British MPs will meet Warren East to discuss his restructuring plans for Rolls-Royce, underlining the political sensitivities the new chief executive will have to navigate. Mr East is attempting to stabilise the UK's flagship engineering group after five profit warnings.
More than 20 Labour and Conservative MPs wrote to Mr East earlier this month to request a meeting, highlighting concerns for the future for the group’s 21,300 employees in the UK and plans to shift more production to low-cost countries.
Rolls-Royce, which last year generated sales of £14.6 billion and is the world’s second biggest aero-engine maker, accounts for roughly 2 per cent of total UK goods exports.
Mr East, who took up his post in July, has promised to update investors in February on plans for streamlining the company's bureaucratic processes. He has said that Rolls-Royce will have to reduce its unit costs to remain competitive against far bigger rivals such as General Electric and Pratt & Whitney of the US.
MPs are understood to have been particularly alarmed by negotiations under way to make components for the group’s next combat engine in India. No deal has yet been disclosed but it is understood that the government in New Delhi is pressing for investment in Indian manufacturing in return for any defence orders.
“We were told the company brought people from India to be trained in the UK and then go back and do that job in India,” said one person familiar with the MPs’ request. “That is exactly the kind of thing that concerns us.”
Rolls-Royce said it had received the letters and would be contacting MPs in the new year to arrange a meeting. “Rolls-Royce remains fully committed to the UK,” a spokesman said. “We actively engage with all our stakeholders, including MPs, to make sure they understand us and can support us when appropriate.”
Yet political anxiety has been exacerbated by the failure of Rolls-Royce management in recent years to communicate with MPs over its longer-term plans, the person said, even as it announced big job cuts and pressed suppliers to shift production to low-cost countries.
In November 2014, the group announced that 2,600 jobs would go as part of a restructuring announced by John Rishton, who presided over three profit warnings before stepping down as chief executive in July. In the letter sent to Mr East, MPs say that several requests for meetings with Mr Rishton went unanswered.
Among the signatories on the letter are Margaret Beckett, MP for Derby South and a former Labour foreign secretary.
Ms Beckett said legislators wanted to ensure a good working relationship with the new chief executive as he implemented his restructuring. “There is nervousness about the extent to which the ambitions we have for the UK are shared by Rolls-Royce,” she said.
“There is a keenness to get on to better terms with Rolls-Royce to work together for the prosperity of both the country and the company. These are some of the most valuable jobs we have in the UK.”
Bryan Huish, chief negotiator for the Unite union at the group’s Bristol site, said that unions were supportive of the need to make Rolls-Royce a more flexible and cost-efficient company. But, he added, UK manufacturing jobs should not be sacrificed. “We are a British company. It seems we are growing in other countries and gradually dwindling in the UK. We need a good UK balance while we become a global force,” he said.
Rolls-Royce is not only a significant British employer, it is also a nursery for much-needed engineering talent. It employs 9,000 engineers in Britain, and 650 apprentices, according to government figures.
Copyright The Financial Times Limited 2015
