GKN: Leading in our chosen markets
JP Morgan Cazenove CEO Conference
Nigel Stein | CEO, GKN plc | 13 June 2013
Our strategy
Lead in
chosen
markets
Be the best at what we do - focus
#1 or 2 in our markets, or plan to get there
Leverage
global
footprint
Positioned close to our customers
Strong in high growth markets
Use established footprint to go faster
Technology
driving
margin
Best products to meet customers needs
“Something special” to bring to our customers
Technology sustains differentiation
Operational
excellence
Safety is our No1 priority
Excellence in everything we do
Engage with our people
Sustain above
market growth
Achieve profitable growth ahead of our markets
Balanced approach: growth, margin and ROIC
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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: Proforma GKN 2012 sales
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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)
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Well balanced portfolio
Commercial
Sales by market 2012
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
Worldwide defence spending remains
subject to budget cutbacks
70%
External forecasts
Military split
US
87%
Europe
13%
Note: Engine Systems proforma 12 months of 2012
Latest forecast growth rates –
2013 to 2018:
− Civil: 3% to 4% CAGR
− Military: Flat near term; Future uncertain
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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
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
Comme
Commercial
rcial
LTA
24%
RRSP
59%
MRO
9%
Integration progressing well
Military/
Space
8%
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Engine Systems Sales E2013
GKN Aerospace – Well positioned for the future
Ship set values $m
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JP MORGAN CAZENOVE CEO CONFERENCE
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
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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
13.7
13.0
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
India
6.4%
10.2%
4.5
6.1
ASEAN
6.7
4.4%
10
19.9
4.1
5
4.5
5.6
2013
2018
0
2013
2018
2013
2018
2013
Source: IHS Automotive LV forecast Feb. 2013, GKN analysis.
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2018
Vehicle segment and platform trends
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
Millions
Share of
Growth
2013-2018
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
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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.
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*Emerging product segment
Balanced global footprint with rising AWD contribution
Sales by region of origin 2012
Asia
29%
Europe
37%
All-Wheel Drive
CVJ Systems
Americas
34%
61% of
Sales
39% of
Sales
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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
− Geographic footprint
− Broad customer base
− Strength in growth markets
Technology leadership /
increasing AWD content
− Response to tighter legislation
− Customer co-developments
− Fuel-efficient products
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JP MORGAN CAZENOVE CEO CONFERENCE
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
Global # 1
18% global share
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Diverse customer base
75% automotive/
25% industrial
3,000 customers
globally
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
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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.”
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JP MORGAN CAZENOVE CEO CONFERENCE
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
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JP MORGAN CAZENOVE CEO CONFERENCE
2018
Market Share Gain
− Market concentration ongoing
− Mega-platforms awarded to
global PM players
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)
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JP MORGAN CAZENOVE CEO CONFERENCE
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
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JP MORGAN CAZENOVE CEO CONFERENCE
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
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
Leverage GKN technology to increase content
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
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JP MORGAN CAZENOVE CEO CONFERENCE
Drivers to progress through the margin range
Trading Margin
GKN Driveline
2012 FY
Targets
Technology sustains margin
progression
7.3%
8 - 10 %
− 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
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JP MORGAN CAZENOVE CEO CONFERENCE
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
Profitability growth
Business
performance
Increasing EPS, cash
flow & dividends
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