By Sarah Young
LONDON (Reuters) -Rolls-Royce said on Tuesday it would cut up to 2,500 jobs as its new chief executive seeks to build a more efficient business, the latest boss to attempt to revamp one of Britain's most prestigious engineering companies.
Over the last decade, Rolls-Royce (LON:RR), whose engines and systems are used on the Airbus A350 and Boeing (NYSE:BA) 787 as well as ships, submarines and in power generation, has been through several restructurings, axing more than 13,000 jobs.
Tufan Erginbilgic, who took over in January, is the latest CEO to try to tackle the company's inefficiencies. Rolls has long trailed the margins made by General Electric (NYSE:GE), its main competitor in the widebody aircraft sector.
In July, his operational improvements helped prompt a profits upgrade and he said there would be more to come.
On Tuesday the company said it planned to shed up to 2,500 roles out of its total staff of 42,000.
"This is another step on our multi-year transformation journey to build a high performing, competitive, resilient and growing Rolls-Royce," he said.
The bounceback in long-haul flying this year plus Erginbilgic's strategy has sent the stock soaring more than 130% this year.
The shares traded up 2% to 217.70 pence in early deals on Tuesday, having recovered from pandemic-lows of around 40 pence in 2020, but they are still some way below a 2019 high of 340 pence.
"Investors are welcoming its cost cutting plans," said interactive investor head of investment Victoria Scholar, adding that gains this year had helped to reverse some of Rolls-Royce's "long-term underperformance".
But one industry executive who declined to be named noted that Rolls would be cutting jobs at a time of rising demand for new more fuel-efficient aircraft.
"It is a brave thing to do when all engine-makers are ramping production," the executive said.
ENGINEERING TECHNOLOGY, SAFETY TO MERGE
As part of the new streamlining plan, Rolls-Royce said it would merge its engineering technology and safety groups, and as a result chief technology officer (CTO) Grazia Vittadini, who was formerly CTO at Airbus, would leave in April 2024.
The plan would also improve the company's procurement and supply chain management to cut costs, while finance, legal and human resources functions would be brought together across the group, creating synergies, it added.
Erginbilgic is due to provide investors with further detail on his strategy, including financial targets, at a capital markets day scheduled for Nov. 28.
In its main geographies, Rolls-Royce employs 21,000 people in Britain, 11,000 in Germany and 5,500 in the United States, but the company did not provided details of where the cuts would take place.
Erginbilgic's predecessor Warren East launched two turnaround plans. One in 2020 aimed at surviving the pandemic which slashed 9,000 jobs, and one in 2018 which made 4,600 redundancies.