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Rolls-Royce may cut thousands of jobs in turnaround plan

Rolls-Royce Chief Executive Officer Tufan Erginbilgic has initiated a transformation program at the manufacturer, including some key management changes.

Rolls-Royce Holdings Plc could cut thousands of jobs after the company hired consultants led by McKinsey & Co to advice on streamlining its operations
Source: Buisness Live

Rolls-Royce Holdings Plc could cut thousands of jobs after the company hired consultants led by McKinsey & Co to advise on streamlining its operations. The Times reported Part of the turnaround plan will see the combination of non-manufacturing departments in each of the company’s civil aerospace, defence, and power systems divisions, the newspaper said, citing an unidentified consultancy source. As a result, 10% of around 30,000 jobs in these departments could be eliminated, the report said

Rolls-Royce performed as expected in the first part of the year, with flying hours recovering and cost-cutting steps helping to put it on track to meet 2023 targets.

Tufan Erginbilgic, who took over as boss of the aerospace engineer in January, previously said Rolls-Royce was a ‘burning platform’ which needed to improve its cash generation, cut debt and invest for the future.

The group told investors on Thursday its transformation plan was ‘moving at pace’, noting that its share price has performed strongly in the last year. 

A strategic review initiated by Erginbilgic is due to report in the second half of 2023, Rolls-Royce added. 

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What is the plan?

Part of the turnaround plan will see the combination of non-manufacturing departments in each of the company’s civil aerospace, defense, and power systems divisions, the newspaper said, citing an unidentified consultancy source. As a result, 10% of around 30,000 jobs in these departments could be eliminated, the report said.

Rolls-Royce may cut thousands of jobs in turnaround plan
Photographer: Chris Ratcliffe/Bloomberg

The company’s headquarters in Derby are likely to be hit hardest by the cuts, The Times said, noting that most of its back-office administration functions are based in the city. Rolls-Royce said that a decision had yet to be made regarding its workforce.

“We are working at pace on our transformation across a number of work streams and only one part of one of those work streams is about realizing organizational efficiencies,” a spokesperson said in an emailed comment. “We have made no decisions whatsoever on any potential impact on employees and any suggestion otherwise is pure speculation.”

What is the company’s strategy now:

Its civil aerospace unit, the biggest part of the business, was boosted by flying hours reaching 83 percent of pre-pandemic levels in the four months to 30 April. The group also maintained its annual guidance.  

The company highlighted a new order win for its civil aerospace unit, which provides engines for Airbus A350 and Boeing 787 planes, and said it was seeing improved pricing in its power systems business.

This will help put it on track to meet guidance for operating profit of between £800million and £1billion pounds for 2023 and free cash flow of between £600million and £800million;

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In Power Systems, revenue growth is being driven by demand for aftermarket services and high order intake in the prior year, especially for power generation solutions. 

Erginbilgic said: ‘We are making good progress and our financial performance year-to-date is in line with expectations.’

He added: ‘We are transforming Rolls-Royce into a high quality and competitive business with a strong balance sheet and growing profit, cash flows, and returns.’

Written By

Sarthak Tiwari is currently pursuing a Computer Science Engineering degree at VIT Bhopal. As an active member of the Fintech Club, he serves as a content writer, contributing insightful articles on the intersection of finance and technology. With a keen interest in emerging technologies, he took the lead in organizing a successful blockchain event, bringing together industry experts and enthusiasts to explore the potential of this transformative technology.

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