GKN PLC Share News (GKN)

* Customer Airbus voices fears over "shorter term" investor

* GKN seizes on comments to bolster defence campaign

* Bidder Melrose says takes long-term approach to investment(Adds GKN response)

By Sarah Young

LONDON, March 15 (Reuters) - GKN gained an ally inits campaign to fend off a hostile takeover bid from Melroseon Thursday when customer Airbus said it couldnot guarantee new work to an owner with a short-termperspective.

Turnaround specialist Melrose's cash and share bid iscurrently worth around 7.8 billion pounds ($10.9 billion), anoffer which GKN's management opposes as being too low.

In an unusually robust intervention in a live takeoversituation, European planemaker Airbus said it would find it"practically impossible" to give new work to GKN if it didn'tknow who its long-term investor would be.

For Tom Williams, the chief operating officer of Airbus'scommercial aircraft unit, the main concern was over a long-termcommitment to research and development.

"The industry does not lend itself to shorter term financialinvestment which naturally reduces R&D budgets and limits vitalinnovation," he said in a statement emailed to Reuters.

"It would be practically impossible for us to give any newwork to GKN under such an ownership model when we don't know whowill be the long-term investor."

While planemakers cannot formally block consolidation amongsuppliers they do have significant leverage both through theirpurchasing power and also, on occasions, through change ofclauses in existing contracts, according to industry sources.

REARGUARD ACTION

Under GKN's defence plan it will become focused on itsaerospace operations.

It has lined up a $6.1 billion deal to merge its automotivebusiness with U.S. company Dana Incorporated, pledged toreturn 2.5 billion pounds to investors from the Dana deal andfrom the planned sale its powder metallurgy business.

GKN seized on the Airbus comments, first reported in theFinancial Times, to try to rally opposition to the bid.

"As we have previously stated, and as these comments fromAirbus reinforce, winning new business in our markets would bemore difficult if customers were uncertain as to the identity oftheir future long-term partners," said GKN Chairman Mike Turner.

Melrose's business model is typically to break up companiesonce it has improved their performance, but the group denied ithad a short-term approach.

Melrose's Chairman Christopher Miller said its approach wasto "invest as if we were to own the business for ever".

"Under Melrose, shareholders and customers will be able toenjoy a considered and longer term process of value creation,investment and business enhancement," Miller said in an emailedstatement.

Melrose has already told British lawmakers that under itsownership GKN will maintain at least the levels of research anddevelopment investment made by GKN between 2014 and 2016.

The deadline for GKN shareholders to accept Melrose's offeris March 29.($1 = 0.7156 pounds)(Reporting by Sarah Young and Paul SandleEditing by Jane Merriman/Keith Weir)