Further Staff Reductions at Rolls-Royce

Rolls-Royce announced plans for additional headcount reductions as part of an intensified program to improve operational efficiency and reduce cost across the group. The company proposed a restructuring plan that will reduce headcount by 2,600 over the next 18 months, principally in its aerospace division. The majority of this reduction will be achieved in 2015.

John Rishton, Chief Executive Officer, said, "We are taking determined management action and accelerating our progress on cost. The measures announced today will not be the last; however they will contribute towards Rolls-Royce becoming a stronger and more profitable company. We will work closely with employees and their representatives to achieve the necessary reductions on a voluntary basis where possible, while making sure we retain the skills needed for the future."

The company explained that its investments in technology and new capacity, alongside the simplifying organizational changes, have enabled Rolls-Royce to increase output and improve efficiency, citing several examples across its various units:

• A large engineering team was required for the development phase of the Trent 1000 and Trent XWB engines. Both these major programs have now entered their production phase, reducing engineering requirement.
• A number of new facilities have opened, such as Crosspointe in the U.S. and in the U.K. at Rotherham and Washington, Tyne & Wear. These set new standards in productivity and efficiency and allow Rolls-Royce to improve the competitiveness of our footprint, the company said.
• The organization of the group into two divisions, Aerospace and Land & Sea, will enable Rolls-Royce to reduce management layers and structural cost including indirect labor.

Rolls-Royce anticipates these actions to result in incremental restructuring costs of around £120 million over the next two years and intends to accrue around half of these costs this year, subject to employee consultation. Annualized cost benefits are expected to be around £80 million when fully implemented, approximately half of which is in the company’s 2015 guidance and the full benefit in its medium term outlook.