GKN pumps in £30m to plug pensions hole

GKN is to pump an extra £30m into its pension fund over the next three years, and signalled yesterday that it may put in as much again if the stock market rebound stalls.

The industrial giant, which makes car parts, aerospace components and helicopters, said that the collapse of equity markets had opened up a £343m hole in its pension fund and said it was considering shutting the final salary scheme to new members.

Marcus Beresford, the chief executive, said: "We will not change the terms for people currently in the defined-benefit scheme, but clearly we have got to rethink and to think very carefully about what is the best way forward in today's economic climate."

Final salary schemes in Germany and the US have already been closed to new members, he said.

GKN said it will merge three separate UK funds to save on administration costs, and will put an extra £10m per year into the fund for at least the next three years, in addition to the £8m it has been paying to help narrow the deficit.

Under the terms of the new accounting standard FRS 17, which provides a snapshot of a pension fund's assets versus liabilities, GKN's pension deficit more than doubled to £343m at 29 June, compared with £169m at the end of last year and a small surplus at the end of 2000.

Nigel Stein, finance director, said the FRS 17 calculations provided only a "snapshot" and were highly volatile, but he conceded that the position had worsened since the end of June.

He said the £18m-a-year top up may have to be boosted further. "To give an idea of the order of magnitude, it could be another £10m on top of that if stock markets were to stay down at the depressed levels we have seen in recent weeks."

Mr Beresford said yesterday he will stand down as chief executive at the end of the year, having turned 60 in May. He has held the top post only since last summer when Sir CK Chow moved across to the Brambles Industries at the time of its demerger, and said he expects to pick up a portfolio of non-executive directorships. He is already a member of the board at Spirent, the telecoms equipment company.

Mr Beresford is to be replaced by Kevin Smith, the managing director of the aerospace division, which accounts for 30 per cent of the group's profits.

Some analysts described Mr Smith as a surprising, even "controversial", choice but he dismissed criticism of his combative style. He said: "I'm a little bit more aggressive than some of my colleagues in getting my views across, but GKN's style has always been forthright and honest."

The company unveiled a 40 per cent slump in pre-tax profits for the first half of the year, to £80m on flat sales of £1.7bn. The company has made 1,900 people redundant since December.