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Friday, 19 October, 2001, 08:20 GMT 09:20 UK
Profile: Rolls-Royce
A Rolls-Royce Trent engine
Rolls-Royce has cut 5,000 jobs as the effects of last month's terrorist attacks continue to hit all companies with interests in the airline industry. BBC News Online profiles one of the UK's most famous companies.

Mention the words "Rolls-Royce" to most people and they will immediately think of the famous cars, with their classic design and luxurious fittings.

But the truth is the modern Rolls-Royce plc company has had no direct involvement with the motor cars for about 30 years.

Rolls-Royce: History
1884: Henry Royce sets up engineering business
1904: Royce builds his first car and meets car dealer Charles Rolls
1906: Rolls-Royce company formed
1907: 'Silver Ghost' car launched
1914: Company designs its first aero engine
1940: Merlin engine powers Spitfire and Hurricane fighter planes
1971: Goes into receivership and is nationalised; aerospace and motor car businesses separated
1987: Rolls-Royce plc privatised
The aerospace and motor car sides of Rolls-Royce were split in 1971, and Rolls-Royce is now one of the world's leading engine makers for both civil and military aircraft.

Its engines are used in both Boeing and Airbus passenger aircraft, and military planes such as the Harrier and Tornado are also powered by Rolls-Royce.

The company also supplies marine power systems for both commercial and naval ships, and makes gas turbines for use in power generation.

Civil aerospace

While the defence, marine and energy divisions have been relatively unaffected since the 11 September attacks, the civil aerospace business - which accounts for 54% of turnover - has suffered.

Rolls-Royce said that sales at its civil aerospace business in 2002 are likely to be down by about a quarter on this year's performance.

As a result the company is to cut 5,000 jobs from its worldwide workforce of 43,000 - with 3,800 of the posts going in the UK.

If there is any consolation for Rolls-Royce it is that its rivals in the aero-engine business have also been having problems.

Its US competitors General Electric and Pratt & Whitney have both been shedding jobs as the world's airlines cut back on costs and new orders.

Rolls-Royce Trent 800 engine
The Rolls-Royce Trent 800 engine powers the Boeing 777
One thing that could help protect Rolls in the short run is the money it makes from the contracts it has to repair and maintain the engines it has already sold.

This aftercare business is usually more lucrative than selling the actual engines. Rolls-Royce has taken an aggressive approach to engine pricing as it looked to increase market share.

But Sandy Morris, aerospace and defence analyst at ABN Amro, says it is "pretty clear" that demand for new planes will fall, which is bound to have an impact in the long run on the aftercare business.

Overall, Mr Morris says he has "respect for Rolls-Royce for its technology and for the market share it has taken from its competitors."

But he adds "as an investment proposition it has not quite proven itself".

The battle for market share does not appear to have done its shareholders any favours, with the company's share price now lower than the 170p level at which it floated in 1987.

Starter motor

It is all a far cry from when Henry Royce set up his own electrical and mechanical business in 1884.

Mr Royce built his first car in 1904, and that year also met Charles Rolls, a car dealer.

The two struck up a deal whereby Royce made a range of cars to be sold exclusively through Rolls' showroom.

The cars were labelled 'Rolls-Royce' - and so a legend was born.

In 1906 the Rolls-Royce company was formed and the Silver Ghost model was launched, soon to be described as "the best car in the world".

Taking flight

At the outbreak of World War One, Royce laid down the foundations of the modern company when he designed his first aero-engine.

A Harrier jump-jet
The Harrier jump-jet is powered by Rolls-Royce engines

Engine development continued during the 20s and 30s, and when Word War Two broke out the Rolls-Royce Merlin engine powered the Spitfire and Hurricane fighter planes.

In the post-war period the UK aeroengine industry gradually consolidated through a series of mergers until in 1966 Rolls-Royce became the UK's main player after it merged with its only domestic rival Bristol Siddeley.

Back down to earth

In the 1960s it also began developing its RB211 engine, but spiralling costs in this project brought the company to its knees.

Despite cash injections from the Conservative government of Edward Heath the company went into receivership in February 1971, and was eventually nationalised

In 1987 Rolls-Royce was floated again as part of the Thatcher government's privatisation programme.

What about the cars?

After being split off from the aero-engine business in 1971, Rolls-Royce and Bentley motor cars continued as an independent company until it was taken over by the defence and engineering group Vickers in 1980.

Rolls-Royce motor car Spirit of Ecstasy statue
Rolls-Royce motor cars: now in German hands

It stayed under Vickers' ownership until 1998, when it was sold to the German car maker Volkswagen.

But Volkswagen's rival BMW holds the rights to the name and the marque, having bought the rights for 40m from Rolls-Royce plc in the same year.

BMW is now set to manufacturing Rolls-Royce cars in 2003, leaving Volkswagen with the sister Bentley brand at the original factory in Crewe.

See also:

18 Oct 01 | Scotland
23 Aug 01 | Business
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