Introduction to GKN
Wednesday 11 September 2013
Guy Stainer
Strategy
Creating long-term
shareholder value
Four strong divisions
Lead in chosen
markets
Growth target:
Above market
Leverage global
footprint
Technology driving
margin
Operational
excellence
Margin
Group target:
8-10%
Sustain above
market growth
Investor Visit – Introduction to GKN – 11 September 2013
2
BUSINESS
PERFORMANCE
Increasing cashflow,
EPS and dividends
ROIC
Target: 20%
Financial overview 2012*
Sales
Profit before tax
ROIC
£6,904m
£493m
18.0%
2011: £6,112m
2011: £417m
2011: 18.3%
Earnings per share
Total dividend
Net debt
26.3p
7.2p
£871m
2011: 22.6p
2011: 6.0p
2011: £538m
*Numbers presented on a management basis, 2012 restated for IAS19 revised
Investor Visit – Introduction to GKN – 11 September 2013
3
The changing shape of GKN
Rebalancing profit contributions
Top 10 customers – c.50% Group Sales
Boeing
VW
GE
Land
Systems
Driveline
Ford
UTC
Aerospace
EADS
GM
Powder
Metallurgy
JLR/
Tata
Fiat/
Chrysler
Renault /
Nissan
Automotive
Aerospace
Source: 2013 consensus trading profit
Source: Pro forma 2012 sales
Investor Visit – Introduction to GKN – 11 September 2013
4
GKN Driveline – An excellent global footprint
GKN Driveline
end-2012
£3.24 billion
Sales
U.K.
France
Spain
Italy
Slovenia
Turkey
United
States
c.22,000
Employees
45 Plants
22 Countries
Sweden
Poland
Germany
South
Korea
Japan
China
India
Mexico
Thailand
Manufacturing plant
Singapore
Colombia
Taiwan
Malaysia
Joint Venture
Corporate office /
Engineering centre
Brazil
Investor Visit – Introduction to GKN – 11 September 2013
5
Australia
Substantial growth opportunities in global markets
Light vehicle production by region 2013 - 2018 (million units)
North America
Europe
2.2%
US & Canada
2.0
West Europe
5.2%
-0.4%
2.7
8.3
8.1
2018
2013
2018
2.1
East Europe
4.0
2.9
Japan
Russia
4.0%
Mexico
CAGR
2013
4.5
6.0
4.6
13.1
13.0
13.7
S. Korea
16.0
2007
2013
2018
2007
0.4%
14.1
11.9
2013
2018
China
4.3
4.4
2013
2018
28.8
7.7%
South America
6.4%
4.5
6.1
India
ASEAN
10.2% 6.7
4.4%
10
19.9
4.1
5
4.5
5.6
2013
2018
0
2013
2018
2013
2018
2013
2018
Source: IHS Automotive LV forecast Feb. 2013, GKN analysis.
Investor Visit – Introduction to GKN – 11 September 2013
6
Leading positions in our core product segments
CVJ Sideshafts
GKN
NTN
Nexteer
Hyundai WIA
Wanxiang/Neapco
Propshafts
GKN
Dana
IFA Rotorion
American Axle
JTEKT
AWD PTU/FDU
AWD Couplings
Performance Diffs
Electric Axle*
GKN
JTEKT
GKN
GKN
Magna
BorgWarner
Eaton
Magna
Dymos
GKN
American Axle
American Axle
Hyundai Wia
Honda
Dana
BorgWarner
American Axle
Magna (inc. WIA JV)
JTEKT
Linamar
Source: GKN estimated rankings on 2013 basis; excludes in-house.
