Rolls-Royce restructure to cost 4, 600 jobs

Rolls-Royce, the Engineering firm is to cut 4, 600 jobs over the next year as part of a major restructuring. Middle managers and back-office staff are to bear most of the cuts, which are expecting  1, 500 by the end of this year, continue throughout 2019  and the full implementation of 3, 100 job cuts by mid-2020.

Rolls-Royce said that the programme would cost £500m to carry out, including the redundancies, but would save it £400m a year by the end of 2020.

The Trent 1000 engine parts have been wearing out faster than anticipated causing some planes to be grounded.

Rolls-Royce, the blue-chip engineering group in Derby is poised to set new targets for its civil aero-engine business when it updates investors this week, with a view to revive profitability and cash flow. It plans to simplify processes, including deep cuts to back-office and mid-level management jobs across the company as it consolidates from five divisions to three.

Warren East, Rolls-Royce, CEO, announced the plan in March after a decision was made in January to have just three divisions: civil aerospace, defence and power, pending review by turnaround specialists Alvarez & Marsal.

The immediate need to cut costs has been intensified by recent troubles with the Trent 1000 engine that powers Boeing 747 Dreamliner, which is expected to incur costs of £750m by the end of 2019 and a further £200m in later years.

Rolls Royce will reaffirm its target to generate about £1bn cash flow by 2020. Rolls Royce has never made a profit on engine sales but has heavily relied on long-term maintenance contracts.

For the investors, the dividends were cut 30 per cent in 2016, and they are hoping to hear when dividends will rise again.