Melrose clamps down on loss-making contracts at GKN

GKN-owner Melrose promised to turn around loss-making contracts on Thursday as it swerved problems in the car industry.

The FTSE 100 group, which won an £8 billion hostile bid for the company, said a review of GKN’s sales had found that 10% of sales were loss-making.

The company, which said it would no longer enter into loss-making contracts, hopes to get that profitable by making the factories more efficient.

Finance chief Geoffrey Martin said: “It’s real evidence [GKN was] entering stuff it shouldn’t have done. We can correct that by changing the cost base of GKN. There’s lot of work to do there.”

Melrose clinched a bitter takeover battle against GKN’s incumbent management last March.

The company tripled pre-tax profits to £703 million, excluding accounting provisions, and sales boomed from £2 billion to £9.1 billion to account for the addition of GKN.

GKN supplies 90% of the world’s car manufacturers and Melrose said it had seen signs of a slowdown but cutting costs meant it would not cause “a major impact” on profits for this year.