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Last Updated: Friday, 11 January 2008, 14:58 GMT
Rolls-Royce set to cut 2,300 jobs
Rolls-Royce engine
Rolls-Royce employs about 39,500 people worldwide
Aerospace firm Rolls-Royce has said it plans to cut up to 2,300 jobs to reduce costs and improve efficiency.

The job losses come as the firm seeks to ward off the impact of high raw material prices and a weak dollar.

The cuts will affect the company's operations in the UK, US, Germany and the Nordic countries, the firm said.

The losses, which represent just under 6% of Rolls-Royce's global workforce, will come among managerial, professional and clerical staff.

The firm employs about 39,500 people in 50 countries, with 23,300 in the UK.

Headwinds

Rolls-Royce declined to say how many jobs would be lost in the UK, but said it would try to make the cuts through voluntary redundancies.

Its UK operations include plants in Derby, Bristol and East Kilbride.

We will not accept any attempt to make compulsory redundancies
Bernie Hamilton, Unite union

"We are determined to create a leaner and more agile support structure, better suited to the global markets in which we operate," said Mike Terrett, Rolls-Royce's chief operating officer.

"These actions will also help the group to mitigate external headwinds such as increasing raw material costs and the weak dollar," the firm said.

The Unite union said that the job cuts were disappointing given the firm's healthy order book.

"We understand the competitive nature of the aerospace sector and the disproportionate effect that the weakened dollar against the pound is having on the industry," said Bernie Hamilton, national officer at Unite.

"Any jobs lost are disappointing but we will not accept any attempt to make compulsory redundancies."

The company gave no time frame for the job cuts, saying it was still in talks with staff and unions.

Dollar challenge

A spokesman for Rolls-Royce said the main reason for the job cuts was to increase productivity, but added that soaring energy and metals prices had hurt the company's bottom line.

The weaker US dollar is also a challenge, as the firm's manufacturing costs are largely in sterling but it sells in dollars.

The pound hit a 26-year high against the dollar last year.

"Every 1% rise in sterling against the dollar costs us 12m," the spokesman said, although he added that a hedging strategy had mitigated some of the currency risks.

In November, Rolls-Royce announced plans to invest in new facilities in Singapore and the United States, partly to reduce the firm's exposure to fluctuations in the US dollar.

"It's a way to 'dollarise' our supply chain," the spokesman said.

Analysts broadly welcomed the latest cost-cutting announcement.

"Essentially Rolls-Royce has become more efficient from ongoing productivity initiatives in recent years and needs to employ less admin and support staff," said Numis Securities.

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