Rolls Royce

About Rolls Royce

Rolls-Royce Holdings doesn't make cars so luxurious you'll cry (see Motor Cars), but it sure can make an aircraft engine whine. One of the world's largest aircraft engine makers, Rolls-Royce, through its Civil and Defense Aerospace businesses, makes commercial and military engines for a broad customer base, including airlines, corporate and utility – more... aircraft and helicopter operators, and armed forces around the world. Beyond aviation, its Energy unit supplies gas turbine power generation to the oil and gas industry, while its Marine segment makes propulsion systems that power 70 navies worldwide. Rolls-Royce has operations in North America, Europe, and Asia, with an emerging presence in the Middle East.

The company supports its geographic markets with manufacturing and service facilities in 50 countries, and recent expansion includes construction of a manufacturing and assembly facility in the US (Crosspointe, Virginia), as well as an assembly and manufacturing plant in Singapore. The company, which addresses four global markets -- Civil Aerospace, Defense Aerospace, Marine, and Energy (including nuclear) -- keeps its business plans long-term. The lifecycle of Rolls-Royce's products and services averages 40 to 50 years, so the company bases its investments in technology programs on forecasts of up to 20 years. Its performance is best viewed by decades rather than individual years. With that in mind, the company was nonplussed by the lack of sales growth in 2011 and continues to follow a strategy it has had in place for years that includes investing in technology and infrastructure; growing market share and installed product base; and adding value with product related services.

This strategy has resulted in a company that shelters itself through diversity. The company achieves diversity, not only in its regional markets, but also in its balanced offering of products and services, as well as its product portfolio and the diverse end-markets that it serves. The different geographies, product selections, and customers mitigate for one another in the event of a market swing. After recognizing a marked increase in revenue from its engine aftercare services, the company has boosted its offerings to include aftermarket repair and overhaul, as well as field maintenance and fleet data management. All these factors, along with its cost savings measures and operational improvements, allow the company to forecast its revenue as doubling in a decade (by organic growth alone).

Consistent investments in research and development as well as the occasional acquisition represent part of the company's strategy in action. In early 2011 Rolls-Royce, together with Daimler, announced plans to acquire Tognum, a German engine and powertrain supplier for distributed power generation and marine propulsion markets. This follows the company's strategy to increase market share for its marine products. With a 95% stake in Tognum, the two companies can further develop the business jointly. The sizeable hold gives the companies rights to Tognum's intellectual property in the form of patents.

In 2010 subsidiary Rolls-Royce Marine bought Norwegian engineering firm ODIM ASA. The purchase added automated handling systems for seismic and offshore drilling vessels that complement Rolls-Royce's ship design and power systems for the offshore drilling industry. Outside of Norway, ODIM has operations in Canada, Singapore, and Vietnam.

The company's Marine business also boasts an extensive range of products and services, from ship design to power systems and controls to aftermarket support services. It is benefitting from defense contracts in the US and the UK, where its engines power US Marine Corps and Royal Navy ships, respectively. Rolls-Royce's merchant marine operations are headquartered in Shanghai, taking strategic advantage of its proximity to the shipbuilding centers of China, Japan, and Korea -- these countries, when combined, account for a majority of the world's commercial shipbuilding.

These actions come as  no surprise after the civil aerospace sector took a beating during the economic crisis and with a recovery slow to materialize.  Despite the difficult conditions some regions are showing promise. For example: the Middle East signed a long-term services contract with Emirates Airline (part of The Emirates Group) for more than $2 billion. Singapore Airlines made its $1 billion order for Trent 700 engines in mid-2011, around the same time that Brazil's TAM air carrier signed a contract valued at more than $2 billion for Trent XWB engines. Rolls-Royce engines power some 30 types of civil aircraft, from small executive jets to large passenger aircraft. Several of the company's customers saw their aircraft take flight in 2009. Those aircraft, powered by Rolls-Royce engines, included the Boeing 787 Dreamliner, Gulfstream G650, Airbus A400M, Embraer Legacy 650. The company also signed an exclusive deal to power the Airbus 350-1000 aircraft.

On the defense side, Rolls-Royce commands approximately one-quarter of the world's military engine manufacturing market share. Its portfolio covers all major sectors -- combat, helicopters, unmanned and tactical aircraft, training, and transport. While the defense budgets for the US and UK have called for funding cuts to certain projects, the US government approved funding for the F-35 Joint Strike Fighter, so that Rolls-Royce can move ahead in collaboration with General Electric to develop the F136 engine for that aircraft.

Rolls-Royce's Energy (including nuclear) business holds a global position as a leading supplier of power and compression equipment, such as industrial gas turbines, to the oil and gas industry, especially to offshore oil rigs and platforms. With a plan to expand its civil nuclear power generation activities, the company established a civil nuclear business unit in 2009 and will build a factory in the UK to assemble test systems and components for nuclear power stations. While Rolls-Royce's traditional markets are showing weak demand, emerging economies such as India and Venezuela are showing opportunities for long-term growth for the company's gas turbines and reciprocating engines.

Although Rolls-Royce shares its name with the luxury car, the two parted ways when the British government split them in 1971. Since 1996 Sir John Rose has been the driving force behind Rolls-Royce's transformation, increasing revenues more than three-fold. He retired in spring 2011 and is succeeded by another John -- John F. Rishton -- former finance director at British Airways and chief executive of Royal Ahold, a Dutch retailer. Rishton began in a non-executive director role at Rolls-Royce in 2007. – less

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