Originally part of a larger acquisition, GKN Axles is now ... - FAD assali

FROM PROBLEMTO PROFITOriginally part of a larger acquisition, GKN Axles is now a division in its own right, stimulatinggrowth and developing new product innovations. David Dalton reports.In just a few years GKN plc has transformedits axles business from a problem intoa profit centre. At the beginning of the decadeaxle production was bundled with a muchlarger acquisition in wheel manufacturing – asector in which GKN has a history of strengthas the leading player in areas such as agricultureand construction.There was no real intention at that time tobuild up an axles business within GKN. Fouryears into the acquisition, the question remained:what to do with this axles business? “It was asmall business with about €22 million sales,located only here in Italy, with no internationalexposure,” recalls Domenico Traverso, managingdirector of GKN Axles. “At that time we weren’tDomenico Traverso,Managing Directoreven selling into major GKN customers, suchas John Deere.“A strategic study conducted at the end of2004 concluded that we should invest in thebusiness and grow it. In 2005 I was in theGKN driveline business and moved here toCarpenedolo to launch axles as a separatebusiness.” At that time even production wasintegrated into wheel production, so the newbusiness development required the separationof production lines, moving axles completelyinto a new building.“Having separated the two operations, we wereable to create a separate profit and loss accountand see whether the axles business was makingmoney,” says Traverso. “It was not doing so wellat that time.“We created a distinct organisation, with adedicated management team, and developed aplan. The first year, 2005, was all about restructuring.By 2006 the business was already quiteprofitable and we decided to buy a similar companyin the USA, at Jackson Center, Ohio.”The US facility produces hubs, spindles andtorsion axles and stub axles. At the time it wasmanufacturing only for GKN.Critical massThis move brought together two similar companiesapproaching the same market and, inorder to create even greater critical mass, therewas an opportunity to add a third productionunit that originated in Italy but had moved toZaragoza in Spain. By combining these threeoperations, with a small management teamlayered on the top, GKN Axles was able toexploit synergies and start to approach theglobal market.“We had to start from the beginning,”says Traverso. “This happened in August,2006 – relatively very quickly in terms of acompany the size of GKN. The unit in Spainhas now grown to generate €7 million on its ownand we are still quite a young organisation.“We work in quite a niche market, a veryspecific field – that is non-driven axles for agriculturalmachinery and torsion axles for lighttrailers. This niche market, compared to thewhole automotive market, is clearly very small.However, we have identified that the total marketwe are in is worth about €1 billion.“The agricultural part of the market is the onewe are most interested in, as we serve that marketwith other products, and we estimate that thatsector alone is worth €400 million.”Global pictureLooking at the global picture, the first targetfor GKN Axles is to double the business in fiveyears from a baseline of approximately €44 millionin 2007.“That’s not just a matter of increasing volumeand getting new customers,” says Traverso. “Itinvolves a technological turnaround – developingnew products and redesigning existing products.We want to not only modernise the range but alsoprovide more complex products that match thechanging needs of our customers.” GKN AXLES Steel Hub2 EUROASIA INDUSTRY EUROASIA INDUSTRY 3