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14 Jun 2018

BY James Chapple

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Rolls-Royce confirms 4,600 job losses amid engine troubles

Rolls-Royce has announced it will cut 4,600 jobs, just shy of a tenth of its entire workforce, in a bid to save around £400 million a year.

Rolls Royce Trent 1000.jpg
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Rolls-Royce confirms 4,600 job losses amid engine troubles

The embattled aircraft engine manufacturer has been beset by the spiralling cost of repairs and alterations to its faulty Trent 1000 motors.


Earlier this week, Rolls-Royce confirmed a similar fault had been found on a second batch of engines.


It is estimated the total cost of the repairs will surpass £1 billion.


On Thursday (June 14), Rolls-Royce confirmed it would shed around 4,600 jobs over the next two years, predominantly in the UK, as part of a restructure.


These roles will be largely be in managerial or support functions.


Warren East, Roles-Royce chief executive, said the move would “streamline” the business and generate high returns while securing funds to invest in the company’s future.


“We’ve made progress improving our day-to-day operations and strengthening our leadership,” said East. “We’re now turning to reduce the complexity that often slows us down and leads to duplication of effort. It is never an easy decision to reduce our workforce, but we must create a commercial organisation as world-leading as our technologies.


“These changes will help us deliver... a level of free cash flow well beyond our near-term ambition of around £1 billion by around 2020. After a decade of significant investment, we are committed to delivering improved returns while continuing to invest in the innovation needed to realise our long-term aspiration to be the world’s leading industrial technology company.”


Rolls-Royce said the total one-off cost of the restructure through to the end of 2020 is expected to be around £500 million, offset by £400 million savings a year by the end of 2020.


On its engine troubles, Rolls-Royce has acknowledged “incremental costs associated with further recent Trent 1000 in-service issues” in its announcement, but says the mitigating actions it is taking would ensure the fallout does not unbalance its books.


The firm has for some time been investigating issues with the compressor in its Trent 1000 engines, specifically its Package C batch, which has grounded a number of aircraft.


It confirmed on Monday (June 11) a similar “durability issue” had been found on a “small number” of Package B variants.


In partnership with customer Boeing, the firm has pledged to carry out a one-off inspection of all 166 Trent 1000 Package B engines, which have been in service since 2012.


Rolls-Royce said there would be a “limited impact” on customer operations. Trent 1000 customers include British Airways, Norwegian and Virgin Atlantic, the engine powering Boeing’s 787 Dreamliners among other aircraft.


The cost of fixing the Package C engines was initially estimated to be around £370 million.

 

In April, Rolls-Royce said this figure would rise due to the complexity of the operation and compensation owed to customer airlines. The full cost of the repair is expected to surpass £1 billion.

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