Rolls-Royce plans to ax 4,600 mainly British management roles by 2020 to further slash costs, the UK maker of plane engines announced on Thursday.
“Rolls-Royce announces the next stage in our drive for pace and simplicity with a proposed restructuring that will deliver improved returns, higher margins, and increased cash flow,” the group said in a statement.
The London-listed company, whose engines are used in Airbus and Boeing aircraft, said the latest cuts would produce 400 million pounds (536 million US dollars) of annual cost savings by the end of 2020.
Rolls has faced a tough trading environment in recent years on weak demand for its power systems, in particular, ones used by the marine industry, resulting in the loss of about 2,000 jobs alongside the creation of new posts.
The latest update will result in the largest cull at the group since 2001, when it axed 5,000 jobs on a global economic downturn and following the September 11 attacks in the United States.
“Our world-leading technology gives Rolls-Royce the potential to generate significant profitable growth,” the company’s chief executive Warren East said in Thursday’s announcement.
“The creation of a more streamlined organization… will enable us to deliver on that promise, generating higher returns while being able to invest for the future,” he added.
Although Rolls roared back into profit last year, this was largely owing to a recovery in the pound. While the plunge in the value of the pound in the wake of Britain’s 2016 vote in favor of Brexit helped many exporters, Rolls-Royce was forced to book a vast charge as it had not hedged against such a swing in the currency.
Rolls said the latest round of restructuring, leading to the loss of many corporate-supporting roles, was expected to cost the group 500 million pounds (663 million US dollars), while about two-thirds of the job losses would be in the UK.
Rolls employs about 55,000 staff worldwide, almost half of whom are in Britain. The company meanwhile has some 16,000 staff at its UK operational base in Derby, central England.
The company has said it would consider selling its commercial marine business, while in April, Rolls sold German division L’Orange for 700 million euros (815 million US dollars) to US group Woodward.
Speaking to the BBC, East said he saw opportunities in China. “We look at China, and we see an opportunity there for aircraft engine… that’s where a lot of opportunities are.”
“A slimmer, more efficient Rolls Royce is good for UK aerospace in the long run, though job losses along the way mean the journey comes with a cost,” noted Nicholas Hyett, equity analyst at stockbroker Hargreaves Lansdown.
“The group is effectively spending 500 million pounds in the next three years to save 400 million pounds a year thereafter.”