When Rolls-Royce said in 2011 that it was considering non-UK locations for new aircraft engine test beds, the news hit Derby workers “like a ton of bricks”.
More fell as the company struggled to recover from a string of profit warnings between 2014 and 2016.
And every investment in manufacturing capacity abroad — in Indianapolis, Singapore, Germany and even India — was another crushing blow for workers at its civil aerospace division in Sinfin, where 9,000 people are currently employed.
Now, following the news that a £90 million “extra-large” test bed is to be built in Sinfin, thus committing Rolls-Royce to Derby for 30 years, the bulk of those bricks have been lifted. It’s a phenomenal weight off many thousands of pairs of shoulders.
First, there are the 6,000 shop floor workers at Sinfin whose jobs are now safe for at least five years. Then there’s the tens of thousands of jobs in the Midlands supply chain that rely on Rolls-Royce producing large civil engines in Derby. And then there are business leaders and politicians who steer the local economy. Rolls-Royce is essential to the life-blood of Derby and production at Sinfin would have shrivelled had the test bed gone elsewhere.
In all, a £150 million package for the East Midlands was announced by Rolls-Royce last week, with Hucknall and Annesley promised around a sixth of the investment. The rest of the cake is coming to Derby.
At a staff briefing, management announced that Rolls-Royce would invest in a new experimental test bed in Wilmore Road for the next generation of engines, as well as new manufacturing and overhaul facilities. It will also maintain basic manufacturing activities such as precision machining and castings in-house.
In an interview with Business Weekly, Eric Schulz, Rolls Royce president – civil aerospace, said it was quite simply the city’s turn
He said: “I know there have been a lot of questions in the past [about investment going overseas]. But Rolls-Royce is a global company, we have to invest a bit everywhere.
“We invested heavily in Singapore, [where a £300 million aerospace campus has been built]. We have also installed a sister line for the Trent WXB in Dahlewitz, in Germany. And again, that has been needed because the level of volumes we’ve been getting out of Trent WXB, due to the success of the Airbus A350 XWB jet.
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“So when we look forward, the new test bed in Derby will come in addition to the two large test beds we already have here, which we call 57 and 58, and that will complete our ability to make Derby the centre of excellence for the large engine business.”
The new test bed will be crucial to the development of UltraFan, which could be ready for service in 2025 and burn 25% less fuel than the Trent 700 – another of the company’s most successful jet engines. It will also be capable of testing a range of engines including the Trent XWB, which is the world’s fastest selling civil large engine.
Mr Schulz said the new test bed would be in operation through to the mid-2040s.
“The life of a test bed is 20-25 years,” he said. “It’s going to take two or three years to build it and then there’ll be 20-25 years, at least, of operations from that.
He added the £90 million building would have a “very, very large capacity” and will be the company’s largest and most advanced test bed.
He said: “It will be even bigger than what we have today. Our existing test beds are starting to become limited because of the size of the engines. This investment will position Derby so that it continues to be the lead centre of excellence for the large engine business of Rolls-Royce.
The new test bed is earmarked for land currently used as a staff car park, close to the 57 and 58 test beds.
“This is the view today,” Mr Schulz said. “But we’ll have a tender and work with a subcontractor. At the end of the day, there will be constraints that we will have to work through and the final place might change. Honestly, I don’t know where the final place will be. Today, our intention, ideally, is to position the test bed not too far away from the two others, so that we benefit from being next door to each other, enabling people to go from one test bed to another.
“Of course, we’ll analyse it fully and we might have to do things slightly differently to what we expect but we’ll adapt.”
Rolls-Royce employees know all about adapting. The company has undergone two years of major restructuring after a string of profit warnings and January’s corruption fine to settle a case brought by the Serious Fraud Office and authorities in the US and Brazil.
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The group reported its largest ever loss and one of the biggest in UK corporate history earlier this year, slumping into the red with a pre-tax loss of £4.64 billion for 2016 after a £4.4 billion writedown caused by the collapse of the pound since the Brexit vote, as well as a £671 million penalty to settle bribery allegations.
