Rolls-Royce Announces 2500 Jobs Cut | Pursuit of a Leaner Future?

 

Rolls-Royce Announces 2500 Jobs Cut | Pursuit of a Leaner Future?

 

Rolls-Royce, the renowned jet engine manufacturer, has revealed its plans to reduce its workforce by up to 2,500 jobs as part of a strategic shift towards a more streamlined and efficient organization that's better prepared for the future. The announcement came from the company's new CEO, Tufan Erginbilgiç, who assumed his role in January.

 

The proposed job cuts, affecting 2,000-2,500 positions globally, are expected to have an impact in the UK, where about half of Rolls-Royce's 42,000-strong workforce is based. The company also has a significant presence in Germany with 11,000 employees and in the United States with 5,500.

 

Erginbilgiç emphasized that the goal is to create a Rolls-Royce that can thrive in the evolving landscape. He stated, "We are building a Rolls-Royce that is fit for the future. That means a more streamlined and efficient organization 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."

 

While the specifics of where the job reductions will occur were not provided, the company indicated that the details would be worked out in the coming months. The cuts are expected to primarily affect management and support functions, with a focus on reorganizing teams related to finance, legal, and HR. The aim is to optimize shared support functions, eliminate duplication, and enhance overall effectiveness.

 

Rolls-Royce will also create a single team responsible for engineering technology and safety, which will oversee product safety, engineering standards, processes, methods, and tools. The new team will be led by Simon Burr, currently the director of product development and technology in the company's civil aviation division. Notably, Grazia Vittadini, the chief technology officer, will leave her position in April next year.

 

Rolls-Royce's decision to restructure and reduce its workforce comes after the company's CEO described the group as a "burning platform" earlier this year, highlighting the need for significant changes to remain competitive in the market.

 

Rolls-Royce's financial performance has witnessed improvement in the past year, attributed to the recovery in global air travel following the COVID-19 pandemic. However, the company remains focused on long-haul travel, which has caused it to lag behind competitors specializing in short-haul aircraft engines. Despite its share price doubling since the start of the year, it still remains below its pre-pandemic levels in 2019.

 

The company's revenue in the civil aviation sector heavily relies on engine maintenance services, making it particularly vulnerable to the pandemic's impact. In 2020, Rolls-Royce cut 9,000 jobs as it faced what its leaders described as an existential threat to the business due to the pandemic.

 

Richard Hunter, the head of markets at Interactive Investor, noted that the strategic overhaul at Rolls-Royce, which will result in job reductions, was well-received by the market, with potential cost savings estimated to reach up to £200 million.

 

Rolls-Royce is set to provide more insights into its strategic review and establish new medium-term financial targets during a capital markets day scheduled for November 28th.