This is due to the fact that, while sales have been growing, both profit margins and cash generation had been below expectations, the company explained.
GKN says that it has created differentiated product segments that will be classified as either core or non-core. There will be three different strategies for the core product segments – improve (eg constant velocity joints), grow (eg aero engines) and develop (eg eDrive and additive manufacturing). Each strategy will have different capital expenditure targets and different expectations for growth, margin improvement, cash generation and return on investment and all will have stretching targets to be achieved through a transformation program entitled ‘Project Boost’.
‘Furthermore, to ensure that the strategy is delivered and that shareholder value is realised, a much stronger performance and accountability culture will be instilled throughout the business, supported by changes to incentives to align with the new strategy,’ GKN said in a press release.
Project Boost is a two year program to improve cash and profit that will reportedly incorporate all areas of the business operating system including culture. This includes optimising direct and indirect procurement, process and productivity, and capital allocation
‘The Board is confident Project Boost will deliver a step change in profit margin and cash generation, and expects to deliver a significant increase in annual cash flow with the full run rate achieved during 2020 through a combination of cost and capital expenditure reduction and pricing discipline,’ GKN added.
In recent months GKN has also undertaken an intensive analysis of the economic benefits and costs (including the costs of pensions and tax) of separating the Aerospace and Automotive businesses, recognising the strategic optionality for shareholders in having separate companies with distinct investment profiles and capital allocation policies.
This story is reprinted from material from GKN, with editorial changes made by Materials Today. The views expressed in this article do not necessarily represent those of Elsevier.
