Covid-19-induced civil aviation crisis forces Rolls-Royce to restructure, cut jobs
UK-based global major industrial technology group Rolls-Royce has announced a major restructuring of its civil aerospace business, which will involve the loss of thousands of jobs. This restructuring will also affect the group’s central support functions. At least 9 000 jobs would be cut from Rolls-Royce’s total global workforce of 52 000. (This total workforce included 120 in Southern Africa, mainly in Cape Town and Johannesburg but also at an office in Zambia).
These job cuts would form only part of the restructuring. The group was looking to achieve annualised savings of of more than £1.3-billion, and the reduction of the workforce would account for only £700-million of this. Rolls-Royce would also cut spending on plant and property as well as capital and other indirect costs, which would provide another £800-million in savings. The group had already cut executive pay and cancelled its dividend.
The need for this restructuring had been created by the crisis in the civil aerospace sector, with airliner manufacturers facing significant reductions in demand. This, in turn, was the result of the near-total grounding of airlines around the world in attempts by governments to contain the Covid-19 pandemic.
“This is not a crisis of our making,” said Rolls-Royce CEO Warren East. “But it is a crisis that we face and we must deal with it. Our airline customers and airframe [manufacturing] partners are having to adapt and so must we. Being told that there is no longer a job for you is a terrible prospect and it is especially hard when all of us take so much pride in working for Rolls-Royce. But we must take difficult decisions to see our business through these unprecedented times. Governments across the world are doing what they can to assist businesses in the short-term, but we must respond to market conditions for the medium-term until the world of aviation is flying again at scale, and governments cannot replace sustainable customer demand that is simply not there. We have to do this right, which means we will work closely with our employee and trade union representatives as appropriate, look at any viable alternatives to mitigate the impact, consult with everyone affected and treat our people with dignity and respect.”
Regarding the group’s other businesses, Power Systems and ITP Aero were in the process of working out, negotiating and implementing wide-ranging responses to the situation created by the Covid-19 crisis. These responses could include reduced working hours.
The Rolls-Royce defence business, centred on the UK and US, had remained “robust” and its outlook was unchanged. Consequently, it would not experience any job cuts. Indeed, the group hoped to be able to move some of its employees in its other businesses, now facing dismissal, over to its defence business. It would also ensure that its internal civil aerospace supply chain would continue to support its defence programmes.
“The strategic choices that we have made over the last few years have helped us to respond rapidly to Covid-19 and the synergies between our divisions leave us placed to capitalise on the long-term potential of our markets,” he highlighted. “The world on the other side of this pandemic will need the power that we generate to fuel economic recovery. I absolutely believe the call for that power to be more sustainable will be stronger than ever. This plays to our strengths. We must ensure that we are able to continue to innovate and play our leading role in enabling the vital sectors in which we operate to achieve net zero carbon emissions. We have emerged from troubled times before, to achieve incredible things. We will do so again.”
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