GKN offered fresh evidence of the dramatic contraction in the car industry yesterday as it said was cutting production at twice the rate it announced just over two weeks ago.

The engineering group said last month that a fall-off in orders from carmakers meant that production in the second half would be 20 per cent lower than in the first half. Yesterday, GKN, which supplies all the top carmakers, said that production would now be 40 per cent lower.

The group has already cut 1,400 temporary jobs and has said it will make substantial production cuts. Most of its automotive operations will shut in the second week of December for the rest of the year. The company warned that “in the last seven days there have been very significant reductions” in customer schedules. It is expected to make a definitive profits forecast when it has better assessed the situation. A round of further production cutbacks in the new year is planned.

Over the past few weeks, almost all carmakers have announced substantial cuts in production with some, such as Mercedes-Benz, preparing to close for the whole of next month. Yesterday the works council of Daimler, Mercedes’s parent company, said that it expected the company to reduce the working week to 30 hours.

Opel, the General Motors subsidiary, has asked the German Government for state aid. As its parent seeks help from the US Government, Opel promised that the money would be spent in Germany and “by no means be spent outside Europe”.

Another automotive supplier, Nippon Sheet Glass, which owns the UK’s Pilkington, slashed its forecasts. It cut net profit outlook to 9 billion yen (£62 million) from Y27.5 billion, and lowered its operating profit projection to Y20 billion. Nippon was also hit by a Y45 billion fine after the European Commission said Pilkington had exchanged commercially sensitive material and shared contracts with three other glass producers.

Additionally, Dyson, a supplier of high-tech materials to the car industry, said its second-half results would fall “significantly below expectations”.

The sharp cutbacks in the automotive supply chain came as figures revealed that new car sales in Europe fell last month for the sixth successive month, down 14.5 per cent. Renault, whose own sales fell in line with a drop of 14.1 per cent, responded by saying it would cut production further.

Meanwhile, the European Commission said that it would oppose any US bailout of the American car industry that broke state aid rules. On Monday the Senate will begin debating a Bill to give struggling American motor manufacturers $25 billion in emergency loans. The US Government has already laid out plans to give carmakers a similar sum to stimulate investment in green initiatives. If the emergeny loans are approved, the Government would take stakes in GM, Ford and Chrysler for the duration of the loans.

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