Rolls-Royce Holdings Plc plans to eliminate as many as 2,500 positions worldwide and will streamline operations, enacting the deepest job cuts yet under Chief Executive Officer Tufan Erginbilgic.
(Bloomberg) — Rolls-Royce Holdings Plc plans to eliminate as many as 2,500 positions worldwide and will streamline operations, enacting the deepest job cuts yet under Chief Executive Officer Tufan Erginbilgic.
The reductions will target 2,000 to 2,500 employees, or about 6% of the global staff, the company said in a regulatory statement, confirming reports of job losses late on Monday. As part of the corporate overhaul, Chief Technology Officer Grazia Vittadini will leave the company in April next year, Rolls-Royce said. She was in the position since Nov. 2021, having joined from Airbus SE.
Erginbilgic is driving his turnaround effort deeper into the company after already switching some key management positions, including the head of the civil engine subsidiary. The engineering technology & safety businesses will be unified and run by Simon Burr, a senior manager at the civil aerospace subsidiary who is joining the executive team as part of the shift, the company said.
“All this seems pretty obvious, and it is surprising this hadn’t already been done,” Nick Cunningham, an analyst at Agency Partners, said of the announced changes. “The net effect should be to help to prevent costs growing as fast as sales and this should better enable incremental revenues to drop down to profits and cashflow.”
Having joined Rolls-Royce from BP Plc, Erginbilgic brought in consultants to advise on streamlining the organization. Rolls makes engines for the largest commercial aircraft and earns money based on their hours of use as well as with lucrative service contracts.
Rolls-Royce rose as much as 2.3% to 218.4 pence in London trading. The stock is the best performer on the FTSE 100 Index this year.
The CEO, who likened the company to a “burning platform” shortly after taking over at the start of the year, has presided over a more than doubling of the stock price, as long-distance travel rebounds from pandemic lows, reigniting demand for large aircraft like the Airbus A350, for which Rolls-Royce is the sole supplier.
About half of Rolls-Royce employees are in the UK, 11,000 work in Germany and about 5,500 are located in the US. The last time the company cut a large number of positions was in the early days of the Covid-19 pandemic, when aircraft around the globe were largely grounded.
The company’s last round of major job cuts took place in March of 2020, when the manufacturer said it would eliminate 3,000 jobs in the UK to adjust to the pandemic-related downturn.
Cash flow at Rolls has risen rapidly this year, lightening the burden of interest payments just as rate increases make borrowing more expensive. Accelerating its debt-reduction plans could lead to credit-rating upgrades for Rolls, Bloomberg Intelligence said in a report.
Read more: Rolls Restoring High-Grade Path May Spur £1.3 Billion Debt Cut
–With assistance from Siddharth Philip.
(Updates with analyst quote, stock reaction.)
More stories like this are available on bloomberg.com
©2023 Bloomberg L.P.