Sales boost bolsters GKN

Engineering giant GKN’s defences were bolstered against a hostile takeover by Melrose yesterday (January 22), after sales forecasts for its electric car parts division were boosted.

Unite, which is lobbying shareholders and MPs against the “predatory and destructive” merger, welcomed the new forecasts.

However, the union also warned against attempts to uptick GKN’s share price at the expense of workers and the company’s long-term future if the Melrose bid fails.

The FTSE 100 engineering firm revealed that its electric Driveline division is expected to bring in £275m in 2020, up from a previous forecast of £200m and way above last year’s figure of £33m.

GKN Driveline chief executive Phil Swash said the forecasts show the firm is “well positioned to capitalise on the strong market growth in hybrid and electric vehicles”.

Turn around firm Melrose, which is attempting to sway GKN shareholders with a £7bn hostile bid, said the updated figures are “part of the justification of the premium that we are offering”.

GKN management have twice rejected Melrose’s offer, pointing out that the bid is being funded by debt, which will be leveraged against the firm to pay GKN shareholders an “exceptional dividend”.

Unite assistant general secretary Tony Burke echoed their concerns and said a Melrose takeover will lead to cut backs and threaten the long-term stability of the company.

‘High risk, hostile bid’

“This high risk, hostile bid is straight out of the 1980s. It’s all about using workers’ money to boost the share price, plunging the company into debt in the process,” Burke said.

“Unite is sending a clear message to Melrose. We will not let thousands of highly skilled manufacturing jobs be gambled by a bunch of cowboy capitalists.”

Melrose’s bid was initiated after GKN’s share price fell by 15 per cent in October. The drop occurred because the firm had to write off inventory and unpaid invoices in its US aerospace operations.

GKN’s troubles have led to restructuring and cost cutting plans that are scheduled to go ahead regardless of whether the Melrose merger is successful.

‘No need to make changes’

But according to Aston University’s professor of industrial strategy, David Bailey, there is no need to make the changes – which Unite are also opposing.

Writing in the Birmingham Mail, Professor Bailey said, “After the November shock, the GKN board has been under intense investor pressure to change its position.

“But, let’s be clear, this is nevertheless a fundamentally well-run company and there is no need to change the management of the firm through a disruptive takeover or even, I’d argue, split it up.”

Unite is also clear that despite the recent troubles, GKN’s aerospace devision’s underlying performance is “very strong” and could be secured with long-term investment.

The union is warning the current management team’s restructure and cost cutting plan is as dangerous to GKN workers as the Melrose bid.

Unite’s GKN Filton convenor John Sweeney said, “The workforce are worried that the bid will be used as a lever to change terms and conditions even if we do remain with GKN.

“That even if the shareholders don’t accept the offer from Melrose, they’re going to want a pound of flesh from workers anyway.”