introduction to gkn · tata eads . utc ge boeing . the changing ... light vehicle production by...

Wednesday 11 September 2013 Guy Stainer

Introduction to GKN

Investor Visit – Introduction to GKN – 11 September 2013 2

Strategy

Creating long-term shareholder value Four strong divisions

Lead in chosen markets

Leverage global footprint

Technology driving margin

Operational excellence

Increasing cashflow, EPS and dividends

BUSINESS PERFORMANCE

Growth target: Above market

Margin Group target:

8-10%

ROIC Target: 20%

Sustain above market growth


Financial overview 2012*

Earnings per share Total dividend Net debt

Sales Profit before tax ROIC

£6,904m

2011: £6,112m

£493m

2011: £417m

18.0%

2011: 18.3%

26.3p

2011: 22.6p

7.2p

2011: 6.0p

£871m

2011: £538m

*Numbers presented on a management basis, 2012 restated for IAS19 revised


Driveline

Powder Metallurgy

Aerospace

Land Systems

VW

Ford

GM

Renault / Nissan Fiat/

Chrysler

JLR/ Tata

EADS

UTC

GE

Boeing

The changing shape of GKN

Top 10 customers – c.50% Group Sales Rebalancing profit contributions

Source: Pro forma 2012 sales Source: 2013 consensus trading profit

Automotive Aerospace


GKN Driveline – An excellent global footprint

GKN Driveline end-2012

£3.24 billion Sales

c.22,000 Employees

45 Plants 22 Countries

Brazil

India

U.K. France Spain Italy Slovenia Turkey

Malaysia

Thailand

Colombia Singapore

Taiwan

Japan United States

China

South Korea

Australia

Mexico

Manufacturing plant Joint Venture Corporate office / Engineering centre

Sweden Poland Germany


16.0 11.9 14.1

4.5

4.6 6.0

2007 2013 2018

West Europe East Europe

13.1 13.0 13.7

2.0 2.9 4.0

2007 2013 2018

US & Canada Mexico

Light vehicle production by region 2013 - 2018 (million units)

Source: IHS Automotive LV forecast Feb. 2013, GKN analysis.

Substantial growth opportunities in global markets

8.3 8.1

2013 2018

Japan

4.3 4.4

2013 2018

S. Korea

19.9

28.8

2013 2018

China

2.1 2.7

2013 2018

Russia

4.5 6.1

2013 2018

South America

4.1 6.7

2013 2018

India

4.5 5.6

0

5

10

2013 2018

ASEAN 6.4% 10.2% 4.4%

7.7%

0.4%

-0.4% 5.2%

CAGR

2.2% 4.0%

North America Europe


Leading positions in our core product segments

Source: GKN estimated rankings on 2013 basis; excludes in-house.

Propshafts GKN Dana IFA Rotorion American Axle JTEKT

CVJ Sideshafts GKN NTN Nexteer Hyundai WIA Wanxiang/Neapco

AWD Couplings JTEKT BorgWarner GKN Honda Magna (inc. WIA JV)

Performance Diffs GKN Eaton American Axle Dana JTEKT

*Emerging product segment

Electric Axle* GKN Magna American Axle BorgWarner Linamar

AWD PTU/FDU GKN Magna Dymos Hyundai Wia American Axle


Balanced global footprint with rising AWD contribution

Sales by region of origin 2012

Europe 37%

Americas 34%

Asia 29%

39% of Sales

All-Wheel Drive

61% of Sales

CVJ Systems


Share of Growth

2013-2018

9%

17%

22%

7%

3%

9%

19%

4%

10%

0 5 10 15 20 25

Sub-Mini (A)

Small (B)

Lower Med. (C)

Upper med. (D)

Executive (E)

MPV

SUV

Pickup

LCV's

Light Vehicle Production (m)

2007 (70.6m)

2013 (82.7m)

2018 (103.6m)

Vehicle segment and platform trends

Source: IHS Automotive LV Forecast February 2013

0

20

40

60

80

100

120

2007 2013 2018

Mega platforms

1m+

Large platforms 500k-1m

Other

Global light vehicle production by segment

The rise of mega-platforms

39% 52%

58% 29%

21%

15% 32%

28%

27%

Small and medium platforms outperform due to Asia influence SUVs drive continuing AWD growth Mega-platforms an important driver

