Rolls-Royce announced May 20 they would lay off more than 17% of their global workforce as the company adapts to the “medium-term impact” of the novel coronavirus. The London-based engineering company, which designs and manufactures luxury cars as well as airplane engines, is the latest aerospace manufacturer to lay off workers in the face of a crippled air travel economy.
In a statement, CEO Warren East said governments cannot provide enough support to replace customer demand, making the reorganization necessary. The move will cut 9,000 positions from Rolls-Royce’s 52,000 global workforce and cut plant, property, and capital spending. The company expects the job cuts to save 700 British pounds annually, or about $858.4 million; Alongside additional spending cuts, the company says they will save $1.594 billion a year in total. Cash restructuring costs related to the reorganization are estimated at $981 million between now and 2022.
“The strategic choices that we have made over the last few years have helped us to respond rapidly to COVID-19 and the synergies between our divisions leave us well placed to capitalize on the long-term potential of our markets,” said Warren East.
Jobs cut will mostly come from Rolls-Royce’s Civil Aerospace business, which supplies airplane engines to manufacturers. Rolls-Royce says it will conduct a review of its factories’ footprints as well as its support functions. According to the company, about half of Rolls-Royce’s , $18.76 billion in 2019 income came from aftermarket services.
The company’s defense sector, which hasn’t been affected by a drop in consumer demand for air travel, will remain mostly unchanged, and the company will “explore any opportunities” to move workers from the Civil Aerospace sector to it. Rolls-Royce’s internal Civil Aerospace supply chain also serves its defense sector and will continue to do so.
Rolls-Royce Holdings plc maintains customers in more than 150 countries, including more than 400 airlines. Around the globe, airlines are struggling to attract customers as consumers wary of the novel coronavirus or under quarantine stay at home. The shock to the industry has reverberated through aerospace manufacturers like Rolls-Royce, Boeing, and GE Aviation.
In April, GE Aviation announced they would cut their workforce by 10%. On May 4, the company announced further cuts might be necessary. “We are developing our plan for permanent reductions to our global employee base that we anticipate will bring our total reductions this year to as much as 25%,” wrote David Joyce, vice chair of GE and CEO of GE Aviation. On April 29, Boeing Co. announced they would cut their entire workforce by 10%, with potential for cuts of more than 15% to its commercial airplane production sector.