Sky News has obtained a letter from Simon Peckham, Melrose’s chief executive, to Rachel Reeves, chair of the business, energy and industrial strategy select committee, which defends its commitment to the UK’s industrial base.
In it, Mr Peckham said Melrose had “complied with both the letter and the spirit” of undertakings given to the Government as part of its £8bn acquisition of GKN.
He said a review of the business had “made clear that, regrettably, the Kings Norton site does not have a sustainable future due to its cost structure and its commoditized and highly price-competitive global market”.
Mr Peckham wrote: “By taking this difficult decision now, GKN Aerospace will be able to carry out a carefully managed wind-down process over a period of more than two years for the benefit of all stakeholders.”
He added that concerns expressed by local MPs that Melrose’s actions constituted a “breach of faith” were unfounded, telling Ms Reeves: “We acquired GKN’s businesses because we saw their potential [but] we were also realistic and straightforward at the time that changes would be required to revive them and that we would empower GKN businesses to achieve these.”
The Kings Norton factory manufactures military and civil aircraft parts, and the Melrose chief said that redeployment would be a focus of the company’s efforts to minimise layoffs.
Mr Peckham’s letter, which is expected to be published by the committee in the coming days, set out almost £120m of investment in GKN manufacturing facilities and a new global technology centre since Melrose’s purchase of the business.
He was responding to Ms Reeves’ expression of “disappointment” at Melrose’s announcement last week that it would close GKN Aerospace’s Kings Norton plan in 2021 with the loss of up to 200 jobs.
Melrose has enjoyed huge success – and reaped massive financial rewards for its shareholders and top executives – as a buyer and transformer of underperforming industrial companies.
Its takeover of GKN, however, propelled it to a new level of prominence and political scrutiny.
Last week, Sky News revealed that the quartet who run Melrose saw their pay packages slashed last year in the wake of the GKN deal.
In its annual report, the company disclosed that Mr Peckham saw his total remuneration for 2018 fall to £1.05m from more than £42m the year before.
Alongside similar declines for his colleagues, the pay deals put the Melrose quartet firmly in the bottom quartile of remuneration packages among the company’s blue-chip peer group.
Melrose declined to comment? on Mr Peckham’s letter.