Rolls-Royce deal with German workers raises fears in UK
Rolls-Royce has struck a deal with German employees not to impose compulsory redundancies before 2020 in return for concessions on working hours in a deal that could raise concerns over the future of its UK workforce.
The four-year agreement with employees of the former Tognum power systems division — headquartered in Friedrichshafen, Germany — comes as the aero and diesel engine maker prepares to announce management job cuts in early June.
At least 200 jobs are expected to go globally in the final stage of a programme to cut roughly 20 per cent of the 2,000 most senior management roles. However, one person close to the situation suggested the final number could be significantly higher.
These moves follow almost two years of rationalisation and restructuring as the Rolls-Royce battles to recover from five profit warnings since 2014.
Warren East, the chief executive appointed last July, has said he wants to simplify the business and reduce bureaucracy. While acknowledging that Rolls-Royce has to shift some production of components to lower-cost countries, he has insisted the group will continue to invest in the UK.
However, the promise to German unions has surprised MPs, who last month met with Mr East to voice their concerns about the restructuring.
Pauline Latham, Labour MP for mid-Derbyshire, which is home to Rolls-Royce’s biggest factory, said: “I don’t want to see redundancies [in the UK] because it will have a big impact not just on Derby, but on the whole supply chain,” she said.
Tony Tinley, regional officer for Unite union, said UK workers’ concerns had not been alleviated by the lack of shop floor redundancies so far.
“It has not actually removed the threat and that has been the problem in the UK for a long time,” he said. “It is interesting that when there is a legislative framework around employment as in Germany the company is more prepared to engage. We are open to negotiations because one of the main concerns of our members is security of long-term employment.”
Rolls-Royce’s acquisition of Tognum for about £3bn has been regarded with suspicion by many analysts and investors. Difficulties in power systems and marine were blamed for the group’s second profit warning. Some investors have called on Rolls-Royce to leave the business and focus on aero-engines, which account for more than two-thirds of profits.
Under the terms of the deal, new flexible working conditions will help reduce costs — by as much as €10m a year according to the company. Rolls-Royce has also promised to reduce the proportion of contract workers at the German business from 8 per cent to 5 per cent by 2019. Up to 550 jobs are expected to go through voluntary redundancies.
Rolls-Royce rejected suggestions that German employees were getting favourable treatment as a result of stricter labour laws in Germany. “In exchange, [German] employees have agreed to changes in working practices and further steps including voluntary severance, increasing or reducing hours according to workload, and flexible working — including paid and unpaid leave,” a spokesman said.