RE: Potential job cuts28 May 2023 08:51
Rolls-Royce is expected to cut thousands of jobs as it launches a dramatic turnaround plan to save costs.
New chief executive Tufan Erginbilgic, who has described the aero-engineering giant as a “burning platform” that needs to reform to survive, has parachuted in consultants led by McKinsey to advise on streamlining the company.
Plans to merge departments could cut 10 per cent of the company’s approximately 30,000 non-manufacturing staff, one consultancy source said.
Part of the programme will involve merging its non-manufacturing departments in each of Rolls’s civil aerospace, defence and power systems divisions.
Currently, white-collar roles in legal, marketing, human resources and other departments operate separately.
Last week Erginbilgic, formerly head of BP’s huge downstream business, said that the power-systems division had been “grossly mismanaged”. He said the company “needs to have a clear strategy and it needs to be managed properly, but it has lots of potential”.
The company has gone through a series of successive restructuring efforts in recent years to address its ailing performance.
In 2018, the company announced it would cut 4,600 back-office staff after one of its engines, the Trent, was found to have faults that cost the company £2 billion in repairs. In 2020, after the pandemic grounded the planes it made engines for, Warren East, the chief executive at the time was again forced to slash a fifth of its workforce.
The company has said no decision on its workforce had been made.
When the cuts happen, they are likely to be felt in the Derby headquarters, where much of its back-office administration functions are based. The city is still reeling from reports that the planned Great British Railways, which was to be based there, could be scrapped.
Nicola Grady-Smith, Erginbilgic’s former colleague at BP, is heading up the transformation plans, which have identified seven key areas where it hopes to reduce costs and increase revenues.
Her team have found about £1.5 billion in “onerous contracts” that are not profitable, and which it hopes to renegotiate with its clients.
It also plans to reduce the amount of working capital that it holds and is believed to be trying to monetise some of the stock it keeps in inventories.
Every area of the business is undertaking business improvement initiatives to boost efficiency.
The company is also exploring areas for disposal as part of its strategic review. Last week the company stopped work on part of its carbon-capture business.
A spokesman for Rolls-Royce said: “We are working at pace on our transformation across a number of workstreams and only one part of one of those workstreams is about realising organisational efficiencies.”
The British government still owns a golden share in Rolls-Royce, which was privatised in 1987, to prevent foreign ownership of the brand.
Rolls-Royce, established in 1904, split from the car brand of the same name in the
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