Rolls-Royce cuts 4,600 jobs at ‘pivotal moment’ for business

LONDON (Reuters) – Rolls-Royce (RR.L) is to cut 4,600 jobs over two years in the latest attempt by boss Warren East to reduce costs and complexity and make Britain’s best known engineering company more profitable and dynamic. East, a softly-spoken former tech boss, has overhauled the 134-year-old Rolls since he took charge in 2015 but the new cuts come as the group grapples with an aero-engine problem that has grounded planes and angered clients. The announcement, which East said is not linked to the Trent 1000 engine issue, marks the biggest round of job cuts since the company had to retrench during the aviation crisis that followed the 9/11 attacks in the United States in 2001. The plan will remove 10 percent of the workforce, targeting duplication in corporate, administration and management roles to try to save 400 million pounds ($536 million) a year by 2020. Two thirds of the job cuts will fall in Britain. Rolls is the biggest employer in the city of Derby, central England, with 15,700 at its headquarters. “Rolls-Royce is at a pivotal moment in its history,” East told reporters. “We are poised to become the world leader in large aircraft engines. But we want to make the business as world class as our engineering and technology.“We are proposing the creation of a much more streamlined organization. We have to significantly reduce the size of our corporate center, removing complexity and duplication that makes us too slow, uncompetitive and too expensive.” The cuts will not affect its engineers, Rolls said. The news has echoes of an announcement from BT last month, another venerable company that is cutting 13,000 managerial and back-office jobs to reduce bureaucracy and respond faster to its customers’ needs. East, who built the chip designer ARM Holdings from a start-up into Britain’s biggest tech company, has complained that Rolls, a rival to General Electric is too complex and cumbersome due to layers of bureaucracy above the shopfloor. Driving home his new focus, he has set a 2020 free cash flow target of 1 billion pounds, a sizeable jump from the 273 million pounds recorded in 2017, off revenue of 15 billion pounds. The major restructuring, costing a total of 500 million pounds between 2018 and 2020, will be reported as separate one-off costs, allowing it to stick to its targets for free cash flow.