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Tuesday, 28 October 2008
GKN, the automotive and aeroplane parts manufacturer, is axing 1,400 jobs, cutting factory production time and forecasting annual profits a fifth lower than last year, as worldwide car production slams on the brakes.
Around 500 jobs have already gone – in the US – and another 900 will go globally by the end of the year. All the lay-offs will be of temporary staff, of which there are 100 in the UK, the company says.
Some 37 of GKN's 60 plants across the world are already stopping lines or instituting short shifts, and although the group's four Midlands factories have not been affected so far, they may yet feel the squeeze as the cost-reduction scheme is worked out in detail.
The problem is a precipitous decline in the car industry, which represents two-thirds of GKN's business. ""Looking forward for the year as a whole, we are now experiencing significant further deterioration in demand in automotive markets globally,"" the company said in a statement yesterday.
GKN is forecasting fourth-quarter revenues – compared with 2007 – down by 15 per cent in Europe, by 16 per cent in the Americas and by 10 per cent in Asia Pacific. China and Japan will see double-digit declines, the company said. Fourth-quarter profits will be down by between £10m and £12m, and full-year pre-tax profit around 20 per cent lower than 2007's £255m total. The company's shares closed down 9.79 per cent at 106p.
The gloomy numbers from GKN are just the latest in a string of negative announcements from the automotive industry and Moody's, the ratings agency, downgraded both Renault and Peugeot yesterday – in both cases because of the company's downward revisions of their operating margin targets for the year.
Last Friday, Peugeot Citroen vowed to ""massively"" cut production after a 5.2 per cent slump in third-quarter sales, predicting a 17 per cent contraction of the total European car market in the fourth quarter. Chrysler, the US manufacturer, announced plans for 5,000 redundancies by the end of the year, a day after Daimler described its 20 per cent stake in the company as effectively worthless.
The UK has not escaped. Nissan said last week it was stopping the Micra production line at its flagship Sunderland factory for several weeks, to be followed by another three weeks of short shifts. No permanent staff will lose their jobs but some temporary contracts will be cancelled, the Japanese company said. Jaguar/Land Rover and Ford have also slowed production at UK factories because of softening demand.
Meanwhile, the Government announced yesterday that motor manufacturers will be invited to bid to take part in a £10m project to run electric car and ultra-low-carbon vehicle demonstration projects, while another £20m goes to research into related technologies. Green motoring could create up to 10,000 new jobs and preserve thousands more, the Government said. Lord Mandelson, the Secretary of State for Business, said: ""Investment in greener motoring forms part of our plan to put the UK at the forefront of the new low-carbon revolution. We know our automotive sector has a global reputation for taking forward new technology and we want the UK to be at the heart of new developments in electric vehicles.""
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