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Address: Post Office Box 55 Redditch, Worcestershire B98 0TL United Kingdom
Telephone: (01527) 517715 Fax: (01527) 517700 http://www.gknplc.com
Statistics: Public Company Incorporated: 1900 as Guest, Keen and Co. Limited Employees: 40,700 Sales: £4.64 billion (US$7.51 billion) (1999) Stock Exchanges: London Ticker Symbol: GKN NAIC: 336350 Motor Vehicle Transmission and Power Train Parts Manufacturing; 332117 Powder Metallurgy Part Manufacturing; 336411 Aircraft Manufacturing; 336412 Aircraft Engine and Engine Parts Manufacturing; 321920 Wood Container and Pallet Manufacturing; 562110 Waste Collection; 562210 Waste Treatment and Disposal; 562920 Materials Recovery Facilities; 811112 Automotive Exhaust System Repair
Our Vision: GKN is a global industrial company that is committed to growth and fosters entrepreneurship. We shall lead and excel in every market we serve. Our Mission: Create, grow and manage dynamically, a focused group of industrial businesses. Create an environment that encourages our people to realise their maximum potential. Exceed our customers' expectations through innovation, quality and total service. Achieve operational excellence. Deliver sustained outstanding value to our shareholders.
1759: Nine businessmen form an iron-smelting works in southern Wales called Dowlais Iron Works. 1767: John Guest becomes manager of Dowlais Iron Works, the beginning of the involvement of the Guest family in the business. 1851: The grandson of John Guest becomes sole owner of Dowlais Iron Company. 1854: John Sutton Nettlefold enters into a partnership to make custom woodscrews. 1856: Arthur Keen enters into a partnership to manufacture an automatic bolt-making machine. 1864: Keen's business goes public as the Patent Nut & Bolt Company. 1880: Sutton's business goes public as Nettlefolds Limited. 1900: Dowlais Iron Company and the Patent Nut & Bolt Company merge to create Guest, Keen and Co. Limited. 1902: Guest, Keen and Co. acquires Nettlefolds; the company changes its name to Guest, Keen and Nettlefolds Limited. 1920: Company acquires John Lysaght and with it, Joseph Sankey, maker of steel auto parts--marking GKN's entrance into the auto industry. 1951: The U.K. government nationalizes the steel industry, including GKN's steelmaking companies. 1955: The steel industry is denationalized and GKN buys back its steel companies. 1962: GKN enters the defense sector. 1966: Company acquires Birfield and its minority stake in Uni-Carden, maker of constant velocity joints. 1967: The company's steel operations, now called GKN Steel Company, are renationalized. 1974: One of the company's founding operations, the Dowlais plant, leaves the company orbit; GKN Chep, a joint venture pallet pooling service, is formed with Brambles Industries of Australia. 1981: GKN and Brambles join forces again to take over waste disposal firm Redland Purle, which is later known as Cleanaway. 1983: GKN acquires Meineke Discount Muffler Shops. 1986: Company adopts the name GKN plc; most of its remaining steel operations are divested. 1988: A minority stake in Westland, a U.K. helicopter maker, is acquired. 1994: GKN gains full control of Westland through a hostile takeover. 1995: Company makes its final exit from steelmaking. 1998: Company combines its armored vehicle operations with those of Alvis, in return for 29.9 percent stake in Alvis. 1999: GKN acquires Interlake Corporation. 2000: GKN and Finmeccanica of Italy merge their helicopter businesses into a 50--50 joint venture called AgustaWestland.
