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Rolls-Royce Is Said to Cut About 4,000 Jobs in Overhaul

Rolls-Royce Holdings will eliminate about 4,000 jobs as the U.K. jet-engine maker seeks to boost profit margins.

Rolls-Royce Is Said to Cut About 4,000 Jobs in Overhaul
A Rolls Royce Holdings Plc Trent Engine sits on display on the opening day of the Farnborough International Airshow 2016 in Farnborough, U.K. (Photographer: Simon Dawson/Bloomberg)

(Bloomberg) -- Rolls-Royce Holdings Plc will eliminate about 4,000 jobs as the U.K. jet-engine manufacturer seeks to simplify its business and boost profit margins, according to people familiar with the matter.

The cuts will result in annual cost savings of about 300 million pounds to 400 million pounds ($400 million to $533 million), said the people, who asked not to be named discussing information that isn’t public. The measures will be announced as soon as Thursday, ahead of an investor presentation scheduled the following day, they said.

The cutbacks exceed estimates by analysts who had expected savings of as much as 250 million pounds. The latest retrenchment is the deepest since Chief Executive Officer Warren East took charge in 2015 and extends the total jobs eliminated under his leadership to close to 10,000. The company had about 50,000 workers last year, according to its latest annual report.

Rolls-Royce American depositary receipts pared their decline after Bloomberg reported on details of the plan. They were down about 1.2 percent at 3:43 p.m. in New York, after dropping 2.5 percent earlier on a separate Bloomberg report on replacement-part shortages for faulty engines used in Boeing Co.’s 787 Dreamliner.

A spokesman for Rolls-Royce declined to comment. On Monday, in response to stories in the Sunday Times and other publications, the company said its cost-reduction program was aimed at “improving performance across the group as a whole” and that it would provide details on June 15.

East has been signaling the moves for months, as Rolls-Royce contends with pressure from activist shareholders, engine durability issues and a price squeeze from major customers Boeing Co. and Airbus SE.

The cost review was announced in March after ValueAct, Rolls’s biggest holder, declined to extend a two-year old agreement that it wouldn’t interfere in management’s plans to turnaround the embattled engineer. East is trying to bring Rolls’s laggard margins closer to that of rivals General Electric Co. and Pratt & Whitney.

Rolls-Royce said last month that its moves would mainly affect middle management and back-office staff in the company’s human resources, finance, IT, legal and marketing departments. The company has also said it will quit its base in one of London’s most upmarket districts for cheaper offices.

The restructuring moves follow the appointment of U.S. consultants Alvarez & Marsal, hired in March to secure a new round of savings as Rolls targets 1 billion pounds in free cash flow by 2020. Rolls is also clamping down on discretionary spending to help rein in costs this year as it seeks to deliver on financial targets amid spiraling expenses from durability issues afflicting the Trent 1000 engine that powers the 787 Dreamliner.

Rolls-Royce has already shed layers of management, cut less-successful products and agreed to sell its fuel-injection unit in efforts to trim expenses amid a downturn in demand for marine engines and maintenance revenues from its business-jet turbines. The marine unit remains under review for possible disposal.

To contact the reporters on this story: Benjamin Katz in London at bkatz38@bloomberg.net;Aaron Kirchfeld in London at akirchfeld@bloomberg.net

To contact the editors responsible for this story: Anthony Palazzo at apalazzo@bloomberg.net, Brendan Case

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