Rolls-Royce is reported to have asked suppliers for price cuts of up to 15% © Sean Gallup/Getty Images
Rolls-Royce is reported to have asked suppliers for price cuts of up to 15% © Sean Gallup/Getty Images

Rolls-Royce demands price cuts from suppliers

The global slowdown which has largely grounded the aviation industry has forced Rolls-Royce to cut spending and shed 9,000 jobs from its workforce.

Rolls-Royce said it was clear that activity in the commercial aerospace market would take several years to return to pre-coronavirus levels and falling demand for civil aerospace engines had forced the company’s hand.

It said it would have to cut at least 9,000 roles from its global workforce of 52,000 and expenditure “across plant and property, capital and other indirect cost areas”, mainly in the civil aerospace division.

The spending cuts are expected to generate annual savings of more than £600m and the headcount reductions to contribute around £700m.

Warren East, Rolls-Royce CEO, said: “This is not a crisis of our making. But it is the crisis that we face and we must deal with it. Our airline customers and airframe partners are having to adapt and so must we.

“We must take difficult decisions to see our business through these unprecedented times [and] respond to market conditions for the medium term until the world of aviation is flying again at scale.”

East said government assistance was not enough as governments cannot “replace sustainable customer demand that is simply not there”.

Rolls-Royce is threatening to withdraw “support” from suppliers unless they agree to price cuts of up to 15%, according to the Financial Times.

A letter has been written to many of Rolls-Royce’s 700 global aerospace suppliers to demand price cuts of between 5% and 15%.

“Now more than ever we need a competitive supply chain,” Warrick Matthews, Rolls-Royce’s chief procurement officer for the civil aerospace division, was quoted as saying.

“We will reward . . . those who will work with us to help us take cost down with more business.”

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