Milli

on v

ehic

les


Positioned to continue outperforming the market

Global LV market growth

Mega-platforms and AWD growth and content

GKN Driveline target growth c.2% ahead of market Unrivalled global

positioning Technology leadership / increasing AWD content Globally competitive

− Geographic footprint − Broad customer base − Strength in growth markets

− Response to tighter legislation − Customer co-developments − Fuel-efficient products

− Increasingly lean and agile cost structure

AWD systems content Mega-platforms


GKN Powder Metallurgy – the industry leader

Global # 2 22% global share

Global # 1 18% global share

3,000 customers globally

Hoeganaes Powder production

240,000 tons of powder per year

Sinter Metals Component manufacture

6 billion parts per year many applications

Diverse customer base 75% automotive/ 25% industrial

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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.”


Accelerated trend towards design for PM

Key growth drivers Fuel efficiency

Reduced emissions

Electrification

Weight and space saving

Variable valve timing components

Torque converter Differential gears

Industrial products

Sintered components - automotive

73%

Sintered components - industrial

10%

Hoeganaes 17%

Sales by product type

P-Rotor Pump components

Magnetic clutches

Surgical instruments

Pneumatic silencer

Rotor parts

Connecting rod

Automotive products

Parts for prosthetic knee joints


India Today # 1

Extending Capacity

New Greenfield plant under review

Footprint in high growth markets

Mexico and Russia under review

0

10

20

30

40

50

60

70

2013 2018

Mill

ion

Vehi

cles

Brasil Russia IndiaChina Mexico

Growing presence and capability in the key emerging markets

Brazil Today # 2

Plan for Expansion in 2014

China Today # 7 2018 # 2

Expansion of existing facility

New plant opening Q4/2013

Develop powder capability


PM Market

LV Market

GKN Powder Metallurgy market outperformance

Global LV market growth 83 104

2013 2018

m v

ehic

les

4.3 5.6

2013 2018

£m

Unique “Design for PM” capability

Global manufacturing and engineering footprint Market Share Gain

− Innovative design − Technically enhanced powders − Advanced process technology

− Product and process engineering capability in all regions

− Growing presence in high growth markets

− Market concentration ongoing − Mega-platforms awarded to

global PM players

GKN Powder Metallurgy outperformance c.3% above LV market

PM market growth driven by new technology trends


GKN Aerospace North America

GKN Aerospace Europe

GKN Aerospace

Aerospace North America Aerospace Europe & Special Products Group Aerospace Engine Systems (Volvo Aero)

Special products Transparencies and Protection Systems

Engine Systems & Structures Nacelle & Pylon; Engine systems and services

Aerostructures Wing; Fuselage

Sales $3.5 billion 35 sites, 12,000 people World-class product portfolio

53%

42%

5%

% of 2012 Pro-forma sales


GKN Aerospace - markets and customers

Customer base

Market

Sector

Business Mix

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GKN Aerospace – World class product portfolio

Transparencies & Coatings

Fuselage Sections

Nacelle & Pylon

Flying Surfaces

Protection Systems

A380 Fixed Trailing Edge

Ariane 5 Exhaust nozzle

B787 Inner Core Cowl

A400M Engine Intake

B747-8 Exhaust

HondaJet Cockpit Window

AW101 Canopy

F35 Canopy

B787 Cabin Windows

Fuel tanks

Silicone Seals

Fuel Transportation

V22 Fuel Tanks

B787 Anti-icing System

A350XWB Rear Spar

A330 Flap Skins

B767 Winglet

J-UCAS Fuselage

CH53K Aft Fuselage

B787 Floor Grid

HondaJet Fuselage

Engine Products & Services

Engine Rotatives

Engine Structures

Full Engine MRO & Support


30%

70%

Military

Commercial

Sales by market 2012

Note: Engine Systems proforma 12 months of 2012

Well balanced portfolio

US 87%

Europe 13%

Military split

Commercial

Large commercial aircraft – record order backlog (8,500 aircraft, >$1 trillion)

30,000 aircraft forecast to be delivered 2013 to 2032

Military

Worldwide defence spending remains subject to budget cutbacks

External forecasts

Latest forecast growth rates – 2013 to 2018:

