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East removes layers of management

Rolls-Royce shake-up in latest rescue plan

Rolls Royce shares

Rolls-Royce shares (click to enlarge). Source: LSE

Rolls-Royce chief executive Warren East has removed a layer of senior management as he ramps up efforts to turnaround the business.

Mr East has reduced the engine-making group from two sections to five sections and taken out a number of reporting lines.

Rolls-Royce said in a statement today: “The current divisional structure of Aerospace and Land & Sea will end, removing a layer of senior management.”

From 1 January it will operate as five market facing businesses, with the presidents of Civil Aerospace, Defence Aerospace, Marine, Nuclear and Power Systems reporting directly to the chief executive.

Tony Wood and Lawrie Haynes, respectively the presidents of the Aerospace and Land & Sea divisions, will retire. They will stay with the company into 2016 to assist with the transition to the new structure.

 

The company is under pressure from investors following five profits warnings in the past 18 months. It was reported on Monday that the government has drawn up contingency plans to nationalise the nuclear business if the situation deteriorates.

 

 

Last month, Mr East tabled a series of plans designed to simplify the company’s structure and slash its fixed cost base. It said its restructuring proposals will increase revenue segmentation, widen gross margin and increase trading cash flow. It intends to simplify its organisational structure, reduce fixed costs in the business, and add more pace and accountability to decision-making within the business.

The company said the changes it will make will deliver incremental gross cost savings of up to £200m per year.

In addition to the profit warnings, Mr East also faces pressure from ValueAct, the San Francisco-based activist investor which has built a 10% stake in the company and is pushing for a seat on its board.

Shares in the company rose 2% this morning after falling 40% in six months.

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