Born out of the early 20th-century mergers of three companies, GKN plc has evolved into a global industrial giant centered on three main businesses: automotive components, industrial services, and aerospace. In the automotive sector, GKN is a world leading manufacturer of driveline systems and constant velocity joints, and is also one of the largest producers of powder metal and powdered metal components--notably those used in automobiles--in the world. Industrial services includes four main businesses: Chep, a joint venture offering pooling services for pallets, automotive crates, and containers; Cleanaway, another joint venture and the leading waste management and recycling firm in Europe; Interlake Material Handling, a U.S.-based supplier of racking systems used in warehouses and distribution centers; and Meineke Discount Muffler Shops, a U.S. franchised chain of shops specializing in muffler and other car repair. In aerospace, GKN manufactures helicopters, supplies aircraft propulsion systems and components, and offers engineering services to clients in the aerospace, automotive, rail, marine, and defense sectors. The global nature of the company's operations are quite evident in its geographical revenue breakdown: about 39 percent of revenues are generated in the United Kingdom, about 31 percent on Continental Europe, and about 27 percent in the Americas.
Development of the Predecessor Companies
Although the mergers that created GKN took place at the beginning of the 20th century, the companies out of which GKN evolved were considerably older. The group, however, has changed so much in the intervening years that there is little left of its original elements. They were essentially family companies and typical of the entrepreneurial spirit responsible for the United Kingdom's leading position in the iron and steel industry during much of the 19th century.
One segment of the story begins in 1759 when nine businessmen formed an iron-smelting works at Dowlais in southern Wales that was initially called Dowlais Iron Works. John Guest took over as works manager in 1767. When Guest died, his son Thomas succeeded him and he was followed in turn by his son Sir Josiah 'John' Guest, an able entrepreneur, who raised the renamed Dowlais Iron Company to prominence and became its sole owner in 1851. Sir John Guest's wife, Lady Charlotte Guest, was one of the most striking characters to emerge in the company's formative years. After her husband's death in 1852 she ran the company for three years. In 1889 the company built a new integrated steel works on the coast at Cardiff, at which iron was produced from 1891 and steel from 1895.
The second strand of the tripartite merger is centered on Arthur Keen, who was responsible for the two mergers that created GKN. Keen went into business in 1856 with a U.S. businessman who had acquired the British patent rights for an automatic bolt-making machine. In 1864, the business went public as the Patent Nut & Bolt Company. Keen's requirement for steelmaking technology led to the amalgamation with the Dowlais Iron Company and the incorporation of Guest, Keen and Co. Limited in 1900.
The third element in the merger, Nettlefolds, was centered on the manufacture of custom woodscrews, and stemmed from a partnership comprising John Sutton Nettlefold and his brother-in-law Joseph Chamberlain, who in 1854 set up a woodscrew factory at Smethwick. The company flourished to become the leading screwmaker in the United Kingdom. In 1880 it took over the Birmingham Screw Company, and also registered as a public company, Nettlefolds Limited. Further diversification took place in 1887 when a wire-rods, steelhoops, bars, and wires plant was set up in Rogerstone, Newport.
1900s Through 1950s: Concentrating on Steel, Screws, and Fasteners
In 1902, Guest, Keen and Co. acquired Nettlefolds, linking companies with diverse activities in a bid to exploit the benefits of horizontal integration. The first chairman of the newly created company was Arthur Keen, under whom the business was consolidated. This consolidation, based upon steel, continued throughout the first half of the 20th century, with Guest, Keen, and Nettlefolds Limited moving into areas such as rolling, forging, pressing, stamping, and machining.
Arthur Keen died in 1915, to be succeeded by his son, Arthur T. Keen, who died in 1918. The company emerged from World War I still centered on steelmaking, fasteners, and coal mining, primarily aimed at the railway and construction markets.
In 1919 the Earl of Bessborough took over as chairman, and the company took the lead in the nut and bolt industry with the acquisition of F.W. Cotterill. The group continued on the acquisition trail with the takeover in 1920 of John Lysaght, which had subsidiaries involved in steelmaking and rerolling in the United Kingdom and Australia. This acquisition was particularly significant. With the Lysaght purchase came Joseph Sankey, which produced steel presswork, including wheels, chassis, and motor body parts, marking the group's entrance into the motor industry.
In 1920 Edward Steer, a member of the Nettlefolds family, became chairman, a position he was to hold until 1927 when H. Seymour Berry took over. After Berry's death following a riding accident in 1928, Sir John Field Beale headed the company. He was to preside over GKN during the Great Depression and the economic recovery of the 1930s.
