GKN needs to sharpen up
THE trouble with former Chancellor George Osborne’s ‘march of the makers’ is that so many of Britain’s big engineers are not up to scratch.
We are not alone in this, as illustrated by the plans of newish GE boss John L Flannery to split open America’s premier industrial conglomerate.
Whatever the dispute about the value of the ‘ fake’ premium in the £7.4bn Melrose offer for GKN it has galvanised the Redditch-based engineer into action.
After a muddled search for a chief executive, GKN appointed Anne Stevens, who always wanted to run her own show.
It also rejects the idea that it devised a ‘ hasty break- up’ on the spur of the moment. It claims it has been working on the separation of its aerospace work from its driveline car division, which supplies many of the world’s leading motoring marques, for some time.
Melrose identifies poor profit margins as a problem. Chris Miller of Melrose suggests better outcomes could be achieved with an efficiency drive.
As Warren East has found at premier engineering brand Rolls-Royce, performance has been dogged by excessive bureaucracy. East has been working to winnow out surplus managers and duplicated production.
The Rolls chief is now seeking to narrow what the aero engine maker does, with the possible sale of its commercial marine operation. Some 2,000 jobs already have been lost in naval manufacturing over the last three years.
Doubtless there is room for GKN, which boasts 259 years of history, to undertake a similar exercise and deliver benefits.
Melrose thinks that if it shifts management functions from the centre to divisions it can make the company work better for investors. With the right kind of willpower GKN could make the changes itself.
Melrose has the right ideas but if it means chucking out heritage and UK command and control. That would be a mistake. Too often hostile takeovers of UK companies (Cadbury is the best example) are fought on price and won by hedge funds rather than longer-term investors who ought to know the value of culture.
It would be a pity if GKN is simply setting up a straw man defence only to allow it to be blown away if Melrose were to increase the cash in the offer.
Cooking the books
AMONG the big concerns for the Silicon Valley giants is that an irascible Donald Trump might become a Teddy Roosevelt style trust-buster by turning his fire on digital royalty.
Tim Cook of Apple is playing him like a violin. In addition to handing bonuses to all staff, Apple is to repatriate billions of dollars in profits held overseas to the US.
Apple’s commitment is to create 20,000 new American jobs and open a second US campus to accommodate everyone.
As when Jeff Bezos of Amazon promised a second HQ, the Apple pledge is provoking a scramble among US cities for jobs, local tax income and prestige.
Cook is promising to lift capital expenditure by £21.6bn. Apple spent £7.8bn in 2017 and intends to invest £11.5bn this year. That will still leave it headroom to increase dividends and do share buybacks. Apple will continue to make the flagship iPhone overseas. But it will seek to step up component production at home, which is just what Trump wanted.
The second Apple campus will be more modest than Cupertino. It will largely be a technical support centre for Apple’s growing collection of developers and creators who market through the App Store.
With an estimated £144bn of profits parked overseas, Cook has plenty of scope to invest wherever he wants.
But he has found a way of making an under-fire White House a little happier.
RBS unmasked
ROyAL Bank of Scotland has been so brutalised by scandal that it is hard to be shocked any longer.
But use of Parliamentary privilege by LibDem leader Vince Cable has changed that.
The outing of Nathan Bostock, former head of the Global Restructuring Group and now chief executive of Santander UK, as allegedly responsible for a strategy causing endless suffering to small and medium sized enterprises is stunning.
It demonstrates the short-sightedness of RBS and regulator the Financial Conduct Authority in failing to publish and be damned. The truth will out.