Friday, June 15, 2018

News: "Pivotal moment" for Rolls-Royce

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World-renowned engineers Rolls-Royce has confirmed a "fundamental restructuring" programme that affects 4,600 jobs.

Company bosses said that the proposals would deliver improved returns, higher margins and increased cash flow, supporting its long-term ambition to be the world's leading industrial technology company.

The approach involves a proposed reduction of 4,600 FTEs in non-manufacturing related headcount by early 2020, in order to create smaller and more cost effective corporate and support functions and reduce management layers and complexity. Most affected jobs are predominantly in the UK where the majority of corporate and support functions are based, particularly in Derby.

The most advanced turbine blade casting facility in the world was officially opened by Rolls-Royce on the Advanced Manufacturing Park (AMP) in Rotherham in 2014. The 150,000 sq ft facility employs around 150 people and has the capacity to manufacture more than 100,000 single crystal turbine blades a year.

Given that the focus of the restructure is on management and non-manufacturing roles, and the fact that the £110m Rotherham facility is needed to get the Trent 1000 programme back on track, it is unlikely that the site will be significantly affected.

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Warren East, Chief Executive at Rolls-Royce, said: "Our world-leading technology gives Rolls-Royce the potential to generate significant profitable growth. The creation of a more streamlined organisation with pace and simplicity at its heart will enable us to deliver on that promise, generating higher returns while being able to invest for the future.

"We have made progress in improving our day-to-day operations and strengthening our leadership, and are now turning to reduce the complexity that often slows us down and leads to duplication of effort. It is never an easy decision to reduce our workforce, but we must create a commercial organisation that is as world-leading as our technologies. To do this we are fundamentally changing how we work.

"These changes will help us deliver over the mid and longer-term a level of free cash flow well beyond our near-term ambition of around £1bn by around 2020. After a decade of significant investment we are committed to delivering improved returns while continuing to invest in the innovation needed to realise our long-term aspiration to be the world's leading industrial technology company."

An update to the markets said the company was "at a pivotal moment" where it would change its structure to three core areas - Civil Aerospace, Power Systems and Defence - with a much smaller, light-weight head office to remove complexity and duplication.

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Rolls-Royce also gave an update on the Trent 1000 this week where further engine checks are taking place after the European Aviation Safety Agency (EASA) ordered airlines to replace some Trent 1000 engines on their aircraft.

Corrosion-related fatigue cracking was discovered on intermediate pressure (IP) blades in 2016. It was announced that the manufacturer would have to replace turbine blades on the entire fleet of Boeing 787 Dreamliners powered by its Trent 1000 engine.

A similar Intermediate Pressure Compressor durability issue has now been identified on a small number of engines from a different version of the Trent 1000. Inspections are taking place with key customer, Boeing and a redesign of the relevant part has been launched.

The issues hit Rolls-Royce for £170m in 2017 and in-service cash costs could reach £440m in 2018.

Bloomberg reports that suppliers are struggling to meet demand for compressor blades.

The Rotherham facility is one of only a handful of sites globally that produce the turbine blades and are controlled by Rolls-Royce.

The advanced turbine blade castings made in Rotherham run at temperatures 200 degrees above their melting point and rotate at 12,500 rpm, with their tips reaching 1,200mph – nearly twice the speed of sound. At take off each of the engine's high pressure turbine blades generates around 800 horsepower per blade - similar to a Formula One racing car.

Rolls-Royce website

Images: Rolls-Royce

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