In 1929 the steel industry was hit by the Great Depression, which resulted in a new wave of mergers. Three years later, the government introduced duties on imported steel to make domestic steel more attractive, and these moves, combined with rearmament in the latter part of the decade, provided the impetus for a further round of new investment in the industry.
Against this background, GKN continued to expand. In 1930 the group took over Exors. of James Mills, one of the world's largest manufacturers of bright steel bars, and entered the Swedish market with the acquisition of Aug. Stenman A.B., a Swedish manufacturer of hinges and fasteners. Four years later, the iron and steel operations of the Dowlais works, which had once stood at the forefront of the iron and steel industry, were transferred within the group to the Cardiff, Margam, and Port Talbot works of Guest Keen Baldwins Iron and Steel Company. This was a newly formed company created to acquire the heavy iron and steel operations of GKN Ltd. and Baldwins Ltd.
The company was expanding steadily under the chairmanship of Sir Samuel Beale, the younger brother of Sir John Field Beale. Sir Samuel Beale led GKN through World War II, and was to remain a director until 1957.
After the war, the Labour government set about economic reconstruction. The industry was asked to draw up a five-year plan for reorganization and modernization, to reverse the deterioration in its competitive position.
GKN expanded its iron-using and steel-using businesses, such as castings and pressings, to support the fast-expanding U.K. motor industry. J.H. Jolly took over as chairman in 1947, and in 1948, just three years before the nationalization of the steel industry, the group acquired Brymbo Steel Works in North Wales. In the same year it transferred its trading activities to two new companies. GKN (Midlands) took over the bolt and nut works at Darlaston and the screw works at Smethwick, while GKN (South Wales) Ltd. took over the rerolling works and wire and nail plants at Cardiff.
Then in 1951 came the much heralded and controversial Iron and Steel Act under which the three steelmaking companies, Brymbo, G.K. Baldwin, and John Lysaght, together with GKN (South Wales), were nationalized. Two years later Sir Kenneth Peacock took over as chairman.
Steel nationalization proved to be relatively short-lived, and with the return of the Conservative government the industry was denationalized in 1955. GKN bought back its four companies and at the same time Guest, Keen, Baldwins--which had been jointly owned with Baldwins and had been the group's largest source of steel supply--became a wholly owned subsidiary named Guest, Keen Iron and Steel Company.
1960s and 1970s: Major Transformation, Moving the Company into Defense and Auto Sectors
The group was still largely dependent on its original core businesses, but the 1960s were to see a transformation that gathered speed in the ensuing decades. During the 1960s, when the U.K. economy proved far less buoyant, GKN undertook major restructuring and reinforced its links with the growing motor industry, primarily through the acquisition of Birfield Ltd., which supplied components for the Austin-Morris mini. The group entered the defense-equipment market, winning an order for the FV432 armored personnel carrier for the British Army in 1962.
In 1967 the Labour government renationalized the steel businesses. Restructuring, which began in 1961 and was aimed at streamlining the businesses to make them more competitive, resulted in a series of subdivisions. The steel operations were the first to be restructured, with the creation of GKN Steel Company, which was nationalized in 1967.
The shake-up continued with the regrouping of its fastener, forgings, and castings, rolled and bright steel, building supplies and services, and engineering operations. GKN International Trading was created to deal with exports, and the group's overseas interests in Australia, New Zealand, South Africa, and Sweden were also reorganized. The group continued to expand in its traditional areas and to diversify, for example into gas-fired central-heating systems.
In 1963 GKN bought three suppliers of forgings to the motor industry: Ambrose Shardlow, in partnership with United Steel, Smethwick Drop Forgings, and Smith's Stampings. Three years later it took over the diversified Birfield Ltd., which brought with it a 39.5 percent stake in Uni-Cardan AG, a European automotive-components maker based in West Germany. GKN later raised its stake in Uni-Cardan to nearly 100 percent. The Uni-Cardan acquisition proved to be of primary significance to the group's strategy. Among Uni-Cardan's products were constant velocity joints, which permit the full transmission of torque from a car's engine to the wheels. These joints, originally designed for front-wheel-drive vehicles, were to play a crucial role in the growth of GKN's automotive business both at home and abroad.
