‘Inadequate assurances’ for GKN slammed

Business secretary Greg Clark today (March 27) stepped in over the GKN takeover bid from Melrose, just 48 hours before investors are to vote on the iconic engineering firm’s future.

Investors face the choice of either approving the £8.1bn debt-fuelled takeover – which would see GKN placed under the auspices of ‘turnaround specialist’ Melrose, a firm known for restructuring businesses and selling them on for a profit only a  few years later – or backing the long-term GKN management plan.

In a letter to GKN published today (March 27), Clark sought assurances from Melrose if the takeover goes through over concerns Unite and others have raised over Melrose’s intentions.

Chief among these concerns is the firm’s commitment to UK industry, given GKN is a major engineering company employing 6,000 people in the UK alone.

In Melrose’s response to the business secretary, chief executive Simon Peckham gave only vague commitments and would not give assurances over jobs.

Unite assistant general secretary for aerospace Steve Turner called Clark’s intervention “too little, too late from the government”.

“The assurances that the government claims to have secured are unenforceable, short-term and completely inadequate,” he said. “They seem to be more about getting this takeover off the ground than sustaining a long-term future for our aerospace industry.

“It is doubtful that even these limited assurances are worth much more than the paper they’re written on, or are actually legally enforceable by either the government or the takeover panel.  No deal should be struck on the basis of false promises.”

Turner explained that the long-term nature of GKN’s business – designing and engineering a new product can take five to fifteen years to develop – means that Melrose is not up to the job.

“Melrose, with its short-term, profit-first business model, is simply not a long-term investor,” he said. “The fact remains that if the government wants this country to have an aerospace industry in ten, fifteen, twenty years to come, it has to stop this bid.”

Turner added that there are “also serious concerns that a Melrose takeover is not in the defence or national security interests of either the UK or its allies.

“The UK government has a responsibility to defend our national interests, to protect our current and future defence capabilities and listen seriously to growing concerns about this bid, not look to pave the way for it,” he said.

Unite concerns raised in House

Unite’s concerns were raised today in the House of Commons during a debate following news of the assurances the business secretary sought from Melrose this week.

Shadow business secretary Rebecca Long-Bailey demanded to know why Clark waited until the 11^th hour to approach Melrose about last-ditch assurances, and she criticised him for not asking enough of the firm.

“Many of the things the government asked for were weak and meaningless,” she said. “For example, when the government asked to maintain a UK workforce, what did they mean? Is one employee in the UK enough to fulfil this condition?”

Long-Bailey agreed with Unite that most of the assurances given in Melrose’s letter are not legally binding. Labour MPs during the debate pointed to the promises Kraft made when it took over Cadbury that were later broken.

Labour MP Jack Dromey, who has led the campaign in Parliament against the takeover, slammed what Melrose has offered so far – only a five year commitment to the business in an industry that must think 15 years ahead; less money on research and development; no guarantee that all new business will be undertaken in the UK and no assurances over GKN’s auto division Driveline.

‘Simply not good enough’

“This is simply not good enough – and these are ‘guarantees’ that do not go far enough,” he said.

MPs reiterated Unite’s concerns over national security, with Labour MP Wayne David noting that Melrose included only one sentence in its letter giving any assurances over defence. Other MPs highlighted Clark’s powers to intervene in the public interest over defence concerns.

Clark told MPs that he would act under advice of the Ministry of Defence and other parties to determine later if he should block the takeover on national security grounds but did not give any indication when this would happen.

Unite assistant general secretary for manufacturing Tony Burke slammed Melrose’s assurances to Greg Clark as “inadequate”.

“Unite asked Melrose for assurances on job security and investment but they would not make the commitment to us,” he said. “Greg Clark should have stepped in weeks ago as Unite asked and sought guarantees and assurances from Melrose.

“If GKN falls to Melrose on Thursday this will be a terrible blow to UK manufacturing and engineering,” Burke added.  “Any last vestige of a manufacturing strategy will be in tatters.

“It will also be further confirmation that our takeover laws are inadequate and leave good UK companies vulnerable to hedge funds and speculators.

“Eight years on from the takeover of Cadbury, businesses in this country is still too easily able to be destabilised by short-term, profit-hunters,” Burke went on to say. “The government has sat back on the sidelines while the City operates like a casino in which jobs and communities are gambled away.”

Stay tuned on UNITElive for more after shareholders vote on the takeover on Thursday (March 29).