Rolls-Royce Cost Reduction and Productivity Programmes

Rolls-Royce , Rolls-Royce announced today a further stage in the Group’s continuing programme aimed at improving efficiency and competitiveness. 
 
The Group is entering into discussions with employees and their representatives with a view to improving productivity by reducing by up to 2,300 the number of managerial, professional and clerical staff working in the business. 
 
These reductions focus on overhead and support functions. The Group will continue to recruit graduates, apprentices and those required directly to deliver growth. 
 
Rolls-Royce has a strong track record of improving sales per employee and productivity and has made significant investments across the business to achieve these gains. This has underpinned the Group’s success in global markets and enabled it to generate skilled employment. Rolls-Royce has also invested substantially in strengthening its internal management capability through the introduction of new process controls and data management systems. 
 
As a result of this investment, there is now scope to achieve further cost reductions through simplifying the organisation of management, professional and clerical staff. These actions will also help the Group to mitigate external headwinds such as increasing raw material costs and the weak US dollar. 
 
The impact of these proposed changes will extend to the UK, US, Germany, the Nordics and other countries where the relevant functions are located. In the UK, the Group will seek to secure the headcount reductions, wherever possible, through voluntary redundancy. 
 
Mike Terrett, Rolls-Royce Chief Operating Officer, 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. Rolls-Royce will continue to focus on ongoing cost reduction and productivity improvements as the business grows.” 
 
The present restructuring will have no impact on the Group’s 2007 financial performance and the costs associated with this exercise in 2008 will largely be balanced by savings achieved in the course of the year. The Group has a record order book, access to global markets and a proven strategy, which continue to give it confidence for the future.  
 
Background Information 
1. Rolls-Royce, a world-leading provider of power systems and services for use on land, at sea and in the air, has over the last ten years established a strong position in fast growing global markets – civil aerospace, defence aerospace, marine and energy. 
 
2. At the end of November 2007 Rolls-Royce employed around 39,500 people in 50 countries. Around 23,300 are employed in the UK, 8,300 in North America, 2,300 in Germany, 3,400 in the Nordic countries, about 680 in Asia (with an additional 2,000 working in joint ventures) and about 1,520 in the rest of the world. 
 
3. Annual sales were £7.4 billion in 2006, of which 87 per cent were to customers outside of the UK. New product development is carried out on a global basis with 50 per cent of new programmes developed outside the UK. Overall 53 per cent of the Group’s 2006 annual sales came from services revenues. The firm and announced order book at 30 June 2007 was £35.1 billion, of which aftermarket services represented 33 per cent, providing visibility of future levels of activity. 
 
4. The Group has businesses headquartered in the UK, US, Canada, Germany, Scandinavia and China. This global presence allows the Group to access long-term international growth opportunities with its technology, presence, partnerships and people. 
 
5. Rolls-Royce invests in core technologies, products, people and capabilities with the objective of broadening and strengthening the product portfolio, improving efficiency and enhancing the environmental performance of its products. Capital and IT investments made by the Group over the last five years exceeded £1.0 billion. Sales per employee have improved by more than 7 per cent compound over the last ten years.