In 1969 GKN unveiled a joint venture with Broken Hill Proprietary (BHP) of Australia to build a new steel complex at Westernpoint, Australia. The complex was constructed in two phases, the second of which was completed in 1978. The following year GKN sold its half interest to BHP.
In the 1970s GKN continued to increase its involvement in the automotive business and to build up its presence in distribution at home and abroad and its investment in service businesses. The decade also posed major problems. In the latter part of the 1970s the group's chairman Sir Barrie Heath, who took over from Sir Raymond Brookes in 1975, had to contend with hyperinflation, the oil crisis, and a collapse in demand for steel and automotive parts.
During the chairmanship of Sir Barrie, a management committee under Trevor Holdsworth undertook strategic restructuring to pull the company through, moving out of Australia and broadening the manufacturing base in the United States.
During the 1970s, GKN acquired a large number of small distribution companies, largely in the fastener and steel sectors. It later extended this strategy to automotive components, signaling a move into vehicle-parts and accessories distribution on a worldwide scale. The acquisitions continued on the steel and automotive sides, including Kirkstall Forge Engineering, the largest independent manufacturer of heavy-duty axles in the United Kingdom.
In 1974 the Brymbo Steel Works were returned to GKN by the then government-owned British Steel Corporation (BSC) in exchange for GKN Dowlais, in a deal which, while ending the group's long historical association with the Dowlais plant, gave it an internal source of supply. In the same year GKN took another significant step on the steel side with the purchase of Miles Druce & Company, making GKN the largest steel stockholder in the U.K. private sector. In 1974 GKN invested in the services sector with the formation of the United Kingdom's first national cargo-pallet hire pool, GKN Chep, with Brambles Industries of Australia.
In 1976, GKN stepped up its attack on the U.S. market with the formation of GKN Automotive Components Inc. to supply constant velocity--universal--joints for the new generation of front-wheel-drive cars. Within a year the group announced a further U.S. move, unveiling plans to set up a production plant, costing $50 million, in Sanford, North Carolina. Three years later, GKN announced that a second constant-velocity joint factory was to be built in North Carolina, in Alamance County, costing some $80 million. The two plants were commissioned in 1980 and 1981.
In 1977, the group was still stepping up investment in steelmaking and rerolling with the opening of a new rod mill and steel works in Cardiff, costing £52 million. It announced a £48 million rolling mill for Brymbo Steelworks.
The group's U.S. involvement was enhanced in 1979 with the acquisition of Parts Industries Corporation of Memphis, Tennessee, the fourth largest vehicle parts and accessories distributor in the United States. It raised its European profile in this area with the purchase from Unilever of Unigep Group of France and in the United Kingdom with the purchase of Armstrong Autoparts and Sheepbridge Engineering, both possessing large distribution chains.
The company sold off operations that did not fit into its strategy, which in 1979 included its 50 percent stake in John Lysaght (Australia) and the divestment of GKN Bolts and Nuts Ltd., one of the pillars of the company when it was formed in 1902. This sector had been suffering heavy financial losses.
The year 1979 also brought its frustrations. GKN had bid for Fitchell and Sachs, the largest supplier of car parts in West Germany, after taking a minority stake in 1976. After three years of patient negotiations, however, the bid was blocked by the West German courts.
At the end of the decade, GKN set about further restructuring which reflected the increasing importance of automotive components and the nonmanufacturing businesses. It was preparing for the 1980s, which were to prove another period of rapid change, under the initial chairmanship of Sir Trevor Holdsworth, who retired in 1988, and then of David Lees.
