APPENDIX 2
Memorandum submitted by the Rolls-Royce
Barnoldswick Joint Shop Stewards Committee
1. We represent a highly skilled workforce
at the Rolls-Royce Barnoldswick group of factories. These factories
are frequently referred to as the Birthplace of the Jet Engine
(The "RB" in the RB211 family of engines refers to "Rolls
Barnoldswick"). We are prime manufacturers of Fan Blades
and Front Bearing Housings.
2. We are concerned that the prospect of
manufacturing being outsourced overseas will be detrimental to:
employment, advances in manufacturing technology, training of
young people, the economy of local communities, income tax revenue
and national insurance contribution gathering.
3. The Rolls-Royce group employed 49,600
people at 31 December 1999 and 46,500 at 30 June 2000. Civil aerospace
employees fell from 22,700 to 22,000 over the same period. Defence
employees also fell from 8,700 to 8,500 over the same period.
Order intake for the core gas turbine technology was at a record
level for the first half of 2000 being £3.5 billion representing
an increase of £1 billion over the same period last year
(source: Rolls-Royce plc interim results).'
4. Whilst Airbus Industries employs its
pan-European resources to secure a strong market position against
the only other significant player (Boeing), Rolls-Royce a UK based
company competes successfully with the two major engine manufacturers
(General Electric and Pratt & Whitney) for market share. Given
the enormity of the resources of these two American companies,
Rolls-Royce's ability to achieve this market position says much
about the ability of "Rolls-Royce people" throughout
the company.
5. Accordingly we are deeply concerned that
reducing the "Rolls-Royce resource" in both people and
capability terms will undermine our ability to maintain our quality
and competence in Jet engine design, research and manufacture.
6. In the late 1960s Rolls-Royce committed
itself to the development of the RB211 for a proactive entry into
the global commercial aircraft market with government encouragement.
In 1971 Rolls-Royce was nationalised because of the financial
difficulties it encountered in establishing itself as the lead
engine supplier on the Lockheed Tristar. Rolls-Royce was privatised
in the 1980s. We believe this was done as a political gesture
without any real consideration of how the company would survive
in a vastly changed market place with the increased reliance on
commercial sales.
7. The relationship between the flotation
share price and its current price is a reflection on how the analysts
view the task that faces Rolls-Royce in a fiercely competitive
industry. We believe that the continual necessity to protect the
share price, to avoid a hostile takeover is a considerable drain
on the resources of the management of the company.
8. The under-valuation of the strategic
economic importance of the British motor car industry by both
Government and investors has lead to its demise. It is bizarre
to those of us who value British manufacturing to grasp that Rolls-Royce
Motors, Jaguar, Land Rover and Vauxhall are no longer British
owned companies; whilst at the same time we are expected to be
enthusiastic that Nissan and Toyota have seen the value of building
factories in the UK to exploit the European car market. The same
fate may befall Rolls-Royce if it is left to the rigours of the
market.
9. We believe that reaffirmation by the
Government that they are committed to using the `Golden Share'
to prevent overseas ownership of Rolls-Royce would be of a considerable
value to the Rolls-Royce workforce.
10. The nature of the commercial aircraft
market place has encouraged countries with national airlines to
seek offset arrangements (orders in exchange for a share of the
manufacture of a particular engine component). The Rolls-Royce
workforce does not seek this type of arrangement but understands
the practicalities of obtaining orders with these airlines.
11. What does cause significant concern
to the workforce is an increasing acceptance by the Rolls-Royce
Aerospace Board that it is preferable to seek out other manufacturing
companies who are prepared to invest in their companies to take
on the responsibility of manufacturing engine components, than
to carry on manufacturing these items within Rolls-Royce.
"We will focus our manufacturing activities
and only make things that are vital to the business and which
we are good at making. The rest we will buy but from fewer, more
competent global suppliers."
(Colin Green, Director of Operations-November
2000).
12, Approximately two thirds of Fan Systems
is located at Barnoldswick. And two thirds of the site workload
is in Fan Blades, the remainder of the work being Front Bearing
Housings and Fast Response.
13. We have had sight of a plan for the
Fan Systems business. Included in the plan were the closure of
the Ansty, Fast Response area (this has happened) and the outsourcing
of composite materials (this is currently being transferred to
an Austrian company).
14. The plan also proposed several changes
for Barnoldswick Fan Blade manufacturing. Amongst these proposals
was a plan to transfer the manufacture of solid fan blades to
the Fast Response area and two years later transfer the work to
an external supplier. We have been told that this has changed
and the intention is to keep the work at Barnoldswick. A cell
has been set up in the Fast Response area with peppercorn investment,
the necessary cost savings to match the work outside, being arrived
at through changes in working practices. We expect the company
to act in an honourable way, but you will hopefully understand
our nervousness and more important understand the pressure that
is on the people in this area to achieve success.
15. It is worth noting that whilst we are
the sole suppliers of unique technology in producing Honeycomb
Wide Chord Fan Blades, the Company was in the past prepared to
release the machining of the blades for the V25000 engine to IHI
Tanashi a Japanese member of the international consortium that
manufactured and built the engine. More recently the company proposed
to outsource the manufacture of Trent 500 Front Bearing Housings
to Volvo. This arrangement did not come to fruition we are pleased
to say, but it underlines that nothing is sacred as far as the
Rolls-Royce manufacturing strategy is concerned.
16. Rolls-Royce receives a significant boost
to the profit and loss statement by receiving Launch Aid Investment
from HMG rather than borrowing the money from banks. We believe
that the Government should be encouraged to consider an option
to Launch Aid by becoming a Risk & Revenue sharing partner
with Rolls-Royce through investing money into the manufacture
of Rolls-Royce components in Rolls-Royce UK facilities.
17. We strongly believe that a national
strategy for the Aerospace industry is essential and that government
must be prepared to guide this strategy in the national interest.
18 December 2000
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