Airbus’ fears over Melrose plans

Unite members are not the only ones anxious about Melrose’s takeover of engineering firm GKN. Reiterating its worries yesterday (April 11), GKN’s biggest customer Airbus told investors that the firm – Europe’s largest plane-maker – had continuing concerns over Melrose’s plans.

“We did not take a hard-nose decision yet, but we have concerns,” Airbus chief executive Tom Enders said at the firm’s annual meeting in Amsterdam on Wednesday (April 11). “It’s clear our aviation business is a long-term business and private equity is relatively volatile, short term. We certainly prefer industrial investors who commit to the business on a longer-term scale than on a short-term scale.”

Enders’ speech comes just two weeks after Airbus said, days before the takeover was approved on March 29, that it would be “practically impossible” to give new work to GKN if Melrose became the new owners.

“The nature of our industry is one that requires a commitment to long-term investment and strategic vision,” Chief operating officer of Airbus’s commercial aircraft division Tom Williams told the Financial Times at the time.

“The industry does not lend itself to shorter-term financial investment which naturally reduces R&D budgets and limits vital innovation. It would be practically impossible for us to give any new work to GKN under such an ownership model when we don’t know who will be the long-term investor.”

Sales to Airbus account for about 20 per cent of GKN’s aerospace business.

Unite assistant general secretary Steve Turner highlighted Airbus’ importance, saying that it is “GKN’s single biggest customer whose close working relationship on major civil and defence aerospace projects sustains thousands of highly skilled jobs.”

“Airbus’s repeated warnings should have alarm bells ringing furiously in Whitehall and highlights the need for business secretary Greg Clark to call the bid in,” he said.

Unite is now seeking meetings with both the business secretary and defence minister Gavin Williams to lobby the government to intervene on national security grounds since GKN makes parts for the Chinook, F-35 and Tornado, among other military aircraft.

Clark said that the government would consider intervening once it has assessed evidence from the Ministry of Defence (MoD) and other parties.

Lord Heseltine, a former defence minister, has been one of many prominent voices who have supported blocking the takeover on defence grounds, saying last month that “no other country would let this happen.”

Airbus’ second intervention

Airbus’ second intervention yesterday comes as the latest company accounts reveal that Melrose’s top bosses earned more than £170m last year alone – and stand to gain even more post-takeover.

Unite assistant general secretary Tony Burke said that the eye-watering earnings of Melrose bosses show that “Melrose has always been a company that exists solely to make money for its executives and their shareholders – they are not an engineering firm like GKN is.”

“Our big concern now is how long is Melrose actually going to be in the automotive and aerospace industries. They’ve said they would commit to staying five years in aerospace but it is our view that the sector requires a lot longer than that – 15 to 20 years – to bring in the necessary investment to be successful.”

Burke said Unite is now lobbying for a wholesale overhaul of the UK’s notoriously weak takeover laws.

“Above all there must be laws in place to take into account the national interest, our manufacturing sector and Britain’s wider industrial strategy,” he said.

“The situation we have now is that the UK is essentially like a shop – the doors are wide open, nobody’s in the shop, and the keys to the safe are hanging up behind the till saying ‘take me.’ We must have stronger legislation to protect our industries and jobs.”