Aerospace giant Rolls-Royce wields axe

Embattled engine maker Rolls-Royce has confirmed plans to axe its two divisions and shake-up managem

Embattled engine maker Rolls-Royce has confirmed plans to axe its two divisions and shake-up management - Credit: PA

Embattled engine maker Rolls-Royce has confirmed plans to axe its two divisions and shake-up management in the latest move to turn the group around after five profit warnings.

Chief executive Warren East will scrap the Aerospace and Land & Sea divisional structure - an overhaul which will claim the scalp of two top bosses.

Tony Wood, president of the Aerospace division, will leave the company next year, while Lawrie Haynes, president of the Land & Sea business, has decided to retire.

Both will remain with the group into 2016 to help with the changes.

Rolls said the move will cut out a layer of senior management, with the group instead comprising five businesses from January 1 - Civil Aerospace, Defence Aerospace, Marine, Nuclear and Power Systems.

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The heads of these businesses will report directly to Mr East.

Rolls said the revamp will “simplify the organisation, drive operational excellence and reduce cost”.

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Mr East added the changes are the “first important steps in driving operational excellence and returning Rolls-Royce to its long-term trend of profitable growth”.

The shake-up comes amid a major revival plan to boost performance and slash costs by between £150 million and £200 million a year.

FTSE 100-listed Rolls issued its fifth profit warning in less than two years last month as a result of weak demand and low crude prices that have hurt sales at its marine unit, which supplies the oil industry.

It is cutting management roles and has previously announced 3,600 redundancies.

But Mr East, who joined in July, is under pressure to revive the group’s fortunes after the profit warnings have hammered its share price - down around 43% over the last six months.

US activist shareholder ValueAct has also doubled its stake in the firm to around 10% and is pressing for change.

It was reported earlier this week that the Government would consider nationalising the Rolls arm that makes the power systems used in Britain’s nuclear systems if the firm’s woes deepened.

The speculation comes amid rumours of takeover interest in Rolls following its share price plunge.

The UK Government holds a “golden share” in Rolls, which means certain deals would require its consent.

Foreign ownership of Rolls is also limited to 15% under rules drawn up when the group was privatised in 1987.

The latest step in Mr East’s turnaround plan will see Rolls hire a new chief operating officer next year.

Under the changes, director of engineering and technology Colin Smith will also become group president from January 1, remaining on the main board.

The group will give more details and an update on its cost-cutting plans and the impact on jobs in February.

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