GKN logged a 4-percent cut in pretax profit in the first quarter of 2013 to £119 million ($181.3 million), due to a restructuring charge as well as the declining vehicle production in Europe, Japan and India. According to the British engineering group, its profits were badly affected in part by a £23-million restructuring charge related to job cuts in Europe and Japan.
The UK supplier’s trading margin dropped 0.7 percentage points to 7.4 percent. Profits at its Driveline division, which manufactures vehicle components like driveshafts, chassis and axles, succumbed to a 20-percent drop after suffering from weak demand, especially in continental Europe. Driveline, whose customers include Volkswagen, General Motors Co. and Ford Motor Co., accounts for around 55 percent of GKN’s total profits.
Margins at Driveline dropped to 6 percent in the first three quarters of 2013 from 7.6 percent in the same period in 2012. This could be attributable to the slumping demand for new vehicles in Europe as consumers try not to make expensive purchase while the current economic crisis in the region continues.
In contrast, the US market is going strong while the Asia market remains volatile. Vehicle sales in Europe have dropped 9.7 percent in the first quarter of 2013, forcing some carmakers to reduce their 2013 expectations.