If you had been holding GKN shares for the last 20 years you wouldn’t feel too clever today. They always seemed something of a class act among global motor component makers, but then something always went wrong. The shares have underperformed the market by 50% in that time.


If you had held them since 2003 through, smug would be the look to wear. Yesterday morning, on the announcement of 2006 results they shot up another 6%. Coincidentally that is the length of time that Sir Kevin Smith has been the chief executive. Maybe no coincidence.


He said that the restructuring he has had to do could at last be stamped: job done. Are you looking at further big acquisitions to bolster the core businesses? Not really, he told the analyst; I don’t really want a big restructuring job for the team.


“Restructuring is not a great core competence for us. We are not bad at it. But we don’t really want that any more. We want to add value.


“If you look at us we have had our heads down for a number of years. We have had to close 14 plants and recover the driveline business. And now all businesses have good potential and that gives us more opportunity to express ourselves.”


Smith’s messages are wonderfully clear (as are the accounts of the company now). They are delivered in a reassuringly gritty northern accent. What he wants he says are acquisitions that add value instantly.


“The opportunities that we see are those that we generate ourselves. They do not come out of merchant bankers – love them dearly though I do. We are not looking for transformational deals but we do need acquisitions. Without them the restructuring is a job half done.” He probably lost his appetite for big ones, having examined the relevant bits of Visteon in depth just before Christmas.


With his lower cost base generated in shifting production to Eastern Europe, Brazil, Mexico and the Far East, he has been winning 70% of the business he has been pitching for. The sum of the moves last year meant driveline products (constant velocity joints mostly – they are the world leader) were down 4% in sales last year. Other automotive businesses were down 8% but the margin – and these boys know how to make a margin – was up 8%. The fact that the business is well balanced geographically can be seen in the currency exposure. Despite all the movements last year, the cost of being British and sterling-denominated has barely raised a flicker of concern in the treasury.


Margin, says Smith, should henceforth be in the 7% to 10% region. Tell that to your OEM customers too often and you’re on bread and dripping immediately when you call by for a bit of corporate hospitality. For a gritty Northerner though, that’s a top treat.


His margins are achieved among the OEMs only by Mercedes – a fact long disguised by the regretted marriage to Chrysler and by their own quality blooper. And unlike many of the assemblers, he no longer has a huge problem with his pension fund having popped in GBP200m last year to top it up.


GKN thinks that with the growth in China and India, global vehicle building will grow on average at just under 3% a year for the foreseeable future. And although there is some loss of value in the average set of components delivered per vehicle, because of the de-emphasis of 4WD in Europe and the US, there is good margin in “crossovers” and plenty of need for rugged drivelines in the emerging markets.


GKN is back as a quality player in the world’s Premier division of component makers. Probably.


Rob Golding