GKN jumps on US investment plans

SHARES in GKN, the automotive components and engineering giant, jumped 18p to 414p when it announced plans to invest pounds 31m to boost its US vehicle components business, writes John Murray.

The investment will add capacity to its constant velocity joints (CVJ) and driveshafts manufacturing and assembly operations. GKN already has two plants in North Carolina supplying this market, but a spokesman said the company had yet to decide whether one or both would be expanded or whether a new plant would be opened.

The increased volume will service new business, mainly from Japanese car makers manufacturing in the US, notably Mazda and Nissan. The company said its US subsidiary's sales were forecast to rise 60 per cent to 3.3 million vehicle sets over the next three years.

There was some speculation in the City that the company might be close to a deal to supply General Motors in the US. GM currently makes its own CVJs. Rob Golding, analyst at SG Warburg, said the grip the automotive unions had in the US made this unlikely.

Bob Bucknell, at Smith New Court, said positive market sentiment could boost GKN shares.