Coronavirus: Rolls-Royce cuts spend as part of work to save £750m

posted by Charlie Hart
6 April 2020

Rolls-Royce is taking action to reduce cash expenditure as its aerospace division suffers due to coronavirus.

The engineering firm said salaries would be cut by 10% across its global workforce and discretionary spending such as consulting and sub-contract costs would be minimised.

Actions taken by Rolls-Royce will have a cash flow benefit of £750m in 2020, it said. 

The firm added the “primary impact” of the virus had been on its Civil Aerospace business as flying hours dropped by 50% in March and are expected to further deteriorate in April. 

“Our airframe and airline customers are facing unprecedented business challenges and we are in close communication with our customers and suppliers as we prepare for an anticipated reduction in engine delivery and MRO (maintenance, repair and overhaul) volumes,” it said. 

Rolls-Royce also implemented measures to minimise operational disruption, including enhanced hygiene procedures, modified shift systems in manufacturing facilities and the “temporary closure” of some facilities to all but essential personnel.

The firm added it is working as part of the VentilatorChallengeUK Consortium to increase the UK’s supply of ventilators

“Our role in the consortium is to organise a parallel supply chain to feed in materials as quickly as possible to a number of new assembly plants.

“Working with the Manufacturing Technology Centre in the UK, expert medical consultant practitioners and supported by Innovate UK, we have also prototyped, developed and put into operation within just one week, a fast-make intubation shield for use with ventilators,” it said.

It comes as analysts revealed widespread car plant shutdowns in Europe and North America as a result of Covid-19 could cost the industry $100bn in lost revenues if factories remain shut until the end of April.

Ian Henry, owner of consultancy AutoAnalysis, told the Financial Times factory closures in Europe would cost an additional €8bn for each week production is shutdown, and in North America, the figure would be up to $7.5bn.

Henry added: “I can’t see any semblance of normality returning before May, at the very earliest.”

Last month, carmakers including Aston Martin, Jaguar Land Rover, Volkswagen, BMW and Toyota suspended production in Europe.

Meanwhile, economists have predicted the coronavirus lockdown in the UK will cost the economy up to $2.4bn a day.

The Centre for Economics and Business Research said increased social restrictions that are preventing businesses from opening as normal will reduce the UK’s GDP by 31%.

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