Rolls-Royce to Cut 400 Jobs Worldwide in Marine Unit

By Robert Wall

LONDON--Rolls-Royce Holdings PLC (RR.LN) will cut a further 400 jobs at its struggling marine unit as the British engine maker continues efforts to offset weakness in several of its key markets.

The job losses in its marine activities follows Rolls-Royce's repeated profit warnings over the past two years, in part because of weakening demand from oil and gas companies as they cut back spending plans owing to low crude prices.

"This is a fundamentally strong business, but we have to take decisive action to position it for future growth, with a structure that is simple, efficient and effective," Mikael Makinen, head of the marine unit at Rolls-Royce said in a statement.

London-based Rolls-Royce said the 30 million pound ($45 million) in restructuring costs associated with the layoffs were included in its July earnings update and will stretch into next year. The moves should generate GBP40 million in savings from 2016, it said.

Some of the savings would be invested in research and development spending.

Separately, Rolls-Royce on Monday disclosed it would spend almost $600 million to modernize manufacturing facilities in Indianapolis, Ind. "This investment ensures that we can increase our competitiveness in the market, which will benefit both our customers and Rolls-Royce," said Marion Blakey, president and CEO, Rolls-Royce North America.

The British maker of jet engines for Boeing Co. and Airbus Group SE planes has been seeking to boost profitability and cut its workforce after a series of profit warnings linked to weakness in key markets for its products. The company last year said it would shed 2,600 jobs in its aerospace division and in May said it would eliminate 600 jobs, about 10% of the workforce, at the marine unit, which has employees in 34 countries. Rolls-Royce warned earlier this year that more job cuts in its marine businesses were possible.

Chief Executive Warren East, who took the job in July, is undertaking an operational review of the entire business, which is due to be completed in November.

The engine maker last week also said it would shutter an engine overhaul joint venture with American Airlines due to a lack of work.

Rolls-Royce said its guidance for the marine unit would remain unchanged. It anticipated sales of GBP1.45 billion to GBP1.65 billion. Profit could range from no profit for this year to GBP40 million, it said in July.

-Write to Robert Wall at [e-mail]

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October 05, 2015 11:00 ET (15:00 GMT)

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