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Rolls-Royce, the aerospace engine manufacturer, is to make its first job cuts since 9/11 as it seeks to trim costs in the face of rising raw material costs and a weak dollar.
The company, which employs 23,000 people in the UK, said that it would cut 2,300 jobs from support and overhead functions in the first significant sign that the weak dollar is starting to impact manufacturers' competitiveness.
UK-based Rolls said that it was looking to reduce the number of support staff in managerial, professional and clerical positions by 8 to 10 per cent. However, it insisted that it would continue to hire about 200 apprentices and 200 graduates a year as production expands to keep on top of a record order book for aircraft engines worth £35 billion.
The job cuts will take place in the UK, US, Germany and Scandinavia but the company refused to say how many jobs would be cut in each territory. In the UK, Rolls will initially seek voluntary redundancies from across professional, managerial and clerical ranks.
Rolls has been trying to improve its productivity in the last two years and the company insisted that the staff changes were not a response to external factors, but were part of an ongoing programme to make the company as competitive as possible.
Mike Terrett, the chief operating officer, said: "We are determined to create a leaner and more agile support structure, better suited to the global markets in which we operate."
While Rolls-Royce manages its dollar exposure through long-term hedging, like other British companies which carry out a large part of their business in dollars, it has been affected as sterling rose to a 26-year high last year. Also, raw materials it uses, such as cobalt, nickel and titanium are at historically high levels.
The redundancies will have no impact on the firm's 2007 financial performance, Rolls said, and the costs associated with the scheme in 2008 would be largely balanced by savings throughout the year.
Rolls-Royce's order intake ballooned in 2007 by about £25 billion. According to analysts at Numis, the company has a £45 billion backlog of work.
The engine maker makes most of its money from the aftermarket servicing and repairs of aircraft engines, rather than the initial sale. Consequently a strong order book leads to many years of lucrative service revenues.
The company had about £600 million of cash at the end of 2007, even after paying £500 million into its pension fund.
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Does Rolls Royce supply engines to Boeing for use in the Dreamliner?
John Tipple, Horndean/Waterlooville, Hampshire, UK