Rolls Royce to cull 2,300 jobs but manufacturing posts to be spared

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Rolls-Royce is set to axe around 2,300 white-collar jobs as part of a major cost-cutting drive that will help alleviate the effects of the weak dollar and higher raw material costs.

The UK is likely to bear the brunt of the job cull, given the company employs about 60 per cent of its global workforce in the region – some 23,000 of 40,000 employees. However, Rolls-Royce will also look to slim down in the US, Germany and the Nordic countries. It did not specify where the axe will fall, ahead of entering into a consultation period with its staff. The London-based company employs 12,500 people in Derby, 3,500 in Bristol and a further 2,500 in Scotland.

Rolls-Royce, one of the largest aeroplane engine makers in the world, said that the plan to cut around 6 per cent of its global workforce would not affect its manufacturing staff. Instead, it will look to reduce the number of administrative staff in areas such as management, secretarial, finance, purchasing and human resources. The company reported a record order book of over £35bn in June and will continue to hire graduates and apprentices to keep up with demand. Rolls-Royce has hired 4,000 staff since 2005.

Although the cost savings achieved by cutting jobs will help offset the impact of the weak US dollar and higher raw material costs, the plan was not triggered by external factors, the company said. Mike Terrett, chief operating officer of Rolls-Royce, said: "We are determined to create a leaner and more agile support structure, better suited to the global markets in which we operate. The investments we have already made in new management systems will help us deliver this simplified organisation."

Unions tentatively supported the company's plans to sharpen up its business through a voluntary redundancy programme, but warned that they would oppose more draconian cost-cutting measures.

Bernie Hamilton, Unite's national officer for aerospace, said: "We understand the competitive nature of the aerospace sector and the disproportionate effect that the weakened dollar against the pound is having on the industry. Unite will do everything it can to help the company remain competitive, recognising that this announcement comes at a time of a healthy order book and recent successes in gaining new orders. Any jobs lost are disappointing but we will not accept any attempt to make compulsory redundancies."

Rolls-Royce said it hoped to achieve the job cuts in the UK through voluntary redundancy. The company did not say how much it expects to save or what the job cuts would cost. However, it did claim that the cuts would not impact its 2007 financial performance and that the cost of making the cuts would be offset by savings it would achieve throughout 2008.

Analysts largely welcomed the plan, arguing that the move reinforced confidence that the Rolls-Royce management team was addressing its exposure to the weak dollar. Merrill Lynch estimated the cost of making the job cuts would be around £115m, while Credit Suisse said an efficiency drive of such magnitude should yield savings of around £69m.