* Melrose opposed to short-term split of GKN
* GKN responds with swift restatement of rejection
* GKN has new CEO after profit warnings last year
* Melrose issues trading update (Adds Melrose trading update, comment from hedge fund manager)
LONDON, Feb 1 (Reuters) - Melrose Industries pressed the case for its 7.2 billion pound ($10.2 billion) hostile bid for British engineer GKN on Thursday, ruling out a "hasty separation" of GKN's automotive and aerospace if it won control.
Its offer document, followed later by a trading update from Melrose emphasising the turnaround specialist's track record, drew a blunt response from GKN which again urged its shareholders to reject the approach.
"This offer is derisory," Anne Stevens, the former Ford executive who became GKN chief executive last month, said in a statement, accusing Melrose of trying to buy it on the cheap.
GKN, whose roots date back to the 18th century, makes parts for the Boeing 737 jet, Black Hawk helicopter and components for Volkswagen and Ford cars.
Melrose is attempting to snap up GKN after the engineer was weakened by profit warnings in October and November, blows that were sparked by problems at its aerospace division and cost its incoming chief executive his job.
GKN now wants to try to improve profitability by pursuing its own plan of separating itself into its automotive parts and aerospace divisions.
In a letter to shareholders on Thursday, Melrose Chairman Christopher Miller said while the two GKN businesses needed investment, splitting them up was not the best course of action.
"Any actions to immediately separate the businesses in preparation for a sale would be value destructive," he said.
Melrose said GKN shares had risen from 326.3 pence since it first approached the company last month, telling investors it had added 1.7 billion pounds in value. The shares traded at 427.1 pence by 1235 GMT.
Melrose specialises in buying companies that it can improve through investment and cost cuts with the aim of selling them at a profit later.
Later on Thursday morning it issued a trading update Miller said offered "clear proof" of the change in fortune it could bring to GKN.
One of its recent acquisitions, U.S. ventilation and home security products maker Nortek, had seen underlying profit rise by 50 percent compared to 2016 and an improved operating margin of 15 percent, Melrose said. This compares to 9.3 percent prior to the acquisition.
However another of its businesses, gas and steam turbine firm Brush Turbogenerator, is to be restructured at an expected cost of 40 million pounds after sales fell by more than half. Melrose blamed shifts in global environmental policy.
The offer document said Melrose would consider a variety of options for GKN's businesses once they had been improved, which could include sale or floatation.
The FTSE 100 company GKN now has 14 days to publish its detailed defence against the bid, and Stevens said this would include its own transformation plan.
"We remain committed to separation at the right time," she added, arguing that Melrose lacked relevant experience in high technology business and investing for the long term.
One hedge fund manager said the investment community believes Melrose would ultimately be the better manager for GKN and that a 5-10 percent bump to the current terms would likely be enough to secure a GKN recommendation.
"Unless of course someone else enters the fray with a bid for aero or auto, then we have ourselves a bidding war."
Melrose's offer for GKN consists of 1.49 new Melrose shares and 81 pence per GKN share and represented a value of 418.3 pence per GKN share, based on Wednesday's close. Melrose shares added 0.3 percent to 227.1 pence on Thursday.
Elliott, a hedge fund with 0.48 percent stake in GKN and a 0.2 percent short position in Melrose, declined to comment. ($1 = 0.7034 pounds) (Reporting by Emma Rumney. Additional reporting by Maiya Keidan and Carolyn Cohn; editing by Adrian Croft and Keith Weir)