British engine maker Rolls-Royce cuts 4,600 jobs

Rolls-Royce has some 16,000 staff at its UK operational base in Derby, above, central England. (Reuters)
Updated 14 June 2018
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British engine maker Rolls-Royce cuts 4,600 jobs

  • Rolls-Royce employs about 55,000 staff worldwide, almost half of whom are in Britain
  • Rolls-Royce had in January announced a major overhaul of its operations, reducing the number of core units and basing the remainder around civil aerospace, defense and power systems
LONDON: Rolls-Royce plans to axe 4,600 mainly British management roles by 2020 to further slash costs, the UK maker of plane engines announced on Thursday.
“Rolls-Royce announces the next stage in our drive for pace and simplicity with a proposed restructuring that will deliver improved returns, higher margins and increased cash flow,” the group said in a statement.
The London-listed company, whose engines are used in Airbus and Boeing aircraft, said the latest cuts would produce £400 million ($536 million) of annual cost savings by the end of 2020.
Rolls has faced a tough trading environment in recent years on weak demand for its power systems, in particular ones used by the marine industry, resulting in the loss of about two thousand jobs alongside the creation of new posts.
The latest update will result in the largest cull at the group since 2001, when it axed 5,000 jobs on a global economic downturn and following the September 11 attacks in the US.
“Our world-leading technology gives Rolls-Royce the potential to generate significant profitable growth,” the company’s chief executive Warren East said in Thursday’s announcement.
“The creation of a more streamlined organization with pace and simplicity at its heart will enable us to deliver on that promise, generating higher returns while being able to invest for the future,” he added.
Although Rolls roared back into profit last year, this was largely owing to a recovery in the pound.
While the plunge in the value of the pound in the wake of Britain’s 2016 vote in favor of Brexit helped many exporters, Rolls-Royce was forced to book a vast charge as it had not hedged against such a swing in the currency.
Rolls said the latest round of restructuring, leading to the loss of many corporate-supporting roles, was expected to cost the group £500 million, while about two-thirds of the job losses would be in the UK.
East, who has implemented a group-wide restructuring since his appointment as chief executive in 2015, insisted that the latest cull was not linked to repairs it has been forced to carry out on Trent engines.
Used by the Boeing 787 Dreamliner and Airbus A380 superjumbo, the engines have seen some parts wear quicker than expected, forcing Rolls to carry out costly repairs.
Rolls employs about 55,000 staff worldwide, almost half of whom are in Britain.
The company meanwhile has some 16,000 staff at its UK operational base in Derby, central England.
“Most of these management and support functions (set to go) are in Derby and therefore, it will be most strongly felt in Derby,” East said in an interview with BBC radio.
Rolls had in January announced a major overhaul of its operations, reducing the number of core units and basing the remainder around civil aerospace, defense and power systems.
“We have world-class technology in Rolls-Royce, but... (not) a world-class business to go along with it,” East said Thursday in a call with reporters.
At the same time, the company has said it would consider selling its commercial marine business, while in April, Rolls sold German division L’Orange for €700 million to US group Woodward.
Speaking to the BBC, East said he saw opportunities in China.
“We look at China and we see an opportunity there for aircraft engine... that’s where a lot of opportunities are.”


Malaysia reviews China infrastructure plans

Malaysia’s former PM Najib Razak (AFP)
Updated 18 June 2018
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Malaysia reviews China infrastructure plans

  • Malaysia's scandal-mired former PM Najib Razak signed a string of deals for Beijing-funded projects, including a major rail link and a deep-sea port.
  • New Prime Minister Mahathir Mohamad has announced a planned high-speed rail link between Kuala Lumpur and neighboring Singapore will not go ahead as he seeks to reduce the country’s huge national debt.

KUALA LUMPUR: Malaysia has been a loyal partner in China’s globe-spanning infrastructure drive, but its new government is to review Beijing-backed projects, threatening key links in the much-vaunted initiative.

Kuala Lumpur’s previous regime, led by scandal-mired Najib Razak, had warm ties with China, and signed a string of deals for Beijing-funded projects, including a major rail link and a deep-sea port.

But the long-ruling coalition was unexpectedly voted out last month by an electorate alienated by allegations of corruption and rising living costs.

Critics have said that many agreements lacked transparency, fueling suspicions they were struck in exchange for help to pay off debts from the financial scandal which ultimately helped bring down Najib’s regime.

The new government, led by political heavyweight Mahathir Mohammed, has pledged to review Chinese deals seen as dubious, calling into question Malaysia’s status as one of Beijing’s most cooperative partners in its infrastructure push.

China launched its initiative to revive ancient Silk Road trading routes with a global network of ports, roads and railways — dubbed “One Belt, One Road” —  in 2013.

Malaysia and Beijing ally Cambodia were seen as bright spots in Southeast Asia, with projects in other countries often facing problems, from land acquisition to drawn-out negotiations with governments.

“Malaysia under Najib moved quickly to approve and implement projects,” Murray Hiebert, a senior associate from think-tank the Center for Strategic and International Studies, told AFP.

Chinese foreign direct investment into Malaysia stood at just 0.8 percent of total net FDI inflows in 2008, but that figure had risen to 14.4 percent by 2016, according to a study from Singapore’s ISEAS-Yusof Ishak Institute.

However, Hiebert said it was “widely assumed” that Malaysia was striking quick deals with China in the hope of getting help to cover debts from sovereign wealth fund 1MDB.

Najib and his associates were accused of stealing huge sums of public money from the investment vehicle in a massive fraud. Public disgust at the allegations — denied by Najib and 1MDB — helped topple his government.

Malaysia’s first change of government in six decades has left Najib facing a potential jail term.

New Prime Minister Mahathir Mohamad has announced a planned high-speed rail link between Kuala Lumpur and neighboring Singapore will not go ahead as he seeks to reduce the country’s huge national debt.

The project was in its early stages and had not yet received any Chinese funding as part of “One Belt, One Road.” But Chinese companies were favorites to build part of the line, which would have constituted a link in a high-speed route from China’s Yunnan province to trading hub Singapore, along which Chinese goods could have been transported for export.

Work has already started in Malaysia on another line seen as part of that route, with Chinese funding — the $14-billion East Coast Rail Link, running from close to the Thai border to a port near Kuala Lumpur.

Mahathir has said that agreement is now being renegotiated.

Other Chinese-funded initiatives include a deep-sea port in Malacca, near important shipping routes, and an enormous industrial park.

It is not clear yet which projects will be amended but experts believe axing some will be positive.

Alex Holmes, Asia economist for Capital Economics, backed canceling some initiatives, citing “Malaysia’s weak fiscal position and that some of the projects are of dubious economic value.”

The Chinese foreign ministry did not respond to request for comment.

Decoder

What is the "One Belt, One Road" initiative?

The “One Belt, One Road” initiative, started in 2013, has come to define the economic agenda of President Xi Jinping. It aims to revive ancient Silk Road trading routes with a network of ports, roads and railways.