Rolls-Royce is to cut 2,600 jobs, including about 1,700 in the UK, over the next 18 months and has warned of more cuts to follow. The jet engine maker, based mostly in Derby and Bristol, announced the fresh job cuts on Tuesday as it ousted Mark Morris, its long-serving finance director.
The job losses come three weeks after the company issued a profit warning that wiped £2bn off its market value. It was the second such warning from the company in eight months.
John Rishton, Rolls’s chief executive, said: “We are taking determined management action and accelerating our progress on cost. The measures announced today will not be the last, however they will contribute towards Rolls-Royce becoming a stronger and more profitable company.”
The company said the jobs would go from its aviation division, which makes the engines for Boeing 787 Dreamliners and Airbus A350s. A spokesman declined to state how many British jobs would be lost, but Unite said about two-thirds of the cuts would be in the UK.
Rolls employs 24,800 workers in Britain out of 55,200 worldwide.
“We will work closely with employees and their representatives to achieve the necessary reductions on a voluntary basis where possible, while making sure we retain the skills needed for the future,” Rishton said.
Ian Waddell, Unite’s national officer, said: “Rolls-Royce is in danger of making decisions in the short-term that it will later regret. Engineering skills and expertise are already in short supply across the aerospace industry and will be difficult to replace should there be an upturn in business. We will be seeking guarantees over no compulsory redundancies and seeking assurances that the company doesn’t turn to casual labour to plug the skills cap in the future or seek to offshore skilled UK jobs.
“This is a bitter blow to a proud workforce and we will be doing everything we can to fight for jobs and skills.”
The new cuts, which will cost the company £120m, come on top of about 1,000 indirect job losses that happened last year, along with several hundred within its defence business.
Rolls’s shares rose 2% to 850.5p. Until this year, the company had enjoyed 11 years of strong profit and revenue growth, as soaring demand for fuel-efficient engines for passenger jets made by Airbus and Boeing boosted its civil aerospace unit, which accounted for 43% of sales in 2013.
Rolls did not explain why Morris was leaving after 27 years, but it is understood it is not related to the Serious Fraud Office investigation into bribery allegations.
The Rolls spokesman would only say: “Mark has decided to leave the company after 27 years. We are not going to comment further.”
His exit comes shortly after the company was allegedly embarrassed by Morris’ failure to understand free cash flow, a key financial metric, during a presentation with investors and was forced to send a clarification. After the meeting Cantor Fitzgerald analyst Andy Chambers said: “In our view, management has not covered itself in glory in the last few days, and this has served to undermine rather than reinforce the bull case.”
Morris will collect a payoff of about £700,000 before share options, according to Rolls’s annual report, and full details of his termination payment are to be made public in the next few days.
The new finance director is David Smith, who joined Rolls-Royce this year. He is currently chief financial officer of the aerospace division.
Rishton said: “David has an exceptional track record as a finance leader. Since joining Rolls-Royce, he has demonstrated determination, discipline and intellectual rigour. These are qualities that will be essential in returning Rolls-Royce to its long-term path of profitable growth. I am grateful to Mark Morris for his hard work over many years and wish him well for the future.”
Ed Stacey, an analyst at Espirito Santo, said investors would be looking for a clear message from the new finance director and tight control on spending. “The share-price reaction shows there’s some optimism that he can deliver.. Some restructuring had already been indicated ... two weeks ago, the plan is probably not any better or worse than people had expected but what we have now is some concrete numbers, so it’s eliminating uncertainty.”