But the company said earlier this month that 2017 had started well, with all businesses performing in line with expectations.
Indeed, Mr Schulz said he was confident better times lay ahead with the help of the civil aerospace business.
“When you look at things in aggregate, by 2020-21 we will have 50% of the market in large engine business. That has been the dream since the 1980s. So the dream is coming through and I’m delighted to say we will achieve it with the help of this new test bed in Derby.
“This test bed will see UltraFan – that’s why it has to be bigger. We are using engines which are even bigger than past ratios. This is clearly opening a new page in the history of Rolls-Royce. If you look at the history of the civil engine business, we had the RB211, then we started in the Trent family, and now we’re starting to invest with the view that we will continue to sustain our technology on gas turbines and, clearly, we will continue to invest in our product, and Ultrafan is now the next generation of product.
In announcing the £150 million investment for the East Midlands, Rolls-Royce said it was seeking to double the production of new engines, at the same time as introducing three new engines to the market: the Trent XWB-97, which will power the Airbus A350-1000; the Trent 1000 TEN, which will power all variants of the Boeing 787 Dreamliner family; and the Trent 7000 which will power the Airbus A330neo.
Reports after the announcement suggested the new test bed at Sinfin will create a further 200 jobs on top of the 350 staff recruited over the past year to meet the steep increase in production of the XWB.
However, Mr Schulz said it was difficult to say how many new jobs would be forthcoming.
He said: “The problem is we are rebalancing with some of the other divisions in Rolls-Royce. So there are plusses and minuses.
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“We’re undergoing a big transition and this is where the maths is sometimes difficult to do. You reduce some areas, such as business functions, and rebalance with the load we have. But at the very, very least we can say we have sustained the jobs.”
Asked whether new jobs for Derby might be announced over the coming months and years, Mr Schulz responded positively: “Clearly, the civil aerospace business is continuing to grow. If you look at production, we are growing at a rate of 20-25% every year. That’s going to go on again for next year and the year after.”
The growth has been supported by another extra-large test bed for big civil turbines that opened in Dahlewitz, Germany, in 2014. The test bed, which cost €90m euros, was partly funded by state authorities.
Previous reports suggested Rolls-Royce’s final decision on where to build its next test bed was likely to depend on where it wins public funding.
Mr Schulz confirmed the British government had not pledged any funding towards the new test bed but hinted it was willing to provide funding for research that will prove crucial to the UltraFan’s development.
“We have support from the Government on all kinds of different proposes and I would say the relationship between Rolls-Royce and the Government has always been key and important, and will continue,” he said.
The £150 million investment is part of an accord struck with the union Unite to introduce greater labour flexibility as the company faces its biggest production challenge since the Second World War. With a £71 billion order book after a near-decade of booming engine sales, it will have to double engine production to get the turbines delivered on time.
As part of the deal, there will be no compulsory redundancies for five years in Derby. In return, Business Weekly understands workers have agreed to provide “direct support” to step up production of the company’s fastest selling engine — the XWB — in Germany. They will drop their two-year opposition to training employees from the company’s Dahlewitz site in the art of engine assembly. Meanwhile, a joint management-employee committee will be set up to ensure that Derby retains sufficient workload to maintain a core workforce.
Mr Schulz said: “I’m really delighted to announce the £150 million investment. But I’m also really delighted to see the level of communication and discussions we had with our union leaders. They are pretty much ready for the challenge. They understand that we are in a global business and the company has to make decisions that protects itself. I am really, really grateful that we have been able to align our objectives and I’m grateful to all of the workforce and union leaders for showing they were ready to challenge themselves and move on to something that protects the business in the longer term, and protects jobs in the longer term.
“I take great satisfaction, I have to say, to be able to reach a point where the confidence between the workforce and management is at a level that allows us to build for the future. It’s great.”
Source: Derby Telegraph