1980s: Major Moves into Industrial Services
The cold wind of recession hit the group in the early 1980s, and the decade started with a shock. GKN announced a loss of £1 million for 1980, the first since it was incorporated in 1902. Sir Trevor Holdsworth, who was responsible for fundamental changes to group strategy, set about slimming down and reshaping the group. Its workforce, for instance, had shrunk from 93,000 in 1980 to 38,000 when he retired. As the new structure evolved, the group moved out of steel, further internationalized through local investments and joint ventures, built up the automotive side, and developed industrial service businesses from its involvement in distribution.
The decade brought a series of sales and acquisitions, reflecting deep-rooted changes. In 1981 GKN and Brambles of Australia took a 50/50 interest in Redland Purle, the largest private-sector waste-disposal operator in the United Kingdom. The business is now known as Cleanaway Ltd. In the same year there was another major change when GKN and BSC merged their steel rerolling and associated businesses to create Allied Steel and Wire Ltd. In the following year, when the group became Guest, Keen and Nettlefolds plc, it won a large contract from the British Army for its Saxon armored personnel carrier.
In 1983, another strand of the business took shape with GKN and Costain of the United Kingdom merging their scaffolding and building-services operations to create GKN Kwikform, which became a market leader in the United Kingdom. That year the group expanded further in the United States with the acquisition of Meineke Discount Muffler Shops, one of the largest franchised exhaust-system fitters, while in the United Kingdom it set up a facility to produce fiberglass-reinforced road springs for commercial vehicles. Another success in the defense area came in 1984 when the group was awarded a contract for its Warrior tracked armored personnel carrier.
During 1984 and 1985, the group expanded its vehicle-parts-distribution businesses in the United States, and in Australia with the acquisition of Quinton Hazell Automotive. Viscodrive GmbH was created in West Germany to develop viscous drive-control units and a year later, in 1985, Viscodrive Japan and Translite were set up to market the units and composite leaf springs to the Japanese motor industry.
Another name change came in 1986 when the group became GKN plc, reflecting the move away from its original businesses. This change was underlined when in the same year the group sold its steel-stockholding operations and merged its engineering steels and forgings activities with BSC to form United Engineering Steels, with operating assets of about £600 million.
The group's international expansion continued apace. In 1986 and 1987, GKN made further European acquisitions in Spain and Italy, in the driveshaft and powder metallurgy areas, respectively. During 1987 it became a market leader in vending services following several acquisitions, and sold Allied Steel and Wire, which did not fit in with its strategy. In 1988 the group sold off the underperforming GKN Autoparts distribution business.
Also in 1988 the group hit the headlines by taking a 22.02 percent stake in Westland, the troubled U.K. helicopter and aerospace group. The deal roughly doubled the group's defense sales, which then accounted for about five percent of its £2 billion turnover.
It also forged an alliance with Jaguar cars. The two companies created a joint venture to supply all the major body pressings for the Jaguar/Daimler range of saloon and high-performance sports cars. In the United States GKN made some important changes, selling its imported-vehicle-parts distribution business and expanding the distribution of domestic-vehicle parts through the acquisition of Mid-America Industries.
In 1989 the group reported record pretax profits of £214.8 million, a far cry from the beginning of the decade. During that decade the group's emphasis had clearly shifted overseas. Sales of the U.K. subsidiaries in 1989 accounted for less than 37 percent of total sales of £2.7 billion against 68 percent a decade before. The transformation of GKN from its original businesses was quite apparent in the breakdown by sector at the end of the 1980s: the automotive side accounted for 61 percent of sales; industrial services, 35 percent; and defense, four percent.
1990s and Beyond: Strengthening a Three-Legged Structure
GKN suffered in the early 1990s as recession cut into automobile sales in the United Kingdom and elsewhere, including the major U.S. market. The company's defense operations also felt the effects of the economic downturn as the aerospace sector was hit particularly hard. Under the leadership of Lees, GKN once again responded aggressively during recession, further streamlining operations through a series of divestments. Along with more recently acquired businesses, such as vending and scaffolding, GKN also severed its ties to its remaining founding operations. The last of the fasteners operations were jettisoned, and in February 1995 the company's only tie to steelmaking, its 40 percent stake in United Engineering Steels, was sold off. GKN had recovered sufficiently by 1994 to take the bold--if widely criticized at the time&mdashtion of a hostile takeover of Westland, completed for approximately £557 million. By 1996 Westland had orders totaling £4 billion (US$6.2 billion) for its Lynx, SuperLynx, and EH101 helicopters. Other key moves during the first half of the decade included the extension of Chep into the lucrative U.S. market and the expansion of the automotive components business into the fast-growing markets of Asia and Latin America.
