GKN warned today that plummeting demand from the world's carmakers was biting into profits and forcing it to shed jobs in its automotive components businesses.
All 1,400 of the company's temporary workers in the sector will be laid off by the end of the year and around three quarters of its 50 plus automotive related factories around the world are bringing in measures to reduce production.
The company said its aerospace business was performing strongly and demand at its Offhighway operations, which primarily make parts for agricultural machinery, was still solid. However it warned that "lead indicators" for civil aerospace and Offhighway were now "negative and we expect softening of demand in this markets in 2009."
A number of carmakers, including several in the UK, have announced plans to curb production and today the German car manufacturer Daimler was reported to be planning to double the Christmas/new year stoppage period at two of its big production venues, Sindelfingen and Untertuerkheim.
In the US the Swedish components maker, SKF, said it was moving production of automotive seals in Illinois to other plants in the US and Mexico to maintain competitiveness.
Carmakers are scaling back production in response to falling demand as consumers become more cautious about spending on big ticket items and finance becomes harder to get in the wake of the credit crunch.
GKN employs around 42,000 people worldwide, including 5,000 in the UK, of which around half work in the automotive components operation.
According to GKN, at most, only a handful of workers in Britain will be affected by lay off of temporary staff, though it is unclear if the restructuring of the business will mean further job cuts.
Keith Hodgkinson, the GMB officer who represents nearly 1,500 members in GKN at Telford, said: "GMB has been aware for some time of the precarious situation regarding demands for the automotive products manufactured at Telford.
"We have in place an agreement with the company that members who wish to opt to leave the company via voluntary redundancy are free to do so and over the last few quarters more than 100 workers have taken up this option.
"We are seeking further information from the company following their statement."
GKN said it was expecting automotive component sales in the fourth quarter to be 15% lower than last year and 20% down on the first half of 2008. The restructuring programme is being drawn up on the basis that automotive components demand in 2009 would be around 8% lower than 2008.
The company also warned that it would review its final dividend, with one broker suggesting it could be cut by 5p a share.
Overall GKN said group pre-tax profit for both the fourth quarter and the whole of 2008 would be materially below its earlier guidance. The full-year figure was likely to be 20% down on the £255m for 2007.
The company insisted its financial position remains strong. It said it was pressing ahead with the deal to acquire the Airbus wing component manufacturing plant in Filton and expected the acquisition to be completed by January.
"The positives are a proven track record in taking costs out and the benefits of the low cost manufacturing realignment programme of the last four years combined with its market shares," said analysts at Evolution Securities.
