Review of Performance


  2010 2009 restated
Sales (£m) 2,433 1,803
Trading profit (£m) 169 10
Trading margin 6.9% 0.6%

Driveline’s sales increased 35% to £2,433 million (2009 restated: £1,803 million) compared with global vehicle production which increased 24%. Excluding the favourable impact of currency translation of £41 million, underlying sales increased by £589 million (32%). This market outperformance was particularly apparent in North America, China and Japan. It reflects Driveline’s global footprint, new programme wins, a return to more normal vehicle segment demand patterns as government support schemes are progressively withdrawn and its strong position in European premium vehicles.

Trading profit increased substantially to £169 million (2009 restated: £10 million) reflecting higher sales and the benefits of restructuring, partially offset by higher engineering costs to support new programmes and future growth and some temporary costs incurred to raise capacity in some regions to keep pace with significant increases in demand. Current year trading profit included a £6 million curtailment gain arising from changes to pension arrangements in Japan. The impact of translational currency was £3 million positive, with underlying trading profit up by £156 million. Driveline trading margin was 6.9% (2009 restated: 0.6%).

Net restructuring charges were taken amounting to £29 million (2009 restated: £79 million), reflecting the conclusion of charges on the programme that commenced in 2008.

Capital expenditure on tangible fixed assets was £73 million (2009 restated: £73 million),
0.7 times (2009 restated: 0.7 times) depreciation.

Return on average invested capital was 16.0% (2009 restated: 0.9%), reflecting the increase in profitability.

During the year, Driveline continued its good performance of new business awarded; as well as continued strength in our core sideshafts business, there were notable successes with propshaft, all-wheel drive (AWD) coupling, electronic differential locking and open differential product lines. Driveline’s hybrid/electric drive products also won new contracts in North America, Japan and Europe. Although initial volumes are small, these are important programmes in positioning Driveline for the rapidly emerging hybrid electric vehicles segment.

Driveline also commenced production of open differentials in North America and power transfer units (PTUs) in China, and launched a number of innovative products designed to help vehicle manufacturers improve vehicle handling performance, including:

  • Direct Torque Flow technology: a new design solution to connect the propshaft to the vehicle’s transmission in a way that saves weight, assembly time, space and cost.
    The first application is on the Audi A8 Quattro high performance luxury saloon;
  • Face Spline and Twin Ball CVJ: results in smaller products, lighter weight and tighter turning circles. This has launched on the BMW 7 Series and will appear on the new BMW 5 and 6 Series all-wheel drive vehicles later this year;
  • ElectroMagnetic Coupling Device (EMCD): GKN Driveline’s AWD coupling is now being produced for the first time in Europe and appears on the new Mini Countryman ALL4 crossover vehicle;
  • Front electronic limited slip differential (eLSD): a world first application of EMCD technology as a front eLSD in a Japanese OEM’s performance SUV;
  • New propshaft business won with Mercedes, for the first time, and a contract to supply a major European customer with 100% of their propshaft needs, commencing in 2013.

As previously announced, in order to meet production demands from underlying growth in China, India and North America, major driveshaft capacity expansion is underway which will increase capacity in these markets by around 60% over the next four years. Driveline also opened a new sideshaft plant in Turkey, a small but high growth market.