Rolls-Royce to cut 4,600 jobs

The Phnom Penh Post - - BUSINESS - Ben Perry

ROLLS-ROYCE plans to axe 4,600 mainly Bri­tish man­age­ment roles by 2020 to fur­ther slash costs, the UK maker of plane en­gines an­nounced on Thursday.

“Rolls-Royce an­nounces the next stage in our drive for pace and sim­plic­ity with a pro­posed re­struc­tur­ing that will de­liver im­proved re­turns, higher mar­gins and in­creased cash flow,” the group said in a state­ment.

The Lon­don-listed com­pany, whose en­gines are used in Air­bus and Boe­ing air­craft, said the lat­est cuts would pro­duce £400 mil­lion ($536 mil­lion, € 454 mil­lion) of an­nual cost sav­ings by the end of 2020.

Rolls has faced a tough trad­ing en­vi­ron­ment in re­cent years on weak de­mand for its power sys­tems, in par­tic­u­lar ones used by the ma­rine in­dus­try, re­sult­ing in the loss of about 2,000 jobs along­side the cre­ation of new posts.

The lat­est up­date will re­sult in the largest cull at the group since 2001, when it axed 5,000 jobs on a global eco­nomic down­turn and fol­low­ing the Septem­ber 11 at­tacks in the United States.

“Our world-lead­ing tech­nol­ogy gives Rolls-Royce the po­ten­tial to gen­er­ate sig­nif­i­cant prof­itable growth,” the com­pany’s chief ex­ec­u­tive War­ren East said in Thursday’s an­nounce­ment. “The cre­ation of a more stream­lined or­gan­i­sa­tion with pace and sim­plic­ity at its heart will en­able us to de­liver on that prom­ise, gen­er­at­ing higher re­turns while be­ing able to in­vest for the fu­ture.

Al­though Rolls roared back into profit last year, this was largely ow­ing to a re­cov­ery in the pound.

While the plunge in the value of the pound in the wake of Bri­tain’s 2016 vote in favour of Brexit helped many ex­port- ers, Rolls-Royce was forced to book a vast charge as it had not hedged against such a swing in the cur­rency.

Rolls said the lat­est round of re­struc­tur­ing, lead­ing to the loss of many cor­po­rate-sup­port­ing roles, was ex­pected to cost the group £500 mil­lion, while about two-thirds of the job losses would be in the UK.

East, who has im­ple­mented a group-wide re­struc­tur­ing since his ap­point­ment as chief ex­ec­u­tive in 2015, in­sisted that the lat­est cull was not linked to re­pairs it has been forced to carry out on Trent en­gines.

Used by the Boe­ing 787 Dream­liner and Air­bus A380 su­per­jumbo, the en­gines have seen some parts wear quicker than ex­pected, forc­ing Rolls to carry out costly re­pairs.

Rolls em­ploys about 55,000 staff world­wide, al­most half of whom are in Bri­tain.

The com­pany mean­while has some 16,000 staff at its UK op­er­a­tional base in Derby, cen­tral Eng­land.

“Most of these man­age­ment and sup­port func­tions [set to go] are in Derby and there­fore, it will be most strongly felt in Derby,” East said in an in­ter­view with BBC ra­dio.


Rolls had in Jan­uary an­nounced a ma­jor over­haul of its oper­a­tions, re­duc­ing the num­ber of core units and bas­ing the re­main­der around civil aerospace, de­fence and power sys­tems.

“We have world-class tech­nol­ogy in Rolls-Royce, but . . . [not] a world-class busi­ness to go along with it,” East said on Thursday in a call with re­porters.

At the same time, the com­pany has said it would con­sider sell­ing its com­mer­cial ma­rine busi­ness, while in April, Rolls sold Ger­man di­vi­sion L’Or­ange for € 700 mil­lion to US group Wood­ward.

Speak­ing to the BBC, East said he saw op­por­tu­ni­ties in China.

“We look at China and we see an op­por­tu­nity there for air­craft en­gine . . . that’s where a lot of op­por­tu­ni­ties are.”

Shares in Rolls-Royce rose 2.5 per­cent to 849 pence in morn­ing deals on Lon­don’s bench­mark FTSE 100 in­dex, which was down 0.7 per­cent over­all.

“Re­duc­ing costs is typ­i­cally ap­plauded by share­hold­ers as it tends, in the short-term at least, to boost the profit and cash flow of which they are part own­ers,” noted AJ Bell In­vest­ment Di­rec­tor Russ Mould.


A Rolls Royce Trent XWB en­gine is shown on the assem­bly line at the Rolls-Royce fac­tory in Derby, cen­tral Eng­land, on Novem­ber 30, 2016.

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