Rolls-Royce to cut 1,000 jobs as sales of luxury cars dive

NEARLY 1,000 jobs are to go at Rolls-Royce Motor Cars in an attempt to stem losses in the face of falling sales of luxury vehicles.

The cuts, far higher than expected, will dismay workers at Crewe, Cheshire, where Rolls is one of the biggest employers, and fuel fears in the City about first-results of Rolls' parent, Vickers, due on Thursday.

Stockbrokers expect Vickers, which makes Challenger tanks and owns Cosworth Engineering as well as Rolls-Royce, to reveal a loss of pounds 5m before tax in the six months to June and a cut in the interim dividend from 3.7p last time.

Rolls has already cut 1,700 jobs, leaving about 3,000 at Crewe. Previous reductions in the workforce were aimed at bringing the break-even point down to fewer than 2,000 cars a year. In April the former chairman, Sir David Plastow, said the company expected worldwide sales this year to be similar to last year's. But demand has since slumped at home and abroad. The company's revised targets are for a break-even point of fewer than 1,500 cars a year, half the level of 18 months ago.

Redundancies will be expensive. Last year, as sales at Rolls-halved, the company incurred pounds 14.6m costs in closing the Mulliner Park Ward plant in west London and pounds 16.8m restructuring costs, mostly redundancy charges.

The decision to reduce the size of the workforce follows disappointing sales figures for August, the most important month for UK car sales. Rolls' sales fell from 432 in August 1991 to 314 last month.

Sales of other luxury car makers, including Lotus and Porsche, halved but Jaguar managed to increase sales.

As well as falling sales, the job cuts reflect increased efficiency following a review by external consultants and an increase in the proportion of parts bought in.

Rolls-Royce cars already incorporate externally made air conditioning, but will now have a larger range of bought-in components. The company is considering going outside for services such as marketing and information.

It will present this switch as modernisation. Car dealers will, however, be disappointed if there is any damage to Rolls' reputation for craftsmanship.

The cuts follow Vickers' failure to sell the company or to find a partner. At the annual meeting in April, Sir David hinted that it had given up talking to potential partners as none had put a high enough price on Rolls-Royce.

Sir Colin Chandler, the chief executive, is understood to believe that closure is not an option. The costs would be huge.

Rolls is not alone in cutting the size of its workforce. Jaguar recently announced 700 jobs would go from its Coventry plant while Ford, Jaguar's parent company, put 3,800 on short-time working.