Rolls-Royce’s CEO Tufan Erginbilgic called the company a “burning platform” in need of transformation as he took the helm at the British aerospace and engineering giant earlier this year. His efforts to turn the company around have led to higher profits in a matter of months and a stock price that’s soared 120% so far in 2023.
Now, as part of its cost-cutting measures to make it “fit for the future,” the company is planning to lay off between 2,000 and 2,500 employees.
“We are building a Rolls-Royce that is fit for the future. That means a more streamlined and efficient organization that will deliver for our customers, partners and shareholders,” Erginbilgic said in a statement Tuesday. “This is another step on our multi-year transformation journey to build a high performing, competitive, resilient and growing Rolls-Royce.”
The job cuts will impact Rolls-Royce globally. The company said the layoffs had been “minimised” as it has already begun taking measures to curb costs. Another measure it announced was the consolidation of the company’s engineering technology and safety teams as one.
A representative at Rolls-Royce declined to comment on which specific departments will be affected by the cuts as it is yet to be determined, but said that employees in the submarines and small modular reactors businesses, which collectively employ 4,400 people, won’t be among those laid off.
The British company currently employs 42,000 people around the world, including 21,000 in the U.K. and 5,500 in the U.S.
The company’s announcement follows as Rolls-Royce has been working on a large-scale overhaul of its business to help improve its financial performance. Rolls-Royce underwent several restructuring efforts in recent years as it grappled with a halt in travel activity due to COVID-19.
The engineering giant, which designs systems used in defense aircrafts as well as by large carriers like British Airways, cut several thousands of jobs in 2020 due to soft air travel demand, as Rolls-Royce earns revenue by the hour when its engines are used in planes.
Making use of Rolls-Royce’s ‘last chance’
When Erginbilgic took over at the start of 2023, he issued a dire warning about the company’s situation relative to its peers.
“Every investment we make, we destroy value,” the new CEO told employees in a January call, adding that the company’s financial performance was “unsustainable,” the Financial Times reported.
Erginbilgic, a former executive at oil and gas company BP, argued that Rolls-Royce’s problems were not all linked to the pandemic, although it exacerbated them.
“Rolls-Royce has not been performing for a long, long time. It has nothing to do with COVID, let’s be very clear. COVID created a crisis, but the issue in hand has nothing to do with it,” Erginbilgic said at the time.
“Given everything I know talking to investors, this is our last chance.”
Since Erginbilgic’s urgent call for change, the company has managed to turn its fortunes around. He hired consultants to help with streamlining the British multinational company and focused on improving productivity and efficiency.
Those actions have already shown signs of paying off. In August, Rolls-Royce reported a fivefold increase in operating profits of £673 million (about $820 million now) for the first half of 2023 compared to the same period a year earlier. It also increased its full-year guidance on profits as it stays the course on its cost-controlling measures.