GKN drops incoming chief executive before he takes up role

Aerospace and automotive firm says Kevin Cummings will leave board immediately as it warns of further US writedown

The chief executive designate of GKN has been ousted from the FTSE 100 company weeks before he was due to take up the top job at the aerospace and engineering firm.

Kevin Cummings, whose appointment was announced in September, had been due to take over from Nigel Stein on 1 January, but will now leave the board and the company immediately, the firm said.

GKN shares tumbled by 9% as the shock announcement was accompanied by news of a further writedown at its North American aerospace division, which was run by Cummings.

The non-executive director Anne Stevens, a former senior executive at the US carmaker Ford, will become interim chief executive from January and until then Stein will continue to run the company.

GKN, which makes wing components for Airbus near Bristol, concluded that the “next stage of GKN’s development is best delivered under alternative leadership”. It declined to say whether Cummings would get a payoff. He was paid £1.38m last year, including a basic salary of £505,000.

The company has been reviewing its aerospace factories in North America and while the review is not yet complete, it now says it is likely to result in a further writedown of £80m to £130m as the value of stocks had been overestimated. The biggest factory, in St Louis in Missouri, makes air frames for F-15 and F/A-18 fighter jets.

The company had already identified problems at its Alabama factory, taking a £15m charge after revising down the value of inventory, when it issued a profit warning last month, citing pricing pressures and operational challenges in aerospace. Two customer claims are set to result in a further charge of £40m relating to the aerospace and the automotive business.

Cummings joined GKN’s aerospace division in North America in 2008 and became head of the entire aerospace business in January 2014.

Nicholas Hyett, an equity analyst at Hargreaves Lansdown, said: “Working capital writedowns happen from time to time, but when they come in waves of ever increasing size investors start to get worried, and with good reason. If US aviation is broken, what about the rest of the business?”

Hans Büthker, the former chief executive of Fokker Technologies, which GKN acquired in 2015, becomes the new head of its aerospace unit immediately, faster than planned. It is GKN’s second big boardroom shake-up since September.

In the UK, GKN has closed its Yeovil factory, where 221 people worked on making airframes for Royal Navy helicopters.

The RBC Capital Markets analyst Wasi Rizvi described Thursday’s news as a “major knock to management credibility”. He added: “The turmoil may be seen by some as perhaps making a break-up more likely … The appointment of an independent interim chief executive may also prompt some fresh thinking.”

He said the writedown would also cast further doubt on the attractions of the aerospace division as a standalone business.

GKN, which used to be known as Guest, Keen and Nettlefold, traces its history back to 1759 and the industrial revolution. It has grown from a south Wales ironworks that supplied cannonballs to the British army during the Napoleonic wars. Two centuries later, GKN emerged from the second world war as Britain’s biggest steel producer. Today, its components are used on the Porsche 918 Spyder, the Boeing 787 Dreamliner and the Ariane 5 rocket.

Russ Mould, the investment director at the stockbroker AJ Bell, said: “It is unusual for one FTSE 100 company to be in such a state of managerial flux, but we currently have two, if you include the London Stock Exchange which is readying itself to find a successor to [its chief executive] Xavier Rolet.”

He noted that the average tenure for a FTSE 100 chief executive was 66 months.

Contributor

Julia Kollewe

The GuardianTramp

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