Rolls to shed 2,000 jobs and trim supplier base

ROLLS-ROYCE, the aero-engine maker, is to shed a further 2,000 jobs this year and streamline its supply base as part of an efficiency programme expected to boost profits by pounds 70m.

The job cuts follow 2,000 redundancies last year and will take the workforce down to about 38,300. The number of suppliers is likely to decline from 500 to around 300.

News of renewed cost drive came as Rolls disclosed that it had contacted competition authorities in Brussels and Washington over a joint venture between its two US rivals to develop a new engine for the proposed Airbus super-jumbo.

Sir Ralph Robins, chairman, said Rolls had "put down a marker" with the Federal Trade Commission and the European Commission, expressing concern that the alliance between General Electric and Pratt & Whitney was not widened to other engine programmes. "We want to make sure they are not allowed to employ uncompetitive practices when they are bidding against us," he added.

GE and P&W are jointly developing an engine for the A3XX, the proposed Airbus 500-seat double-deck jet. It will compete with the Trent 900 engine Rolls has offered to develop.

Sir Ralph said Rolls took it as a compliment that its US rivals should need to combine forces to compete with Rolls. But Rolls itself will also require a significant number of risk and revenue-sharing partners to fund the development of the engine.

A quarter of the current Trent programme is funded by overseas partners. Last year the Trent tightened its stranglehold in the "big twin" market, winning two-thirds of all engine orders for the Boeing 777 and Airbus A330. Overall, Rolls has 40 per cent of engine orders on the two aircraft.

The Trent's success helped Rolls increase its order book by 30 per cent to pounds 10.4bn last year and boosted pre-tax profits by 18 per cent to a record pounds 325m.

Sir Ralph said that although order intake this year would not be as high as 1998, when the order book grew by pounds 8bn, it would still grow strongly despite the Asian downturn. Sales of civil and military engines, including those supplied by its US business Allison and the Rolls/BMW joint venture, will reach about 1,200 this year against 1,065 last year.

The group-wide efficiency programme, known as Better Performance Faster, contributed pounds 30m to the bottom line last year. A total of 5,000 engineers have been put through courses.

Profits from the civil and military aerospace business rose from pounds 253m to pounds 370m, while Rolls's industrial turbine division grew profits by pounds 4m to pounds 35m.

Spares accounted for one-third of aerospace sales but are thought to contribute about two-thirds of profits. Sir Ralph said margins had held up well.

Sir Ralph played down remarks he reportedly made last year warning that Rolls might switch production abroad if the Government burdened industry with further social costs, saying he did not see this as a problem. Indeed, most manufacturing work in the BMW venture is carried out in the UK because it is more competitive, he said.