GKN pensions war intensifies

A FRESH war of words erupted yesterday between GKN and suitor Melrose Industries over who can best look after the engineer’s 32,000 pensioners.

With just over a week before shareholders must decide whether to back Melrose’s £8.1billion hostile approach, GKN insisted it could protect its schemes and dismissed its rival’s claims as “misleading”. Melrose has offered to invest up to £1billion into GKN’s pension fund, having originally said it would inject £150million.

Part of GKN’s defence involves merging its automotive business with US auto parts group Dana, which would involve transferring a chunk of its scheme liabilities and deficit.

Melrose argued that this would leave GKN’s remaining aerospace business “overburdened” with up to £3billion of pension liabilities, equivalent to 11 times its trading profit.

The schemes have an estimated deficit of £1.1billion. GKN said that under a binding agreement with trustees it had agreed actions to eliminate the funding gap of its UK schemes, remove the need for expected future cash contributions and reduce their liabilities.

GKN finance director Jos Sclater said: “A month ago, Melrose appeared to suggest that its plan to pay £150million into the pension scheme was sufficient. Now it appears to have unveiled a £1billion plan that would achieve less than GKN’s own agreement with the trustees.”

Melrose countered: “GKN are seeking to hide the true picture. The ratio of liabilities to profits at its aerospace business is enormously above what is considered appropriate for a public company.

“GKN’s pledge to reduce that liability to almost £2.2billion – still far too high to be respectable – relies on frowned-upon short-term actions such as buying out pensioners from future benefits.”