Defense business booming: Rolls Royce Power Systems plans job cuts despite record profits

Tank engine manufacturer Rolls Royce Power Systems from Lake Constance presents a healthy balance sheet for 2023 – and still plans to cut jobs.

The German RRPS group, formerly known as MTU, is part of the British engine manufacturer Rolls Royce, which suffered greatly during the Corona years. However, the parent company, which presented its balance sheet on Thursday in the UK, also presented strong figures, and the share price has been on a steady rise for several months. The record figures were achieved despite a slowdown in global economic growth and geopolitical uncertainty, said Stratmann.

War stimulates business

However, the war that broke out in Ukraine two years ago has also boosted the Lake Constance company’s business, and the bloody conflict in Gaza that has been ongoing since October is also fueling plans to restore weapons around the world. The sale of Leopard, Puma or Boxer tank engines, known locally as the “authority business”, now accounts for a quarter of total sales. The military secret business also to some extent includes the maritime sector – in addition to the export of engines for civilian boats, tugs and ferries, it also includes those for warships. Stratmann spoke of “increasing demand from NATO”. Regarding the construction of the tank engine, he said: “We see an annual market growth of ten percent in the medium term now that the Bundeswehr is increasingly among the customers. The company usually does not give any information about actual quantities, other buyers or delivery dates.

RRPS is also growing in other areas of the civil enterprise, particularly in large battery storage systems or gas engines for power generation. It is said that emergency power systems for data centers will sell well in 2023. The board even predicts an annual growth of around 20 percent for the battery business. According to Stratmann, there is currently a large order from Latvia, which wants to be “more independent than Russia” in terms of its energy supply.

The extent of the job cuts is still being determined

Despite the recent positive figures, the Rolls-Royce subsidiary is sticking to its announcement last year that it will start cutting jobs in 2024 and further increase margins. Plans to cut already worried workers last year. Rolls-Royce boss Tufan Erginbilgic’s announcement that he would cut 2,500 jobs at the group as soon as possible led to a jobs meeting in Friedrichshafen at the end of November. Many employees’ distrust of the parent company has grown since Erginbilgic described Rolls Royce as a “hot platform” at the beginning of last year. Works council chairman Thomas Bittelmeyer said in November that if all group locations had to lay off workers at the same rate, up to 600 jobs would be lost at RRPS and up to 350 jobs at the Friedrichshafen headquarters.

Labor director Thelse Godewerth did not want to confirm these figures on Friday, but said the German subsidiary would have to “do its part.” “We are still in the modeling stage.“ There is no date in this context. At least 10,500 workers of the tank engine manufacturer have no fear of layoffs. In November, the works council and the company’s management signed an agreement on regional and labor security that runs until the end of 2026. Stratmann contested the idea that the German branch office was being dictated on the matter by the London headquarters. “We decide for ourselves.”

Commitment to Ukraine

It was unclear Friday how RRPS plans to manage the expected growth in key business areas with fewer workers. Human resources manager Godewerth said, without being more specific, that skilled workers will also be recruited selectively. In response to ongoing questions, it was said that in 2022 and 2023, 75 additional jobs would be created in tank engine construction – an early payment for political decisions that were already expected. That was also the reason for Jörg Stratmann to make a final political statement on Friday: “We consider ourselves obliged to help Ukraine together with the German government.”

Rolls Royce has put controversy behind it

update
After weak years, engine manufacturer Rolls-Royce is on the rise again. According to figures published on Thursday, the group will more than double its profits in 2023 – up to a healthy 1.8 billion euros. For this year, the British expect a further increase in operating profit of up to 2.3 billion euros. The reasons for the increase are the increase in international air traffic and the decrease in complaints about the engines provided.

energy transition
According to its board, the Friedrichshafen subsidiary RRPS also deals with energy transition solutions. According to Chief Stratmann, large tanks and ship engines will not be able to run on electricity in the future either. But the next generation of engines is already being developed so that they could one day be powered by renewable energy, such as used vegetable oil or food waste.