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Rolls-Royce Holdings has confirmed plans to cut up to 2,500 jobs as part of the new chief executive’s plan to simplify the company’s management structure.
The aircraft engine manufacturer said that it wanted to create a “simpler, more efficient and effective organisation” by removing between 2,000 to 2,500 roles worldwide. It employs 42,000 people at present.
The proposed changes, which affect non-engineering roles, are designed to take out duplication and deliver cost efficiencies. They follow thousands of job cuts at the company during the pandemic.
Tufan Erginbilgic, the chief executive, has moved quickly to make his mark on the Derby-based manufacturer, which he described as a “burning platform” in an address to staff in January just after he joined. He said the company had “not been performing for a long, long time”.
Erginbilgic, 64, said: “We are building a Rolls-Royce that is fit for the future. This is another step on our multi-year transformation journey to build a high-performing, competitive, resilient and growing Rolls-Royce.”
Engineering technology and safety will come together as a single team across the group. The division will be led by Simon Burr, who is director of product development and technology for civil aerospace at present, and Grazia Vittadini, Rolls-Royce’s chief technology officer, will leave the company in April.
A new procurement and supplier management organisation will be created. Functions such as finance and general counsel will also be brought together.
More than half of Rolls-Royce’s staff are in the UK. A further 11,000 are in Germany and there are about 5,000 in the United States. Sky News first reported the planned job cuts.
During the Covid-19 pandemic, Rolls-Royce was forced to raise £2 billion from shareholders to survive and cut 9,000 jobs as it targeted £1.3 billion in annual cost savings.
Shares in Rolls-Royce have staged a remarkable recovery since the start of the year, having risen 115.5 per cent on the back of a resurgence in aviation demand following the pandemic and the early results of its transformation plan. They rose another 3¾p, or 1.8 per cent, to 217¼p today.
The group, whose engines power the Airbus A350 and A380 long-haul jets and the rival widebody Boeing 787 aircraft, reported a pre-tax profit of £511 million for the first half of the year.
In the same period last year when travel restrictions were still partly in place, the FTSE 100 group recorded a loss of £111 million.
Net cash inflows of £356 million helped reduce net borrowings to £2.8 billion from £3.2 billion, a debt mountain accumulated after a £7 billion rescue refinancing during the depths of the pandemic.
Analysts at UBS estimated the job cuts could reduce Rolls-Royce’s costs by between £175 million and £215 million based on a 2018 round.
“We do not believe this will impact 2023 financials materially and so are not surprised that guidance of earnings before interest and tax of £1.2 billion to £1.4 billion are unchanged,” they said. “Given our conversations with investors we believe a cost reduction programme of this scale is likely to be in line with expectations.”
