Rolls-Royce plans to cut up to 2,500 jobs as part of a move to a simpler organisation “that is fit for the future”, according to its new chief executive.
The jet engine manufacturer confirmed on Tuesday that it has proposed a reduction of 2,000-2,500 roles worldwide, with the UK expected to be affected. This amounts to about 6 per cent of its 42,000-strong workforce, half of which are in the UK. It has 11,000 employees in Germany and 5,500 in the US.
Tufan Erginbilgiç, a former BP executive who took over Rolls-Royce in January, said: “We are building a Rolls-Royce that is fit for the future. That means a more streamlined and efficient organisation that will deliver for our customers, partners and shareholders.
“This is another step on our multi-year transformation journey to build a high performing, competitive, resilient and growing Rolls-Royce.”
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Rolls-Royce shares rose 2 per cent on the news, making it the top riser on the FTSE 100 index in London in early trading.
The company did not give any detail on where the jobs will be reduced and said this would be determined in the coming months. Its submarines business in Derby, which makes reactors for Royal Navy nuclear-powered subs, will not be affected by the cuts.
The job reductions are thought to be mainly management and support functions rather than engineers. Rolls-Royce wants to reorganise teams such as finance, legal and HR, providing shared support to “remove duplication” and “achieve greater effectiveness”.
The company will also create a single team for engineering technology and safety, responsible for “product safety, engineering standards, process, methods and tools”. The new team will be led by Simon Burr, who is currently director of product development and technology in its civil aviation arm. The chief technology officer, Grazia Vittadini, will leave next April, the company said.
Erginbilgiç hinted at big changes in January when he described the group as a “burning platform”, to prevent one of Britain’s most venerable and complex manufacturers from falling further behind its rivals.
Rolls-Royce’s financial performance has improved markedly in the past year, mainly thanks to the recovery in global air travel after the coronavirus pandemic.
Although its focus on long-haul travel has meant it has lagged behind rivals that make engines for short-haul planes, its share price has more than doubled since the start of this year but still remains below its pre-pandemic level in 2019.
The company’s civil aviation revenues are heavily dependent on selling maintenance services for the engines it makes, meaning it was hit particularly hard during the pandemic. Rolls cut 9,000 jobs in 2020 – early in the pandemic – to reduce costs in what was described by its leaders as an existential threat to the business.
Richard Hunter, the head of markets at the trading platform Interactive Investor, said: “A strategic overhaul at Rolls-Royce which will result in the global loss of 2,500 roles was well-received, given savings which could amount to up to £200 million.
“The shares have had a stellar year so far, rising by more than 130%, as any number of factors have played into the company’s hands, not least of which has been the return to airline travel.”
Rolls-Royce will reveal more about its strategic review and set new medium-term financial targets at a capital markets day on November 28th.
Separately, the Swedish bearings maker SKF has confirmed that it will close its factory in Luton, which employs about 300 people.
The company proposed the closure of the factory in late May, after announcing that it was consolidating its spherical roller bearing manufacturing in Europe to ensure it remained competitive. The factory, which was SKF’s first outside Sweden when it began production in 1911, will be shut by the end of 2024 in a staged process. -Reuters
