ROLLS-ROYCE said on Wednesday (20) it would cut at least 9,000 jobs from its global staff of 52,000, and could shut factories to adapt to the much smaller aviation market that will emerge from the coronavirus pandemic.
Rolls-Royce, one Britain’s best known industrial names, supplies engines for large aircraft such as the Boeing 787 and the Airbus A350.
It is paid by airlines based on how many hours they fly, meaning its earnings will be hit by the collapse in air travel which is expected to last for years.
“This is not a crisis of our making. But it is the crisis that we face and we must deal with it,” chief executive Warren East said in a statement announcing that Rolls would cut nearly one-fifth of its global workforce.
“Our airline customers and airframe partners are having to adapt and so must we.”
Rolls-Royce relies on aerospace for just over half of its annual revenues, which were around 15 billion pounds in 2019, and the company said that the job cuts would mostly be in its civil aerospace unit.
The job losses, equivalent to shedding 17 per cent of its workforce, would help it to make annual cost savings of 1.3 billion pounds ($1.59 billion), and it would also be looking to reduce expenditure elsewhere on plant, property and capital costs.
With planes grounded worldwide, airlines are slashing thousands of jobs.
“Being told that there is no longer a job for you is a terrible prospect,” East said.
“But we must take difficult decisions to see our business through these unprecedented times.”
Rolls-Royce’s headquarters are in Derby, England, and about two-thirds of its civil aerospace jobs are based in the UK, East said, adding that was “probably a good first proxy” of where the jobs were likely to be lost.
Consultations with unions would now get underway, the company said in its statement, with job losses also expected at its central support functions. Rolls-Royce’s defence unit would not need to reduce headcount.
Asked if the job cuts would lead to a closure of factories, East replied: “We are reviewing our footprint because obviously when you wind an operation down below a certain level then it becomes uneconomic so that might be possible.
“But again we have to consult with our unions and do a thorough run through with the unions on exactly where the job losses are going to be.”
About £700 million of the £1.3 billion cost savings would come from the headcount reduction, the company statement said, adding that the cash restructuring costs from cutting the jobs would be about 800 million pounds.
When asked about what the government would do to help Rolls Royce employees, Justice Secretary Robert Buckland said: “Clearly we will have to go to work with the employer to look at the options.
“All of us will be looking not just at Rolls Royce but at the whole sector and the implications of this for the supply chains as well, let’s not forget them, to make sure we are doing everything we can in terms of plans and action to support what is a very high skilled part of our economy,”