− Civil: 3% to 4% CAGR − Military: Flat near term; Future uncertain


GKN Aerospace Engine Systems

Military aircraft engines

Sub-systems for rocket engines

Engine services

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

RRSP 59%

Military/ Space

8%

MRO 9%

Commercial LTA 24%

Commercial

Engine Systems Sales E2013

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


GKN Aerospace – Well positioned for the future

Ship set values $m


GKN Land Systems: Attractive growth markets

Construction, Mining & Utility

Industrial

Segment Growth 2013-18 3%-5% (CAGR)

Agriculture



Land Systems Market £4bn

39% of Sales

Macro Drivers

Increasing population

Changing eating patterns

Climate changes

Urbanisation

Infrastructure

Increased mass transit

Raw material demand

Globalisation

Energy availability/costs


11% of Sales


27% of Sales

* Based on 2012 sales. 23% Other (mainly automotive aftermarket and structures)


GKN Land Systems offers unique technology coverage

Ind. Ag. & CE.

Ind. Ag. & CE.

Ag. & CE.

Ag. CE. & Ind.

Ind. Ind. Ag. & CE.

Ag. CE. & Ind.

#2 #2 or #3 Niche Ag.

#1 Ag #2 CE

#1 or #2 (Material Handling)

Niche (Material Handling)

Niche Ag. & CE. #1 or #2

Altra Renold

KTR Centa

Rexroth Altra KEB

Dana Altra

Brevini Bonfiglioli

Dana Comer

Bondioli Weasler

Svenborg Carlisle

KEB

Altra Mayr Linak

Oerlikon Titan Mefro

Wheels India

Segment Presence GKN Position Key Competitors Brands

From Power Source

To Power Applied


GKN Group: Growth of sales above our markets

GKN Driveline GKN Powder Metallurgy

GKN Land Systems GKN Aerospace

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

Innovation insertion in key new programs

New aircraft platforms move into rate production

Application of composite and light weight metallic technology

Customer partnerships on key, high-growth 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

Customer demand for global suppliers

Demand for efficient, reliable power management solutions

Leverage GKN technology to increase content

New market penetration - globalisation


Technology sustains margin progression − Light weight

− Fuel efficiency

− Electrification

Operational excellence provides foundation − Lean and flexible cost structure

− Optimising supply chain

− Value driven pricing

Trading Margin 2012 FY Targets

GKN Driveline 7.3% 8 - 10 %

GKN Powder Metallurgy 10.0% 9 - 11 %

GKN Aerospace 11.2% 11 - 13 %

GKN Land Systems 9.4% 8 - 11 %

Group 8.1% 8 - 10%

Drivers to progress through the margin range

= in the range


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 EPS down 3%; Interim dividend increased by 8%

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

On xx 2013 the A350 successfully performed its maiden flight

A350 pic


Increasing EPS, cash flow & dividends

A balanced approach to Growth, Margin and ROIC

ROIC >20%

Growth above market

Target Margin 8% to 10%

Business performance

Focussed capital allocation

Profitable growth

Technology underpins Margin

Operational excellence

Increasing content per platform

Strength in high growth markets

1

Birmingham Plant (BIR)

2

Ground Floor Orientation Plan

Meeting Room 2

ReceptionMeeting Room 3

Meeting Room 1

Main Office

Production Area

Employee Entrance

Security

Meeting Room 4

Human Resources

Main Car ParkSmoking

Area

Fire Alarm test Mondays at 11am

No Smoking on site except

designated areas

3 3

at a glanceGKN Group

4 4

Nigel SteinChief Executive

Marcus Bryson

AndrewReynolds

Smith

Bill Seeger

Doug McIldowie

Judith Felton

GKN Executive Committee

Chief Executive Aerospace & Land Systems

Chief Executive Automotive FinanceDirector

Company Secretary

Human Resources Director

5 5

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

GKN Aerospace

A leading first tier supplier to the global aviation industry focussing on aerostructures, engine systems and products and specialty products

GKN Land Systems

A leading supplier of technology-differentiated power management solutions and services to the agricultural, construction, industrial and mining sectors

