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GKN in aerospace tie-up with Boeing

01 November 2000

British engineering group GKN Plc said it was buying assets from Boeing Co in a deal under which its aerospace unit becomes a strategic supplier to the U.S. firm's military aircraft and missile systems group. GKN, which is paying 44 million pounds ($64.09 million) for Boeing's structural fabrication assets in St Louis, Missouri, also said it was restructuring its struggling aerospace division to improve efficiency and financial performance. The car parts-to-helicopter group, which has underperformed the automobiles sector by about two percent this year, was down 10 pence or 1.4 percent at 720 pence at 0815 GMT. The assets deal with Boeing -- under which GKN would make components for the U.S. company's military aircraft programmes -- was expected to generate revenue of about $1.8 billion over five years, with some $300 million in 2001. The business would initially employ around 1,200 people. GKN is setting up a new division, GKN Aerospace Services, as part of a restructuring to take advantage of the trend by major aerospace firms to focus on their core activies. The unit would consolidate GKN's aerospace manufacturing in seven facilities in Europe and the United States, including St Louis. The restructuring would involve the closure of manufacturing facilities in Avonmouth, near Bristol in the UK and at Carson and Wallingford in the United States, as well as the sale of the actuation unit, Sitec, in Germany. Work will be transferred to the other units. The rationalisation was expected to result in an exceptional cost of around 68 million pounds, including eight million pounds of goodwill and 23 million of asset write-downs. However, the new division was expected to generate revenues of some 550 million pounds in 2001 and near double digit profit margins before tax and interest by the year after. ``This restructuring will allow GKN Aerospace services to significantly improve efficiency and financial performance,'' GKN said in a statement. GKN said the weakness seen in the aerospace division in the first half of the year, owing to programme delays and start-up relatedcosts, had continued in the third quarter. The division saw operating profits decline to 46 million pounds in the first six months of 2000, down from 64 million the year before. However, the group said its industrial services division was growing strongly while its automotive businesses were perforning well in Europe. The automotive driveline unit in North America was continuing to grow despite softer market condions. GKN also said the merger of its Westland unit with Italian helicopter maker Agusta was proceeding well and that regulatory clearance was expected soon.






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