelled out its ambitions for the automotive division's powder metallurgy operations - the sintering process is less labor-intensive than casting or forging, and parts are 20 percent lighter.
Over the past two years GKN Sinter Metals has acquired two major US powder metallurgy companies, Sinter Metals (for $534 million) and Interlake (for $529 million).