Daily Management Review

‘Major Restructuring’ on the Cards for Rolls-Royce, Jobs to be Lost


‘Major Restructuring’ on the Cards for Rolls-Royce, Jobs to be Lost
A major restructuring program is on the cards for British engineering company Rolls-Royce said its new chief executive Warren East.
The aero-engine maker was already under pressure to outline how it would return to growth after four profit warnings in just over a year. The company is now under additional pressure as it faces demands for additional impetus from activist shareholder ValueAct, which last week raised its stake to 10 percent.
"(The) major restructuring will simplify the organisation, streamline senior management, reduce fixed costs and add greater pace and accountability to decision making," Rolls said in a statement ahead of a presentation to investors later on Tuesday.

The aim of the changes in the organization were to "simplify the organization, streamline senior management, reduce fixed costs" and speed up decisions, said East, who took the reins in July.
East said he was targeting annual cost savings of between £150m-£200m.
Earlier this month, the company announced its fifth profit warning in less than two years.
"As a group we are undergoing an unprecedented period of change... these changes, while more painful than we expected in the near-term, are vital to our long-term success," East said.
East said that the review results had "underpinned my confidence" about the opportunities ahead for the business.
"This is fundamental to ensuring Rolls-Royce best positions itself to compete for the long-term opportunities before us," he said.
Following the restructuring, the company had said earlier this month, there would be some job losses among the 2000 senior managers currently employed by the company.
It has previously announced 3,600 job cuts across the group.

Stating that the company was firmly behind East, Rolls-Royce chairman Ian Davis said in a statement that the board would provide all support needed to implement the findings of East’s review.
Decline in its main aircraft business has badly affected the company in recent years.
Many airlines have been sidelining their older planes in favor of modern, more fuel efficient models, the company said in a statement earlier this month, even as demand for new engines for large passenger aircraft remains unchanged.
This has resulted in a significant fall in profits for the supply of spare parts and servicing.  The drop in sale of engines for corporate jets has compounded the problem.
The drastically falling demand from offshore energy companies due to the low price of oil has taken a heavy toll on Rolls-Royce's marine engine business.
US-based activist investor ValueAct has intensified pressure to overhaul the business. The investor had taken a share in the company not long after Mr East's arrival at the helm.
Recently it became the largest investor for Rolls-Royce after doubling its share holding to 10%. The investor is reported demanding the company sell off its marine business to focus on its main aero-engine business. The demand of the firm for a seat o the board of the company was recently rejected.
(Source:www.bbc.com & www.reuters.com)