Investor Visit – Introduction to GKN – 11 September 2013
7
*Emerging product segment
Balanced global footprint with rising AWD contribution
Sales by region of origin 2012
Asia
29%
Europe
37%
All-Wheel Drive
Americas
34%
CVJ Systems
61% of
Sales
39% of
Sales
Investor Visit – Introduction to GKN – 11 September 2013
8
Vehicle segment and platform trends
Share of
Growth
2013-2018
Sub-Mini (A)
9%
Small (B)
17%
Lower Med. (C)
22%
Upper med. (D)
7%
2007 (70.6m)
Executive (E)
3%
2013 (82.7m)
MPV
SUV
19%
Pickup
4%
LCV's
10%
5
10
15
20
Light Vehicle Production (m)
120
100
27%
Other
80
60
40
20
28%
32%
21%
29%
39%
15%
25
2007
Large
platforms
500k-1m
58%
52%
Mega
platforms
1m+
0
9%
2018 (103.6m)
0
The rise of mega-platforms
Million vehicles
Global light vehicle production
by segment
2013
2018
Small and medium platforms outperform
due to Asia influence
SUVs drive continuing AWD growth
Mega-platforms an important driver
Source: IHS Automotive LV Forecast February 2013
Investor Visit – Introduction to GKN – 11 September 2013
9
Positioned to continue outperforming the market
Global LV market growth
Mega-platforms
AWD systems content
Mega-platforms and
AWD growth and content
GKN Driveline target growth c.2% ahead of market
Unrivalled global
positioning
Technology leadership /
increasing AWD content
− Geographic footprint
− Broad customer base
− Strength in growth markets
− Response to tighter legislation
− Customer co-developments
− Fuel-efficient products
Investor Visit – Introduction to GKN – 11 September 2013
10
Globally competitive
− Increasingly lean and agile cost
structure
GKN Powder Metallurgy – the industry leader
Hoeganaes
Powder production
240,000 tons of powder
per year
Global # 2
22% global share
Sinter Metals
Component manufacture
6 billion parts per year
many applications
Diverse customer base
Global # 1
18% global share
Investor Visit – Introduction to GKN – 11 September 2013
11
75% automotive/
25% industrial
3,000 customers
globally
Design for PM – Drives margins
“…is the design and application of products using the unique characteristics of powder
metal to produce parts which cannot be made economically using alternative technologies.”
Investor Visit – Introduction to GKN – 11 September 2013
12
Accelerated trend towards design for PM
Key growth drivers
Automotive products
Fuel efficiency
Reduced emissions
Electrification
P-Rotor Pump components
Differential gears
Torque converter
Weight and space saving
Sales by product type
Variable valve timing components
Magnetic clutches
Industrial products
Hoeganaes
17%
Sintered
components
- industrial
10%
Sintered
components
- automotive
73%
Connecting rod
Pneumatic silencer
Rotor parts
Surgical instruments
Parts for prosthetic knee joints
Investor Visit – Introduction to GKN – 11 September 2013
13
Footprint in high growth markets
70
Million Vehicles
60
Brasil
China
Russia
Mexico
India
Growing presence and capability
in the key emerging markets
50
40
30
20
10
0
2013
2018
India
Today # 1
Extending Capacity
New Greenfield plant under
review
Brazil
China
Today # 7  2018 # 2
Expansion of existing facility
New plant opening Q4/2013
Develop powder capability
Today # 2
Plan for Expansion in 2014
Mexico and Russia under review
Investor Visit – Introduction to GKN – 11 September 2013
14
GKN Powder Metallurgy market outperformance
LV Market
m vehicles
Global LV market growth
PM Market
2013
104
2018
5.6
£m
PM market growth driven by
new technology trends
83
GKN Powder Metallurgy
outperformance c.3% above LV market
4.3
2013
Unique “Design for PM”
capability
Global manufacturing and
engineering footprint
− Innovative design
− Technically enhanced powders
− Advanced process technology
− Product and process engineering
capability in all regions
− Growing presence in high growth
markets
2018
Market Share Gain
− Market concentration ongoing
− Mega-platforms awarded to
global PM players
