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Up to £200m a year cutbacks

Rolls-Royce boss admits turnaround will be ‘painful’

Rolls-Royce chief executive Warren East unveiled a restructuring and job cutting plan for the engine maker that will save up to £200 million after admitting that it will be “more painful than we expected.”

The company has declared four profits warnings this year and seen its shares plummet 44% in the last six months amid weak demand and a need to improve its management information systems, which Mr East recently said were too slow.

Today’s restructuring will simplify the organisation, streamline senior management, reduce fixed costs and “add greater pace and accountability to decision making”.

There will be gross cost savings of £150-200m a year with a one to two year payback.

Mr East said: “As a group we are undergoing an unprecedented period of change. Change in our mix of business and how we account for it. Change in our industrial footprint as we invest in a wide-ranging transformation. And change in demand for our products as we double our large engine output and manage reductions in demand in other markets.

“These changes, while more painful than we expected in the near-term, are vital to our long-term success.

“My review has underpinned my confidence about the opportunities before us and I am convinced that our long-term outlook is positive.

“It has also highlighted a number of areas where we can simplify the way we work, inject pace into our decision-making and responsiveness, and improve our operational gearing and operational effectiveness. This is fundamental to ensuring Rolls-Royce best positions itself to compete for the long term opportunities before us.”

Ian Davis, Chairman of Rolls-Royce, added: “As a board we are committed to providing Warren with the support he needs to implement the findings of his review. He is recommending clear and decisive actions which we fully support and we are committed to ensuring he has the right resources at the highest level to deliver these changes.”

 

 

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