Rolls-Royce faced the threat of more cuts to its struggling marine business even as it axed another 800 jobs in a bid to save up to £50m.
The engineering giant put at risk up to 400 jobs in the UK, with the rest going at foreign sites, as it was forced to make greater cuts following the long-term fall in the oil price, which has hammered its customers.
It is on top of 1,000 jobs the company has already chopped from the marine division, which makes and services equipment for naval, commercial and offshore oil and gas ships.
Cuts: Rolls-Royce put at risk up to 400 jobs in the UK on top of 1,000 jobs the company has already chopped from the marine division
Mikael Makinen, president of the marine division, said the firm was left no choice given the fall in oil prices – from $146 per barrel in 2008 to lows of less than $30.
Ironically, the move came as oil climbed 17 per cent in two days following an Opec agreement.
But it was too late to help revenues in the marine division, which fell by one-quarter in the first half of this year.
Makinen said: ‘The ongoing market weakness that has followed the dramatic fall in the price of oil continues to have an adverse impact upon our order book and profitability.
‘We have made significant progress in transforming Marine into a far more agile and simplified business than we were, and we have to take further steps to address our cost base.
‘Reducing our workforce is never an easy decision, but we have no option but to take further action beyond the changes we have made to date.’
Around 200 of the marine division’s workers in the UK are based in Bristol, where they focus on naval work, and Dunfermline, where they make ships’ fins. It also has workers in Derby, Portsmouth and Solihull.
Chief executive Warren East has led major cost-cutting across the company since taking over at the end of last year, and has already axed 400 roles from senior management.
Rolls-Royce issued five profit warnings in the 20 months to November 2015, as it battled high costs and changes to the market.
Most of the marine workers are based in Norway, while the firm has also been shifting some work to Asia, Poland and Croatia, where the cost of hiring workers is cheaper.
However, despite the severe cuts, the company has not ruled out further reductions, saying that it needs to be able to respond to the market.
Last month East said the business was ‘still not quite at the right size’. Sandy Morris, analyst at Jefferies International, said the Rolls-Royce customers, which typically tend to be reliant on the oil industry, had around 30 per cent of offshore vessels out of service.
He warned that this was unlikely to improve in the near term.
He added: ‘I think the shipping industry, and in particular the offshore industry, has been sinking lower than we ever thought possible and Rolls-Royce, if it wants to survive, has to respond.’