Investor Visit – Introduction to GKN – 11 September 2013
15
GKN Aerospace
Sales $3.5 billion
35 sites, 12,000 people
World-class product portfolio
% of 2012 Pro-forma sales
53%
Aerostructures
42%
Engine Systems & Structures
5%
GKN Aerospace
Wing; Fuselage
North America
Nacelle &GKN
Pylon;
Engine systems and services
Aerospace
Europe
Special products
Transparencies and Protection Systems
Aerospace North America
Aerospace Europe & Special Products Group
Aerospace Engine Systems (Volvo Aero)
Investor Visit – Introduction to GKN – 11 September 2013
16
GKN Aerospace - markets and customers
Market
Business
Mix
Sector
Customer base
Investor Visit – Introduction to GKN – 11 September 2013
17
GKN Aerospace – World class product portfolio
J-UCAS Fuselage
B747-8 Exhaust
A380 Fixed Trailing Edge
A350XWB Rear Spar
B787 Cabin Windows
B787 Anti-icing System
V22 Fuel Tanks
CH53K Aft Fuselage
A400M Engine Intake
F35 Canopy
A330 Flap Skins
B787 Floor Grid
B787 Inner Core Cowl
Engine
Structures
Fuel Transportation
Engine
Rotatives
AW101 Canopy
Silicone Seals
B767 Winglet
Flying
Surfaces
HondaJet Fuselage
Fuselage
Sections
Ariane 5 Exhaust nozzle
Nacelle &
Pylon
Full Engine MRO & Support
Engine Products &
Services
Investor Visit – Introduction to GKN – 11 September 2013
18
HondaJet Cockpit
Window
Transparencies
& Coatings
Fuel tanks
Protection
Systems
Well balanced portfolio
Sales by market 2012
Commercial
Large commercial aircraft – record order
backlog (8,500 aircraft, >$1 trillion)
Military
Commercial
30,000 aircraft forecast to be delivered
2013 to 2032
30%
Military
70%
Worldwide defence spending remains
subject to budget cutbacks
External forecasts
Latest forecast growth rates –
2013 to 2018:
Military split
US
87%
Europe
13%
− Civil: 3% to 4% CAGR
Note: Engine Systems proforma 12 months of 2012
− Military: Flat near term; Future uncertain
Investor Visit – Introduction to GKN – 11 September 2013
19
GKN Aerospace Engine Systems
3rd largest Tier 1
aero-engine
partner
OEM for the RM12
engine for Gripen
aircraft
EU centre of
excellence - space
turbines & nozzles
MRO facility for gas
turbines and small
engines
Components for aircraft
engines and gas turbines
Military aircraft
engines
Sub-systems for
rocket engines
Engine
services
Volvo Aero acquired 1 October 2012
Positions on most major new Civil Aerospace
platforms
Risk & Revenue Sharing Partner (RRSP) on
many platforms; provides Life of Program
participation
Significant aftermarket content (c.30%) providing
profitable long term revenue streams
Integration progressing well
Comme
Commercial
rcial
LTA
24%
RRSP
59%
MRO
9%
Military/
Space
8%
Investor Visit – Introduction to GKN – 11 September 2013
20
Engine Systems Sales E2013
GKN Aerospace – Well positioned for the future
Ship set values $m
Investor Visit – Introduction to GKN – 11 September 2013
21
GKN Land Systems: Attractive growth markets
Land Systems
Market
£4bn
Agriculture
39% of Sales
Macro Drivers
Increasing population
Changing eating patterns
Segment Growth
2013-18
3%-5%
(CAGR)
Climate changes
Land Systems
Market
£6bn
Construction,
Mining & Utility
11% of Sales
Urbanisation
Infrastructure
Segment Growth
2013-18
4%-6%
(CAGR)
Increased mass transit
Raw material demand
Land Systems
Market
£8bn
Industrial
27% of Sales
Globalisation
Energy availability/costs
* Based on 2012 sales. 23% Other (mainly automotive aftermarket and structures)
Investor Visit – Introduction to GKN – 11 September 2013
22
Segment Growth
2013-18
3%-5%
(CAGR)
GKN Land Systems offers unique technology coverage
From Power
Source
Segment
Presence
GKN
Position
Key
Competitors
To Power
Applied
Ind.
Ag. &
CE.
Ind.
Ag. &
CE.
Ag. &
CE.
#2
#2 or #3
Niche
Ag.
Altra
Renold
KTR
Centa
Rexroth
Altra
KEB
Dana
Altra
Brevini
Bonfiglioli
Ag.
CE. &
Ind.
#1 Ag
#2 CE
Dana
Comer
Bondioli
Weasler
Ind.
Ind.
Ag. &
CE.
Ag.
CE. &
Ind.
#1 or #2
(Material
Handling)
Niche
(Material
Handling)
Niche
Ag. & CE.
