After promising start, Rolls-Royce boss East must deliver

Wed Sep 28, 2016 2:04am EDT
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By Sarah Young and Sinead Cruise

LONDON (Reuters) - Rolls-Royce (RR.L: Quote) boss Warren East has rebuilt confidence in the British engine-maker, but there are doubts among investors and industry experts about whether his slimmed-down group has the muscle to meet ambitious production and development goals.

The CEO has axed more than 600 management jobs and sought to reduce production times and costs since taking the helm last July, as part of a drive to increase efficiency at a company traditionally viewed as a symbol of British engineering might.

While wrestling with the restructuring, however, Rolls must almost double its output of wide-body plane engines by 2019 to meet orders. It must also replace the blades across hundreds of engines used in Dreamliners after some cracked, while designing two new jet engines, the Advance and UltraFan.

A source in the company familiar with its strategy told Reuters that East's turnaround program was being felt across the business. It has eliminated 33 internal legal entities out of about 300, allowing it to cut down on back office support and internal transactions, the source said.

There has also been progress on the factory floor, according to the source. At one plant in Washington, northeast England, he said Rolls had cut the time it takes to manufacture the fan and turbine discs used in its engines by 50 percent, by combining production processes and introducing robotics and faster inspection processes.

East has also been shaking up the senior executive team tasked with turning around the aerospace and defense company, naming Daily Mail and General Trust's (DMGOa.L: Quote) Stephen Daintith as its new finance chief last week.

The company also told Reuters that it has appointed mergers and acquisitions banker Ben Story as director of strategy and marketing and Neil Crockett, a former veteran of Cisco Systems Inc, as chief digital officer.

His overhaul has buoyed the company's stock, along with the impact of the fall in the pound against the dollar after the Brexit vote, which makes Rolls engines cheaper for overseas buyers. Rolls-Royce shares are up 25 percent this year.   Continued...

Warren East, CEO of Rolls-Royce, poses for a portrait in front of a Pegasus airplane engine at the company's aerospace engineering and development site in Bristol, Britain, December 17, 2015. REUTERS/Toby Melville/File Photo