Select Committee on Trade and Industry Appendices to the Minutes of Evidence


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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