UPDATE 1-GKN profit dented by auto industry volatility

Thu Apr 18, 2013 2:47am EDT

LONDON, April 18 (Reuters) - Car and plane parts maker GKN posted a 4 percent drop in first-quarter profit as its auto parts unit was hit by a restructuring charge and falling vehicle production in Europe, Japan and India.

The British firm on Thursday said pretax profit fell to 119 million pounds ($181.3 million) in the three months to the end of March, in part due to a 23 million pounds restructuring charge related to job cuts in Europe and Japan. Its trading margin fell 0.7 percentage points to 7.4 percent.

Profits at Driveline, which makes products such as driveshafts, chassis and axles, fell 20 percent after being hit by weak demand, especially in continental Europe. GKN makes about 55 percent of its profits from Driveline.

Margins at the division, whose customers include Europe's Volkswagen and U.S. carmakers General Motors and Ford, fell to 6 percent from 7.6 percent a year earlier.

Demand for new cars has slumped in Europe as governments drive through austerity measures to reduce debts. The U.S. market, in contrast, has bounced back strongly, while Asia has been volatile.

European car sales have fallen around 10 percent in the first three months of 2013, leading some carmakers to cut their 2013 outlooks.

GKN said global light vehicle production in the first quarter fell 1 percent year-on-year, with good growth in China and Brazil offset by declines in Japan, Europe and India.

GKN's aerospace unit, which makes airframes for Airbus and Boeing, delivered a 50 percent rise in first quarter profit, helped by the ramp-up of several civil aerospace programmes, which have offset falling military sales, and last year's purchase of Volvo's aerospace unit.

Global airlines will buy $3.5 trillion of aircraft over the next 20 years to meet demand for travel to and from emerging markets and renew ageing fleets in the West, according to the world's big two planemakers, helping suppliers such as GKN.