GKN buys Opel plant in drive to work closer with GM

GKN, THE engineer, is to buy Adam Opel's driveshaft factory at Kaiserslautern in Germany, opening up a potentially lucrative relationship with Opel's parent, General Motors.

GKN is already the market leader in constant velocity joint driveshafts, and the Kaiserslautern factory will add an extra pounds 60m of annual sales, mainly for the Astra and Vectra ranges. Opel chose GKN over Delphi, General Motors' former car parts arm which currently runs the factory.

Delphi was spun off in May as part of General Motors' moves to outsource its components manufacturing.

The agreement was announced yesterday to end the uncertainty facing the Kaiserslautern plant's 700 workers but completion is not expected for another few months. The price of the deal was not revealed, but analysts said it was unlikely to be more than pounds 100m.

Kaiserslautern produces around a million components a year, and has assets worth pounds 16m. GKN has driveshaft sales of pounds 1.6bn, so the real significance of the deal will be in the new relationship with General Motors. Sarkis Kalyandjian, chief executive of GKN's automotive driveline division, said: "This is an opportunity for GKN to supply a significant amount of General Motors' European driveshaft requirements and allows the two companies to work closely together on future driveline engineering applications."

The Kaiserslautern deal is subject to regulatory approval in Germany. GKN's driveline division claims a market share of 37 per cent, and says outsourcing business like Opel's is going to be the main driver of future growth.

Charterhouse Securities analyst Michael Blogg said GKN had done well from a similar outsourcing contract from Fiat in 1994. "This is a foot in the door. Relationships are important, and I am sure they will be doing their best to roll this deal out to other products."

GKN shares closed up 17.5p at 984p yesterday.