#1 or #2
Svenborg
Carlisle
KEB
Altra
Mayr
Linak
Oerlikon
Titan
Mefro
Wheels
India
Brands
Investor Visit – Introduction to GKN – 11 September 2013
23
GKN Group: Growth of sales above our markets
GKN Land Systems
GKN Aerospace
Innovation insertion in key new programs
Customer demand for global suppliers
New aircraft platforms move into rate production
Demand for efficient, reliable power management
solutions
Application of composite and light weight metallic
technology
Customer partnerships on key, high-growth platforms
GKN Driveline
Leverage GKN technology to increase content
New market penetration - globalisation
GKN Powder Metallurgy
Growth in all wheel drive increases content
Innovative products for more fuel efficient vehicles
Strong market share in high growth regions
Increasing global/mega platforms
New product application of PM technology
Higher performance trends create Design for PM
opportunities
Unique parts and powder capability
Geographic expansion into high growth regions
Investor Visit – Introduction to GKN – 11 September 2013
24
Drivers to progress through the margin range
Trading Margin
GKN Driveline
2012 FY
Targets
7.3%
8 - 10 %
Technology sustains margin
progression
− Light weight
− Fuel efficiency
GKN Powder
Metallurgy
GKN Aerospace
10.0%
11.2%
9 - 11 %
− Electrification
11 - 13 %
Operational excellence provides
foundation
− Lean and flexible cost structure
GKN Land Systems
9.4%
8 - 11 %
− Optimising supply chain
− Value driven pricing
Group
8.1%
8 - 10%
= in the range
Investor Visit – Introduction to GKN – 11 September 2013
25
Results for the six months to 30 June 2013
Good first half
Sales up 12% to £3.87bn
Management PBT up 5% to £278m
£25m restructuring costs included in H1
A350 pic
EPS down 3%; Interim dividend increased by 8%
On xx 2013 the A350 successfully performed its
maiden flight
All divisions performing well
Engine Systems (Volvo Aero) made strong contribution to
GKN Aerospace
GKN Driveline reported good organic sales growth
GKN Powder Metallurgy delivered excellent margin
GKN Land Systems maintained strong operational
discipline
Investor Visit – Introduction to GKN – 11 September 2013
26
A balanced approach to Growth, Margin and ROIC
Growth
above market
Increasing content per
platform
Strength in high growth
markets
Target Margin
8% to 10%
ROIC
>20%
Technology underpins Margin
Focussed capital allocation
Operational excellence
Profitable growth
Business
performance
Increasing EPS, cash
flow & dividends
Investor Visit – Introduction to GKN – 11 September 2013
27
Birmingham Plant (BIR)
1
Ground Floor Orientation Plan
No Smoking on
site except
designated areas
Production Area
Main Office
Meeting
Room 2
Meeting
Room 1
Meeting
Room 4
Human
Resources
Reception
Meeting
Room 3
Employee
Entrance
Security
Fire Alarm test
Mondays at 11am
Main Car Park
Smoking
Area
2
GKN Group
at a glance
3
3
GKN Executive Committee
Nigel Stein
Chief Executive
Marcus
Bryson
Chief Executive Aerospace
& Land Systems
Andrew
Reynolds
Smith
Chief Executive Automotive
Bill
Seeger
Finance
Director
4
Judith
Felton
Company
Secretary
Doug
McIldowie
Human Resources
Director
4
Delivering to our markets
GKN Driveline
The worlds’ leading
supplier of
automotive driveline
systems
and solutions,
including
all-wheel drive.
GKN Powder
Metallurgy
The world’s largest
manufacturer of
sintered components,
predominantly to the
automotive sector
5
GKN Aerospace
GKN Land Systems
A leading first tier
supplier to the
global aviation
industry focussing
on aerostructures,
engine systems and
products and
specialty products
A leading supplier of
technologydifferentiated power
management solutions
and services to the
agricultural,
construction, industrial
and mining sectors
5
GKN Driveline
driving tomorrow’s technology
6
6
GKN Driveline Executive Team
Andrew
Reynolds
Smith
Chief Executive Automotive
& Powder Metallurgy
7
GKN Driveline – CVJ Systems
efficient thinking
the technology leader in CVJ sideshafts
> weight, space and fuel savings
> improved efficiency
> solutions provider
> most extensive range of CVJs
> widest global footprint
> manufacturing CVJs in 21 countries
8
GKN Driveline – AWD Systems
dynamic thinking
the global leader in efficient all-wheel
drive systems
> unique capability to develop and
manufacture full AWD Systems
