Rolls Royce’s aeronautical engine business, its biggest cash cow, is facing severe issues resulting in the grounding of planes.
On Thursday, British engineering firm Rolls-Royce disclosed it would be cutting 4,600 jobs primarily from the UK as part of a plan that streamlines its business and saves $536 million (400 million pounds) a year, by the end of 2020.
Rolls-Royce said the overhaul of its business, which includes job cuts, would cost it 500 million pounds and be spread over 3 years – 2018, 2019 and 2020.
For the purpose of accounting, it will report these as separate one-off costs which will allow it to stick to its cash flow target.
“These changes will help us deliver over the mid and longer-term a level of free cash flow well beyond our near-term ambition of around 1 billion pounds by around 2020,” said Warren East, Rolls-Royce’s CEO in a statement.
The development comes at a time when Rolls-Royce is facing strong pressure in its aeronautical engines business, following issues on some of its engines which have resulted in planes being grounded and complaints from customers.
Rolls-Royce has an employing strength of 55,000 worldwide of which 26,000 are in Britain. The overhaul comes under the management of East, who joined the company 3 years ago with the mandate of turning it around.