Having already taken action to strengthen the financial resilience of its business and reduce its cash expenditure in 2020 to cope with the impact of the COVID-19 crisis, Rolls-Royce is proposing a major reorganization of its business to adapt to the new level of demand it is seeing from customers.
As a result, the company is expecting the loss of at least 9,000 jobs from its global workforce of 52,000. In addition to the savings generated from this headcount reduction, Rolls-Royce will also cut expenditure across plant and property, capital, and other indirect cost areas. The proposed reorganization is expected to generate annualized savings of more than £1.3 billion, of which the company expects headcount to contribute around £700 million. The cash restructuring costs related to these actions are likely to be around £800 million, with outflows incurred across 2020 to 2022.
The proposed reorganization will predominantly affect the company's Civil Aerospace business, where it will carry out a detailed review of its facility footprint. It will also have implications for its central support functions.
Rolls-Royce's Power Systems business and ITP Aero are currently developing, negotiating and executing extensive measures to deal with the current situation. The defense business, based in the U.K. and U.S., has been robust during the pandemic, with an unchanged outlook, and does not need to reduce headcount.
As part of the reorganization, the company will ensure that its internal Civil Aerospace supply chain continues to support the defense programs and explore any opportunities to move people into its defense business. (£1.00 = us41.22 at time of publication.)
