Aero-engine maker Rolls-Royce is to cut 4,600 jobs as part of a “fundamental” restructuring aimed at improving the company’s cash flow.
The jobs will be cut during the next two years predominantly in the UK, where most of Rolls-Royce’s corporate and support functions are located. Most of the job losses will occur within middle-management and back-office staff at its “corporate center” to “remove complexity and duplication” of business activities, said the company.
Rolls-Royce employs around 15,700 people at its headquarters in Derby, around 26,000 in the UK and 55,000 people worldwide. Around a third of the cuts will be made by the end of this year
Around 5,000 jobs have already been cut across the company since 2014 in an effort to cut costs, including from the aircraft engine division. This latest restructuring program will cost £500m to carry out but will save the company £400m a year by the end of 2020, said Rolls-Royce.
The restructuring will organise the company into three business units, civil aerospace, defense and power systems.
Warren East, CEO of Rolls-Royce, said, “We have made progress in improving our day-to-day operations and strengthening our leadership, and are 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 that is as world-leading as our technologies. To do this we are fundamentally changing how we work.
“These changes will help us deliver over the mid and longer-term a level of free cash flow well beyond our near-term ambition of around £1bn by around 2020.”
The cuts come as Rolls-Royce deals with issues affecting its Trent 1000 engine. Airlines operating Boeing 787 Dreamliners powered by Trent 1000 Package C engines have been forced to ground their aircraft while checks are conducted, after it was reported the compressor in the engine was not lasting as long as was expected.
The company has been forced to develop new inspection techniques and expand its MRO capabilities to deal with the Trent 1000 problem.
Rolls-Royce added in a statement that it had invested over £11bn in R&D, factories and engineering facilities during the last eight years. Recently the company has started construction on a £150m engine testing facility in Derby and announced the Pearl 15 engine for business jets.
It has orders for over 2,700 aero-engines for wide-body aircraft and business jets and is increasing its level of production for large aircraft engines.