> world-class engineering over many years
> optimised components through full system
understanding
9
GKN Driveline – Trans Axle Solutions
unlimited thinking
a leader in conventional and controlled
differentials for transmissions and axles
> manufacturing in all regions of
the world
> full product range
> established and experienced player
10
GKN Driveline – eDrive Systems
electrified thinking
a pioneer in advanced electric and
hybrid drivelines
> systems leadership capability
> standard product range
> 250,000 vehicles on the road
> eTransmissions success in each
major automotive region
> broader range of motors
11
Customer brands
12
GKN Driveline – global footprint
13
GKN “AWD Systems” Plants
Asia Pacific
Americas
Europe
GKN Driveline Nagoya
GKN Driveline Newton
GKN Driveline Köping
GKN Driveline Tochigi
GKN DL Bowling Green
GKN Driveline Bruneck
GKN Driveline Shanghai
14
14
GKN Driveline – engineering footprint
3 Research & Product
Development Centres
7 Global Product Centres
10 Application Engineering
centres
2 Proving Grounds
15
GKN Driveline European
16
GKN driveline Europe
17
GKN Driveline Birmingham organisation
Plant Director
BIR
Adam Nock
Operations
Functions
VS Manager
Andrew Ferber
FI-CO / IT
Technology
Julian Fitzsimmons
Manufacturing
Engineering
Dean Trappett
Human Resources
Alison Eldridge
Supply Chain
Management
Astrid Leggewie
Purchasing
Richard Hughes
Quality Mgt
Stuart Reynolds
Customer
Relationship Mgt
Bryan Black
Risk Management
Peter Middleton
Site Serv.Maint
SEO Env’t
Peter Middleton
18
GKN Driveline – Product Segments
CVJ Systems
AWD Systems
Trans Axle Solutions
eDrive Systems
CV Joints
Propshafts
Differentials
eAxles
Sideshafts
Transfer Units
Limited Slip & Locking
Differentials
eTransmissions
AWD Couplings
Disconnects
Final Drive Units
19
eMotors
GKN Driveline Birmingham - History
Hardy, Spicer & Company was formed in in 1925
Moved to new premises on the Chester Road in the 1956-58
Coincided with the development in 1956 of The “Birfield (CV) Joint” and
with the launch of the Mini which utilised the CVJ in its FWD design
1966 GKN acquires Birfield Group
1970/80’s CVJ 5.5m pa / c.2000 people
1986 NMUK commences production of the Bluebird
1992 TMUK commences production of the Carina E
1993 UK Ops formed HSP / BEX / BRD
Automotive Driveline Division HQ
2004 re-named Driveline Birmingham
2005 Southworks vacated and sold
2009 Site Consolidation
20
GKN Driveline Birmingham - Today
Established
1925
Location
Erdington, Birmingham
Products
Sideshafts, Propshafts & Associated Components
Main Customers
JLR, Toyota, Nissan, Renault, Dacia, Honda, Fiat, Volvo, Bentley, Lotus, AMG
Total Area
48,000 m²
Quality
TS16949 Certified
Environment
ISO14001 Certified
Health & Safety
OSHAS 18001 Certified
21
GKN Driveline Birmingham - Products
Sideshafts
Propshafts
22
Side-shafts & Components
Fixed Outer Race
(Bell)
Driveshaft
Plunging Autor Race
(Short Tulip)
Cage
Supplied from
Other GKN Co.
Inner Race
Barshaft
Solid manufactured BIR
Monobloc Tubeshaft supplied from other GKN Co.
23
Propshafts & Components
Vehicle Flange
F
Rubber Coupling
CVJ Joints
DTF Joints
24
Crash Features
Cardan Joints
Jaguar Land Rover Programmes
Propshaft & Side-Shafts
Supply Locations
Second Tier
All UK plants, currently
supporting India &
China
ZF on side-shafts
25
25
UK Transplant Customer Programmes
Toyota
Side-shaft
Supply Locations UK, Japan,
South Africa,
Nissan
Propshaft & Side-shafts
Supply Locations UK, Russia
Honda
Propshaft & Side-shafts
Supply Locations UK, USA
26
26
Other Customer Programmes
Other Customer Summary:
Propshaft & Side-shafts
Supply Locations
27
UK, Italy, USA,
Sweden, Belgium,
Romania, Russia,
France, Poland
BIR Lean Evolution
Faraday 2009 -2011
Value Stream Phase 1-2011
Value Stream Phase 2-2012
Value Stream Phase 3-2013
28
Drives a Theme review H&S across every plant and every process to implement
lessons learnt.
Use of external experts and auditors to ensure best practice.
Roll out of
to provide guidance, training and ee-tools across every
manufacturing site in designated safety corners.
Quarterly Safety Activity reporting
RADAR (Risk Awareness Detection Action Review)
Machinery Risk
Personal Protective Safety Equipment
Safety Devices
H&S has always been and remains our top priority.
29