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Rolls-Royce lifts stakes in engine maintenance centres

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New chief executive Warren East, four months into the job, has said the company must cut costs and be overhauled to better adapt to changing markets.

[LONDON] British engineering company Rolls-Royce, under pressure after a series of profit warnings, said it would increase its stakes in two aero-engine maintenance centres as part of a plan to improve competitiveness.

Rolls-Royce said on Monday it would invest a total of US$206.5 million to bring to 50 per cent its ownership of maintenance centres (AMC) headquartered in Singapore and Hong Kong, and bring in new agreements to make its three AMCs vie for new work.

New chief executive Warren East, four months into the job, has said the company must cut costs and be overhauled to better adapt to changing markets.

Shares in Rolls-Royce have plunged 15 per cent since Nov 11, the day before its fourth profit warning in just over a year, as it struggles to cope with shrinking demand for marine engines and declines in its aero-engine business, where fewer of its older, more profitable engines are bought or require servicing.

Rolls-Royce said the new agreement with its AMCs would improve customer service and the shareholding changes would help simplify its business. "The existing geographic territory-based arrangements used by Rolls-Royce to direct maintenance, repair and overhaul (MRO) work to each AMC will be replaced with a competitive model where each AMC will need to compete," the company said in a statement.

East will on Tuesday present an update of an operating review he has been carrying out on Rolls-Royce.

Shares in Rolls-Royce traded up 2.3 per cent on Monday, reflecting hopes the company could benefit from higher defence spending in Britain.

REUTERS