In a bold move to reshape its future, Rolls-Royce, the prestigious FTSE 100 engineering titan, is set to trim its global workforce by as many as 2,500 positions. This announcement is a key component of the company's newly appointed CEO, Tufan Erginbilgic's turnaround plan.
With a revenue of £12.7 billion in the previous year, Rolls-Royce aims to streamline its 43,000-strong workforce, seeking to eliminate redundancy and drive cost-efficiency. This isn't the first time the engine-maker has undergone a significant restructuring; over the past decade, it has already shed 13,000 jobs. Erginbilgic's latest strategy is intended to make Rolls-Royce "fit for the future."
Analysts estimate that the reduction of 2,500 roles could translate into annual savings of approximately £200 million. These cost reductions will be a welcome relief for the company, which has been navigating a challenging period.
Rolls-Royce is pivoting towards refining its core capabilities, merging its engineering technology and safety units into a single cohesive team. This move is expected to foster standardization and operational efficiency. As a result of this transformation, Grazia Vittadini, the current tech boss, will depart the company next year, with Simon Burr taking the helm of the division.
In addition to workforce reductions, Rolls-Royce is establishing a new enterprise-wide procurement and supplier management organization to consolidate group expenditures, leverage economies of scale, and establish best-in-class standards.
Tufan Erginbilgic, who assumed the role of CEO in January, expressed his vision for the company: "We are building a Rolls-Royce that is fit for the future. That means a more streamlined and efficient organization that will deliver for our customers, partners, and shareholders. Our business is full of committed, talented people, and I believe these changes will enable them to build greater capability in areas that are key to our long-term success. This is another step on our multi-year transformation journey to build a high-performing, competitive, resilient, and growing Rolls-Royce."
Rolls-Royce's shares responded positively to the announcement, rising by 2.1 percent to 218.1p during early trading. This news comes on the heels of Rolls-Royce's recent return to profitability, reporting £1.4 billion in earnings for the first six months of this year. Factors contributing to this success include a resurgence in international travel and strategic price adjustments.
While the company is undoubtedly on an upward trajectory, it is well aware that its profit margins still lag behind its U.S. rival, General Electric. Richard Hunter, head of markets at Interactive Investor, commented on the strategic overhaul, stating, "A strategic overhaul at Rolls-Royce which will result in the global loss of 2500 roles was well-received given savings which could amount to up to £200 million. The shares have had a stellar year so far, rising by more than 130 percent, as any number of factors have played into the company’s hands, not least of which has been the return to airline travel."
Rolls-Royce's latest move sets the stage for an exciting chapter in the company's history, as it seeks to enhance efficiency and secure its position as a leader in the engineering industry.