Rolls-Royce to cut 200 management jobs

Rolls-Royce Holdings is eliminating another 200 management jobs, further thinning the ranks at the embattled engine maker and backing off a pledge that the blood-letting was over.

With the new round of cuts, chief executive Warren East has trimmed more than 600 positions from Rolls-Royce’s management as he tackles the company’s bloated structure.

The latest cuts suggest his efforts haven’t produced the impact he was seeking after the executive indicated in May that the process of culling management was over.

The latest savings push “involves restructuring our management population and will result in a number of people leaving the business,” Rolls-Royce said in a statement.

“This is part of our ongoing transformation programme, designed to remove complexity and cost by simplifying our processes and our structure.”

The company is under pressure amid plans to double its output of aircraft engines by the end of the decade, backed by deliveries for Airbus Group SE's A350 XWB and A330neo planes.

That investment needs to be financed just as profitability suffers due to a slowdown in China and the collapse in the oil and gas market.

Overly complex

Mr East, who took charge of the London-based manufacturer last year, has said the company suffers from an overly complex structure that it makes it slow to respond to changes.

The chief executive has moved to slim processes, including reducing the number of divisions to five from nine and replacing leadership at its critical wide-body aircraft engine business.

Rolls-Royce has been struggling amid a downturn in demand for marine engines and service revenues from its business-jet turbines.

It set a target of stripping away as much as £200 million ($261 million) in costs by the end of 2017, part of an effort to get margins closer to rivals Pratt & Whitney and General Electric Co.

Mr East, who is set to detail savings goals beyond 2017 in November, has said that reaching those margins could imply cuts of as much as £1 billion. Rolls-Royce is currently on target to reach the upper end of a target to trim spending by £30 million to £50 million by the end of this year, a company spokesman said.

Shares Rise

Rolls-Royce shares rose 1.7 per cent to 739.5 pence as of 11.17am in London. The stock has climbed 30 per cent this year, valuing the company at £13.6 billion.

The British manufacturer was already retrenching before East took charge. His predecessor John Rishton announced cuts of 2,600 aerospace jobs and another 600 reductions in its marine business in his final year.

Mr East has since trimmed another 400 posts at the ship-engine unit while also slimming the company’s management team.

About 270 of the affected positions were phased out as of July 28th, the chief executive said at the company's half-year earnings report. The Financial Times earlier reported the latest job-cut plans. – (Bloomberg)