Rolls-Royce Holdings Plc signaled it will hang onto its power systems business that some analysts had seen as a disposal candidate, as it looks for ways to slash costs and tie the unit closer to the rest of the group.
The company will cut the unit’s separate functions such as human resources and legal and instead integrate those roles with the rest of the group, according to people familiar with the company’s plans. Rolls-Royce will also look for ways to cut costs through group-wide procurement of parts and raw materials, the people said, asking not to be identified ahead of the company’s investor day next week.
Chief Executive Officer Tufan Erginbilgic has said he believes the unit, which makes diesel and gas engines for the marine and rail sectors, has a role to play within the group. Erginbilgic told the Financial Times in May that the power systems business had been “grossly mismanaged”, with margins decreasing even as revenues rose.
Last month, Erginbilgic announced plans to cut as many as 2,500 positions worldwide across the group to boost profitability. At the time, the company said it would integrate some duplicate functions to reduce cost and complexity.
“We informed our colleagues on 17 October, in an internal communication, that ‘we will ensure Power Systems is fully integrated and embraced into the Rolls-Royce family’ and this is our intention,” a Rolls-Royce spokesman said.
Read More: Rolls-Royce Confirms up to 2,500 Job Cuts Worldwide
Rolls-Royce is unlikely to cut many engineer roles in the power systems unit as it focuses on internal combustion engines which has limited overlap with the company’s defense and civil aerospace businesses that build gas turbines, the people said. An update on job losses due to the restructuring will come in January, the people said.
Rolls hired Jörg Stratmann, who previously led automotive supplier Mahle Gmbh, as the new CEO of the power systems unit in September 2022.
