The high-tech machining complex Rolls-Royce opened earlier this year is one of several operations the engine builder identified as proof of its progress in production and performance improvements.

Rolls-Royce Speeding Up Cost Reduction, Starts Restructuring

Nov. 5, 2014
Aircraft engine builder reducing operating costs, increasing efficiencies Cutting 2,600 positions over 18 months Targeting redundancy CFO replaced

Aerospace engine OEM Rolls-Royce Holdings Plc plans to cut 2,600 positions over the next 18 months in a restructuring program aiming to reduce operating costs and improve operational efficiency. Most of the employment downsizing will take effect in the group’s Aerospace division, at operations in Great Britain and the U.S., and most will be implemented in 2015.

The news follows an announcement in mid October, when Rolls-Royce committed to “accelerate progress” toward the group’s 4C strategy: customers, concentration, cost, and cash. The company is seeking to reassure analysts and investors after missing profit targets in recent earnings periods.

It indicated its changes would conserve about $128 million (£80 million) annually by eliminating unnecessary and duplicate costs.

“We are taking determined management action and accelerating our progress on cost,” Rolls-Royce CEO John Rishton explained. “The measures announced today will not be the last, however they will contribute towards Rolls-Royce becoming a stronger and more profitable company.

Rolls-Royce detailed that its restructuring efforts will continue the progress it has made in recent years that have been successful at increasing output and improving efficiency. As examples, it noted the progress made in the development of its Trent 1000 and Trent XWB engines, which are in the production phase now – and as such will not require as much engineering staff.

Also, Rolls indicated that new machining centers it has set up at Crosspointe, Va., and Rotherham, England, will allow it to reduce its overall “footprint.”

Last, Rolls-Royce indicated it would be re-grouping its global organization as two divisions, Aerospace and Land & Sea, would reduce its management structure and indirect labor costs.

In addition to the restructuring, Rolls-Royce announced its chief financial officer Mark Morris has left the company, and David Smith has been appointed as CFO and a director of Rolls-Royce Holdings plc. Smith joined Rolls earlier this year as CFO of the Aerospace division after 25 years at Ford Motor Co., where his positions include CFO and CEO at Jaguar Land Rover, and after that as CFO of Edwards Group, a high-tech company.

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