6 6

driving tomorrow’s technology

GKN Driveline

7

GKN Driveline Executive Team

AndrewReynolds

Smith

Chief Executive Automotive & Powder Metallurgy

8

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

9

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

>

>

>

10

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

11

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

12

Customer brands

13

GKN Driveline – global footprint

14

GKN “AWD Systems” Plants

14

GKN DL Bowling Green GKN Driveline Bruneck

GKN Driveline KöpingGKN Driveline Newton

GKN Driveline Tochigi

GKN Driveline Nagoya

GKN Driveline Shanghai

EuropeAmericasAsia Pacific

15

GKN Driveline – engineering footprint

3 Research & Product Development Centres

7 Global Product Centres

10 Application Engineering centres

2 Proving Grounds

16

GKN Driveline European

17

GKN driveline Europe

18

GKN Driveline Birmingham organisation

Risk ManagementPeter Middleton

ManufacturingEngineering

Dean Trappett

FI-CO / ITTechnology

Julian Fitzsimmons

VS ManagerAndrew Ferber

CustomerRelationship Mgt

Bryan Black

Quality MgtStuart Reynolds

PurchasingRichard Hughes

Supply ChainManagement

Astrid Leggewie

Human ResourcesAlison Eldridge

Plant DirectorBIR

Adam Nock

Operations Functions

Site Serv.MaintSEO Env’t

Peter Middleton

19

GKN Driveline – Product Segments

CVJ Systems AWD Systems Trans Axle Solutions eDrive Systems

CV Joints

Sideshafts

Propshafts

Transfer Units

AWD Couplings

Disconnects

Final Drive Units

Differentials

Limited Slip & Locking Differentials

eAxles

eTransmissions

eMotors

20

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) J oint” andwith the launch of the Mini which utilised the CVJ in its FWD de sign

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

GKN Driveline Birmingham - History

21

Established 1925

Location Erdington, Birmingham

Products Sideshafts, Propshafts & Associated Componen ts

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

GKN Driveline Birmingham - Today

22

Sideshafts

Propshafts

GKN Driveline Birmingham - Products

23

Cage

Inner Race

Fixed Outer Race(Bell)

Barshaft

Driveshaft

Solid manufactured BIRMonobloc Tubeshaft supplied from other GKN Co.

Plunging Autor Race(Short Tulip)

Supplied from Other GKN Co.

Side-shafts & Components

24

Propshafts & Components

Rubber Coupling CVJ Joints Crash Features Cardan Joints

F

Vehicle Flange

DTF Joints

25

Jaguar Land Rover Programmes

25

Propshaft & Side-Shafts

Supply Locations All UK plants, currentlysupporting India & China

Second Tier ZF on side-shafts

26

UK Transplant Customer Programmes

26

ToyotaSide-shaftSupply Locations UK, Japan,South Africa,

NissanPropshaft & Side-shaftsSupply Locations UK, Russia

HondaPropshaft & Side-shaftsSupply Locations UK, USA

27

Other Customer Programmes

Other Customer Summary:

Propshaft & Side-shafts

Supply Locations UK, Italy, USA, Sweden, Belgium, Romania, Russia, France, Poland

28

Faraday 2009 -2011

Value Stream Phase 1-2011



BIR Lean Evolution

29

Drives a Theme review H&S across every plant and every process to implement Drives a Theme review H&S across every plant and every process to implement Drives a Theme review H&S across every plant and every process to implement Drives a Theme review H&S across every plant and every process to implement lessons learnt.lessons learnt.lessons learnt.lessons learnt.

Use of external experts and auditors to ensure best practice.Use of external experts and auditors to ensure best practice.Use of external experts and auditors to ensure best practice.Use of external experts and auditors to ensure best practice.Roll out of to provide guidance, training and eRoll out of to provide guidance, training and eRoll out of to provide guidance, training and eRoll out of to provide guidance, training and e----tools across every tools across every tools across every tools across every

manufacturing site in designated safety corners.manufacturing site in designated safety corners.manufacturing site in designated safety corners.manufacturing site in designated safety corners.Quarterly Safety Activity reportingQuarterly Safety Activity reportingQuarterly Safety Activity reportingQuarterly Safety Activity reportingRADAR (Risk Awareness Detection Action Review)Machinery RiskPersonal Protective Safety EquipmentSafety Devices

H&S has always been and remains our top priority.H&S has always been and remains our top priority.H&S has always been and remains our top priority.H&S has always been and remains our top priority.

introduction to gkn · tata eads . utc ge boeing . the changing ... light vehicle production by...

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