In late 1996 a jury in Charlotte, North Carolina, ruled against GKN and its Meineke subsidiary in a class-action lawsuit brought in 1993 on behalf of 2,500 franchisees and former franchisees of Meineke. The plaintiffs had charged that GKN and Meineke had defrauded them out of millions of dollars of payments that were earmarked for the chain's advertising fund. In March 1997 a federal judge set the damage award at US$591 million but this was reduced two months later to US$390 million. While it appealed, GKN was forced to take a provision of £270 million (US$436 million) in its 1996 accounts to cover the award, leading to a net loss for the year of £187 million (US$302 million). In August 1998, however, a U.S. appeals court overturned both the ruling and the damage award, freeing GKN to write back £248 million (US$413 million) in its 1998 accounts, swelling net profits that year to £567 million (US$941 million).
Meanwhile, in January 1997, Lees, in a possibly unprecedented move for GKN, ventured outside the company to find the person he hired that month as chief executive, Chung Kong Chow. Lees had decided to split the chairman and chief executive positions, and to remain nonexecutive chairman. Chow, a citizen of Hong Kong, had been chief executive of BOC Gases, the main division of the industrial gases group BOC.
In late 1997 Chow set a goal of increasing annual sales, which then stood at £3.38 billion (US$5.61 billion), by 40 percent over the next five years. Acquisitions were slated to fuel this growth in part, and one of the key areas for such growth was the company's powder metallurgy division, which was part of the automotive components operations. Using the technology of sintered metal, which involved the compressing of granules of iron and other materials, GKN was able to make light, strong auto parts--and there were applications outside the auto industry as well. After acquiring Sinter Metals in 1997, GKN made several more acquisitions in this field in 1998 and 1999, including six in the latter year alone. The most significant acquisition of the late 1990s came in February 1999, when the company acquired Interlake Corporation, based in Lisle, Illinois, for £348 million (US$570 million). Interlake brought to GKN not only a powdered metals firm called Hoeganaes Corporation but also Chem-tronics Inc., a maker of lightweight aircraft engine components that became part of GKN's aerospace unit, and Interlake Material Handling Inc., a manufacturer of racking systems used in warehousing that was added to the company's group of industrial services subsidiaries.
GKN also restructured its aerospace and defense operations in the late 1990s. In late 1998 the company combined its armored vehicle business with that of Alvis plc in return for a 29.9 percent stake in Alvis. In mid-2000 GKN reached a final agreement with Finmeccanica S.p.A. of Italy on a merger of their respective helicopter businesses into a 50--50 joint venture called AgustaWestland, which instantly became the number two helicopter maker in the world, trailing only the Boeing Company. Then in October 2000 GKN announced that it had agreed to acquire from Boeing a factory in St. Louis, Missouri, where fuselage and wing parts for certain Boeing military aircraft were made. In conjunction with this purchase, GKN said that it would combine all of its aerospace operations, with the exception of the AgustaWestland venture, under a newly created subsidiary called GKN Aerospace Services.
Already by 1999, GKN was approaching Chow's goal of a 40 percent revenue increase as sales reached £4.64 billion (US$7.51 billion), a 37 percent increase over 1997. Net income for 1999 stood at £358 million (US$579 million). Already considered the top U.K. engineering firm as a result of the market leading companies that comprised GKN's three legs, GKN under Chow's leadership was attempting to shed its reputation as an establishment firm run by engineers and accountants and adopt a more entrepreneurial culture and more growth-oriented focus. Chow was expected to pursue additional acquisitions to drive growth in the early 21st century.