Rolls-Royce warned today it will look to make at least 9,000 workers to cut £1.3bn in annual costs as it copes with the economic downturn from coronavirus.
The British engine-maker warned it will swing the axe mostly at staff in its civil aerospace division as it begins consulting unions.
That prompted the government to say it may step in to offer financial assistance to prevent the job losses.
The company’s share price dropped over three per cent to 259.2p in early trading.
Rolls-Royce has around 52,000 employees, and has already scrapped financial targets and cancelled its dividend over coronavirus.
Global travel bans have resulted in the engine maker taking a £300m hit from a lack of flights in March.
But today it warned the crisis will knock its aerospace division further.
“It is, however, increasingly clear that activity in the commercial aerospace market will take several years to return to the levels seen just a few months ago,” Rolls-Royce said.
“We must now address these medium-term structural changes, as demand from customers reduces significantly for our civil aerospace engines and aftermarket services.”
Rolls-Royce to roll out major coronavirus restructure
To achieve the £1.3bn savings, Rolls-Royce will also overhaul its manufacturing plants and property. It will also cut capital costs and seek savings elsewhere.
The 9,000 jonb losses will result in savings of £700m a year, the British giant said. The entire revamp of operations will likely cost the company £800m.
“This is not a crisis of our making. But it is the crisis that we face and we must deal with it,” Rolls-Royce CEO Warren East said.
“We must take difficult decisions to see our business through these unprecedented times. Governments across the world are doing what they can to assist businesses in the short-term. But we must respond to market conditions for the medium-term until the world of aviation is flying again at scale. Governments cannot replace sustainable customer demand that is simply not there.
“We have to do this right, which means we will work closely with our employee and trade union representatives as appropriate, look at any viable alternatives to mitigate the impact, consult with everyone affected and treat our people with dignity and respect.”
Government to engage with Rolls-Royce
Justice secretary Robert Buckland said the announcement has prompted the government to engage with Rolls-Royce.
“Clearly we will have to go to work with the employer to look at the options,” he told Reuters.
“All of us will be looking not just at Rolls-Royce but at the whole sector and the implications of this for the supply chains as well, let’s not forget them, to make sure we are doing everything we can in terms of plans and action to support what is a very high skilled part of our economy.”
Union Unite said 3,375 of the job cuts will come in the UK by the end of the year, with more to follow in 2021.
Unite’s Steve Turner pointed out the engineering firm has put thousands of workers on the job retention scheme. That means the government pays their wages to avoid redundancies.
“We call upon Rolls Royce to step back from the brink and work with us on a better way through this crisis,” he said.
“We are seriously concerned that we are going back to the dark days of the 1980s when businesses ran away from their responsibilities to workers who were the basis of their success.
“We will be meeting with the company over the coming days to convince them to take a different approach, and pressing the government to step up to the plate to protect our manufacturing base.”