Rolls Royce slicing layer of senior management in major restructuring move

Rolls Royce is slicing a layer of senior management as part of a major restructuring move aimed at improving the British engineering company’s prospects, after the firm issued four profit warnings over the past year.

Rolls-Royce Holdings plc had first announced its wide-ranging restructuring plan on 12th November, 2015. Its new Chief Executive, Warren East, who has been at the helm since July, said the move will simplify the organisation, reduce costs, drive operational excellence, and help better place the company so that it can deliver long-term profitable growth.

Rolls-Royce’s current divisional structure of Aerospace and Land & Sea will be scrapped, which from 1st January, 2016, will remove a layer of senior management.

Warren East of Rolls royceWarren East became Chief Executive of Rolls-Royce in July 2015. He is a Chartered Engineer, educated at Oxford and Cranfield Universities. Before joining Rolls-Royce, he was CEO of ARM Holdings plc from 2001 to 2013. (Image: Rolls-Royce)

Rolls-Royce to become five businesses

Next year, the company will operate as five market-facing businesses, with Presidents of Nuclear and Power Systems, Marine, Defence Aerospace, and Civil Aerospace reporting directly to Mr. East.

The company’s Civil Large Engines and Civil Small and Medium Engines businesses will merge into the Civil Aerospace business, and will be headed by Eric Schulz, who is currently President of Civil Large Engines.

Mikael Makinen will continue as President of Marine, and Chris Cholerton will carry on as President of Defence. Harry Holt, who currently heads the Group Operations, will become President of Nuclear as from 1st January, 2016. Rolls-Royce Power Systems will continue being led by Dr. Ulrich Dohle.

According to Mr. East, the executive team will be strengthened further in 2016 with the appointment of a new Chief Operating Officer.

Rolls-Royce says the new structure will clarify executive accountabilities, allow leaders to focus better on operational performance, and make it easier for the company to build on its class engineering capabilities.

Savings of up to £200 million annually

The company estimates that these measures will generate incremental gross cost savings of between £150 million and £200 million each year, with benefits accruing from 2017. The next update on the cost and range of the programme will be released in February next year.

Rolls Royce Trent EngineRolls-Royce’s Trent 7000, made for the Airbus A330neo, successfully underwent a test run in November. Rolls-Royce is the worlds second-largest maker of aircraft engines. (Image: Rolls-Royce)

Mr. East said:

“The changes we are announcing today are the first important steps in driving operational excellence and returning Rolls-Royce to its long-term trend of profitable growth. This is a company with world-class engineering capability, strong market positions and exceptional long-term prospects.”

Two bosses to leave

As a consequence of these measures, Hawrie Haynes, the current president of Land & Sea has decided to retire, and Tony Wood, President of Aerospace has chosen to leave the company. They will both remain with the business into next year in order to help with the transition to the new structure.

Mr. East commented:

“Tony has been with Rolls-Royce for 15 years, during that time he has contributed to many of the company’s most significant achievements. Recently he has played a lead role in positioning our Aerospace businesses for growth, launching next generation technologies and driving cultural change.”

“Lawrie has been with Rolls-Royce for six years in a number of senior leadership positions. He has played a critical role in focusing our Land and Sea businesses on growth markets. His deep knowledge of mission critical engineering, and particularly of the nuclear industry has been of great benefit to the company. I would like to thank both Tony and Lawrie for their excellent support since I became CEO. The Board and I wish them every success for the future.”

In an interview with the Financial Times, Mr. East said that without the extra layer of senior management, one week will be saved for every month it currently takes to make a decision.

At 10:15 GMT today, shares in Roll-Royce were 2.2% up, trading at 552 pence.

About Rolls-Royce Holdings plc

Rolls-Royce Holdings plc is a British multinational company that designs, manufactures and distributes power systems for aviation and several other industries.

Headquartered in the City of Westminster, London, it is the second-largest maker of aircraft engines globally. It also has considerable businesses in the energy and marine propulsion sectors.

In 2011 and 2012, the company was the 16th largest defence contractor in the world, as measured by defence revenues.

Rolls-Royce employs 54,100 workers.