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Rolls-Royce to slash thousands of jobs amid cost-cutting plan

New CEO announces major restructuring of the jet engine maker

Rolls-Royce, one of the world’s leading manufacturers of jet engines, is set to cut up to 2,500 jobs across its business as part of a cost-cutting drive by its new chief executive, Tufan Erginbilgiç. The job losses will be announced as early as Tuesday, and are likely to affect hundreds of UK staff, according to Sky News.

Erginbilgiç, a former BP executive, took over Rolls-Royce in January and immediately warned that the company was facing a “burning platform” situation, implying that drastic changes were needed to prevent it from falling further behind its rivals. He is expected to reveal his long-term strategy for the company on Tuesday, which will include streamlining its operations and reducing duplication of work.

Rolls-Royce has three main divisions: civil aerospace, which makes jet engines for bigger passenger planes such as the Airbus A350; defence, which makes jet engines for fighters and reactors for nuclear submarines; and power systems, which makes engines for boats and generators. The power systems division is thought to be particularly at risk of job cuts, as Erginbilgiç has previously described it as “grossly mismanaged”.

Rolls-Royce to slash thousands of jobs amid cost-cutting plan

Company recovers from pandemic hit but faces inflationary pressures

The job cuts come as Rolls-Royce has experienced a strong recovery from the impact of the coronavirus pandemic, which severely affected its civil aviation revenues. The company’s share price has more than doubled since the start of 2023, although it remains below its pre-pandemic level in 2019.

Rolls-Royce’s civil aviation business relies heavily on selling maintenance services for the engines it makes, meaning it was hit hard by the collapse in global air travel during the pandemic. It cut 9,000 jobs then to reduce costs in what was described by its leaders as an existential threat to the business.

However, the recovery in air travel, especially in long-haul flights, has boosted Rolls-Royce’s performance in recent months. The company reported a profit of £393m in the first half of 2023, compared with a loss of £5.4bn in the same period last year. It also said it expected to generate positive cash flow for the full year.

Despite the improved outlook, Rolls-Royce still faces significant challenges, such as inflationary cost pressures, competition from rivals such as General Electric and Pratt & Whitney, and environmental regulations that require it to invest in cleaner technologies. Erginbilgiç has said that the company’s cost base was being “tightly managed” to offset these pressures.

UK government and unions express concern over job losses

The news of the job cuts has sparked concern from the UK government and trade unions, who have urged Rolls-Royce to protect its skilled workforce and maintain its presence in the country. Rolls-Royce has 42,000 employees worldwide, with about half of them in the UK.

Government officials were briefed on the redundancy plans on Monday evening, in accordance with statutory requirements relating to job cuts. A spokesperson for the Department for Business, Energy and Industrial Strategy said: “We are in regular contact with Rolls-Royce and are monitoring the situation closely. We recognise this is a difficult time for workers and their families and stand ready to support them.”

The Unite union, which represents many of Rolls-Royce’s workers, said it was seeking urgent talks with the company to understand the rationale behind the job cuts and to explore alternatives. Steve Turner, Unite’s assistant general secretary for manufacturing, said: “Rolls-Royce is a world-class engineering company with a highly skilled and dedicated workforce. It is vital that we retain these skills and capabilities in the UK for the future of our economy and our national security.”

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