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Rolls-Royce: How serious is the latest jobs cull?

Michael Ngangula

May. 29, 2020

Rolls-Royce has announced 9,000 job cuts - mainly in its civil aerospace wing - as a direct consequence of the coronavirus pandemic bringing the aviation industry to a shuddering halt.
The cull has been described as devastating news for the city of Derby, which is likely to see a significant proportion of the redundancies.
It is by no means the first time the company has announced major job losses, but many have said this time feels more serious. How worried should we be?
Doesn't Rolls-Royce do this all the time?
Browsing the news archives confirms major job cuts have been a fairly regular feature of Rolls-Royce's history over the past century.
Most recently the company - which employs 52,000 people worldwide - announced it was shedding 4,600 jobs as part of a management reorganisation in 2018 .
"Historically Rolls-Royce has always been known locally as 'Rush 'em, Rest 'em'," said Tony Tinley, regional officer for the Unite union.
"They would have work to last them three or four years. Then the workload would drop off, they'd make a load of people redundant and within the space of six to eight months they'd be taking people back on.
"My dad left in about 1981 and six months later he had a letter inviting him back - I know people who've gone and come back two or three times - so they've constantly gone through that cycle on a number of occasions over the years.
"More recently that's not been the case - they've had full order books for a significant period of time, so they've had smaller impacts, but they still do have a tendency to see that as a way of managing their workforce."
Image copyright Getty Images Image caption The Duke of Cambridge was given a tour of one of Rolls-Royce's Derby sites during a recent visit
Mr Tinley said the approach was not unique to Rolls-Royce.
"It's the British disease I'm afraid. It's by no means particular to Rolls-Royce - they just get the eye on them due to the scale," he said.
"In Canada, where Rolls-Royce has a site, if they have to lay people off they'll do it to varying degrees - so they'll pay some people 50% of their pay to keep them on their books and when the workload picks up they come back on board.
"In Germany they have a completely different strategy - it's very difficult to dismiss someone by reason of redundancy. The responsibility on the company and the community is to keep that person employed."
Why does this time feel different?
Clearly the major factor this time round is the huge question mark hanging over the aviation industry as the world waits to find out if and when normal life - and travel - can resume after the pandemic.
Paul Everitt, chief executive of aerospace industry body ADS, said coronavirus was bringing about "a very difficult period for Rolls-Royce, its employees and its extensive UK supply chain".
"This crisis puts at risk tens of thousands of high-value jobs across the UK, with long-lasting damage to our vital manufacturing base and to the prosperity of communities in every part of the country," he said.
Image copyright Getty Images Image caption The firm has suggested some factories could close
The Midlands Aerospace Alliance warned aviation was facing "the most significant downturn it has ever experienced" and said companies that survived "may take several years to recover their growth".
David Learmount, consulting editor at FlightGlobal, said against such a gloomy backdrop, major layoffs were inevitable at Rolls-Royce, despite union appeals for staff to be retained.
"I understand Unite and why they say this, and I hope they go for the best deal they can get for their workers, but unfortunately the world isn't like that," he said.
"I'm afraid it could be 2023 before aviation gets back to where it has been before Covid and that's a very long time to be paying highly skilled people.
"This is a highly skilled industry so they're not earning peanuts. They deserve a lot more than peanuts."
Image copyright Getty Images
Analysis
By Simon Hare, BBC Inside Out journalist
The saying in Derby goes: "Even if you don't work at Rolls-Royce, you still know someone who does."
That's why the loss of 9,000 jobs, with around half of those in Derby, is so keenly felt here. Once you've factored in the supply chain, the effect on the local economy could be three, four or even fivefold.
We've been here before - there were big Rolls-Royce job losses after the 9/11 terror attacks in 2001. Yet this does feel like a more significant moment, perhaps closer to the "crash" of the company in 1971.
Coronavirus has inevitably hit aviation hard and the effects look likely to last for several months, if not years.
Rolls-Royce began making cars and only later moved into aero-engine production.
Could the engineering and innovation skills built over generations here in Derby now be focused towards the environmental challenges of the future?
How are workers feeling?
John Payne, from Derby, has worked for Rolls-Royce for 40 years - the last four-and-a-half of them in Singapore.
He is due to fly home on Sunday when his contract expires and he said he believed his days with the company were up.
"It's very sad. Derby will be decimated, there are some good engineers there," he said.
"It will hit hard this. It is heartbreaking but as the old saying goes, it is what it is."
Image copyright Getty Images Image caption The Rolls-Royce jobs announcement came after Boeing said it was cutting 15,000 staff
A Rolls-Royce staff member from the Midlands, who wanted to stay anonymous, said the speed of the latest announcement had surprised him.
"When 3,000 jobs were lost last year, there was a long consultation and most of the jobs came from voluntary redundancies," he said.
"They managed to find people who were coming to the end of their career, but this latest round of cuts will mean talented and hardworking people who had bright futures will have to go.
"The British government need to look carefully at the support they can provide to the aerospace sector because there is a real danger that the country will no longer be able to compete on a global scale, with China committing to having its own aircraft and engine-making capability in the coming years."
Is it time for Rolls-Royce to pivot?
With demand for its aero engines likely to be diminished for some time, Unite has suggested Rolls-Royce could use this moment as an opportunity to diversify.
Steve Turner, the union's assistant general secretary, said: "If we're not going to be producing the engines at the sort of volumes we predicted pre-Covid at Derby, then what do we need to produce as a nation?
"That's a serious question - for the government, for Rolls-Royce and other manufacturers.
Image copyright Rolls-Royce Image caption Rolls-Royce has been developing an electric plane called Accel
"We need to green our economy and we need to manufacture at home the sort of products we need to make that happen.
"We need heat pumps, carbon capture, hydrogen technology - we need to transition our auto industry from combustion engines to batteries and hydrogen power. We need energy storage facilities.
"It requires our manufacturing sector to step up to the plate and start delivering here in the UK - not just the products but the jobs, the apprenticeships and the skills it's going to require."
Could the government step in to save jobs?
About 4,000 Rolls-Royce staff have been furloughed since April but Rolls-Royce chief executive Warren East said the company did not expect the scheme to continue for years.
The government has also indicated it is prepared to rescue large British companies severely affected by the coronavirus crisis - a move welcomed by Unite.
However, Mr East has indicated the company aims to steer its own course through this challenging period.
He said: "We have emerged from troubled times before, to achieve incredible things. We will do so again."
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