Engineering firm Rolls-Royce is to cut 4,600 jobs over the next two years as part of a major reorganisation. Middle managers and back-office staff are to bear the brunt of the cuts, which are expected to hit its Derby base hard.
The company is refocusing its business on civil aerospace, defence and power systems. About a third of the job cuts are expected to happen by the end of this year, Rolls-Royce said.
The programme is expected to continue throughout 2019, with full implementation by mid-2020.
Rolls-Royce said that the programme would cost £500m to carry out, including redundancies, but would save it £400m a year by the end of 2020.
The firm also said it would continue to work on its problems with its Trent 1000 engine.
Parts in the engines have been wearing out faster than anticipated, causing some planes to be grounded. Rolls-Royce has said it will take years to modify all the engines in service.
Warren East took over at Rolls-Royce in the middle of a full-sized crisis – five successive profits warnings had led shareholders to question whether the company’s management was actually in control.
He could have taken drastic action then, but company insiders say his first priority was to steady the ship and reassure the City the company was not on a fatal downward spiral. That has largely been achieved.
That is crucial to shareholders, because it offers a measure of Rolls-Royce delivering on its “jam tomorrow” promise of turning its increasing sales of engines – on which the company loses money – into profitable service and maintenance activities in a few years’ time.
Now Mr East is carrying out the next stage of the plan, cutting the middle-management fat to make Rolls-Royce even more profitable.
But big strategic challenges await. There is a big crossroads looming in the shape of a new generation of small aircraft. Rolls-Royce missed out on this market last time round and probably cannot afford to do so again.