© Rolls Royce General | May 25, 2020
Rolls-Royce takes heavy hit from COVID-19 – reduces workforce by 9000
The impact of COVID-19 on Rolls-Royce and the whole of the aviation industry is unprecedented. RR has already taken action to strengthen the financial resilience of its business and to reduce cash expenditure in 2020. However, this will not be enough.
It is getting increasingly clear that activity in the commercial aerospace market will take several years to return to the levels seen just a few months ago. With this in mind, Rolls-Royce must now address these medium-term structural changes, as demand from customers reduces significantly for our civil aerospace engines and aftermarket services. “This is not a crisis of our making. But it is the crisis that we face and we must deal with it. Our airline customers and airframe 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,” says Warren East, Rolls-Royce CEO, in a press release. The company is proposing a major reorganisation of its business to adapt to the new level of demand that is coming from customers. As a result, Rolls-Royce expect the loss of at least 9'000 roles from its global workforce of 52,000. In addition to the savings generated from this headcount reduction, the company will also cut expenditure across plant and property, capital and other indirect cost areas. The proposed reorganisation is expected to generate annualised savings of more than GBP 1.3 billion, of which the headcount reduction is expected to contribute around GBP 700 million. The cash restructuring costs related to these actions are likely to be around GBP 800 million. “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,” Warren East continues. The proposed reorganisation will predominantly affect the company’s Civil Aerospace business, where it will carry out a detailed review of its facility footprint. The Power Systems business and ITP Aero are currently developing, negotiating and executing extensive measures to deal with the current situation. The company Defence business, based in the UK and US, has been robust during the pandemic, with an unchanged outlook, and does not need to reduce headcount. As part of the reorganisation, the company says it will ensure that its internal Civil Aerospace supply chain continues to support its defence programmes and explore any opportunities to move people into the Defence business. “Due to the need to consult with the appropriate employee and trade union representatives, we are not providing further details of the impact of the proposed reorganisation on specific sites, or countries, at this stage,” the press release reads. The restructuring which the company announced on 14 June 2018 will transition into this wider proposed reorganisation.