Selling of parts of business not an option according to Rolls-Royce's CEO Warren East

Rolls-Royce cuts costs to avoid sell-off

Struggling aerospace firm Rolls-Royce hopes reducing operations cost could help save it from having to sell parts of its business. 

Measures outlined by the group’s CEO Warren East are expected to save between £150m and £200m annually. In addition to cutting the previously announced 3,600 jobs, the firm will also axe some of its managerial staff.

The measures proposed to stakeholders will involve simplifying processes and systems, which according to East, had become "bloated" over "many, many years".

The CEO refused to elaborate on how many jobs will actually be lost and said the firm will reveal further details with its full-year results in February.

Having cut its profit estimates for the fifth time in less than two years earlier this month, Rolls-Royce hopes the measures will help the firm survive the current crisis intact.

"The notion that we're going to sell big chunks is just wrong," East said after US activist shareholder ValueAct, doubled its stake in the firm to around 10 per cent last week.

ValueAct, according to reports, wants Rolls-Royce to focus on its main aero-engine business, which accounts for almost half of profits, and sell its marine engine division.

The marine business in particular has been affected by the ongoing oil price crisis, which has seen demand for Rolls-Royce’s technology from its oil and gas customers plummet. The firm’s major profit driver, the jet engine-making aerospace division, has also been affected due to airliners upgrading their fleets and phasing out older aircraft, therefore needing less servicing and spare parts for older engines.

Rolls-Royce chairman Ian Davis said the company’s board was behind East’s plan.

The firm employs 25,000 people in the UK and a total of 55,000 worldwide. It has said that it will present its new medium-term targets to the market in 12 to 18 months.

The firm's shares were up three per cent today, with investors betting it may benefit from an increase in defence spending as a result of the Chancellor's Autumn Statement on Wednesday. The stock price has fallen by almost a third since the start of the year.

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