Automotive supplier GKN has warned that the prospect of further deterioration in demand in auto markets globally will see its fourth quarter automotive profits to be only around 30% of 2007 levels.

The group, which also operates in the aerospace industry, made the prediction in a trading update today (27 October).

“Our production schedules indicate fourth quarter sales to be around 15% lower than last year with activity levels 20% below those at which we left the first half,” the update said.

The company said that strong action is being taken to flex operations, including plant shutdowns, short-time working and workforce reductions.

In an interview, chief executive Kevin Smith said that he would lay off all 1,400 of the group’s temporary staff, which represents 5-6% of its work force, and go beyond that level of cutbacks, according to Reuters.

“Notwithstanding these actions, it will take some time to fully readjust our operations and we therefore expect fourth quarter automotive profits, including powder metallurgy, to be only around 30% of 2007 levels,” the statement said.

In the third quarter group sales at constant currency were slightly ahead of last year although group profit before tax was down by GBP4m.

Overall group trading for the nine months ending 30 September remained ahead of the equivalent period of 2007.

Total group sales at constant currency were 7% ahead of last year and profit before tax also showed a slight improvement.

“Raw material cost increases are now surcharged in arrears to most automotive customers and, adjusting for this lag, group profit before tax would be around 4% ahead which is below our expectations at the time of our half year statement,” the company said.

“For 2009, although markets remain uncertain, we are currently planning our automotive business to meet global production demand around 8% lower than this year. This level assumes further significant falls in demand in North America and Europe and no improvement in emerging markets,” it concluded.