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What's going on?

Rolls-Royce said on Thursday it reckons itll save a lot more cash than expected this year, and the aerospace giant owes it all to this new employee-lite diet its on.

What does this mean?

The world’s been hoping to get back to its globetrotting ways this year, but the pandemics had other ideas: it’s been keeping long-haul flights grounded, and profit from Rolls’s aerospace division which earns more the more miles its engines cover down there with them. That’s been forcing the company to cut costs one way or the other, much to its employees dismay: Rollss cost-saving strategy includes cutting a fifth of its total workforce.

Still, that belt-tightening has been paying off, with the company expecting to go through less cash than it forecasted earlier in the year. Good thing too: Omicrons poised to cause even more travel chaos next year, so it’ll need every penny

Why should I care?

For markets: Rolls needs consistency.
Investors sent Rolls stock down 4% after the news. And sure, thats partly because theyre on edge about where air travel goes from here, but theres more at play: Rollss power systems segment which makes engines for yachts and trains was hit hard last quarter by supply chain issues, not least the chip shortage. Put another way, its one thing if Rollss aerospace division is flailing right now, but quite another if its other businesses cant pick up the slack.

Zooming out: There is a solution here.
Rolls might want to take a leaf out of BMWs book: the carmaker signed a deal on Wednesday that guarantees itll be supplied millions of chips every year (tweet this). Thats part and parcel of a wider trend, where carmakers are dealing directly with chip manufacturers rather than traditional parts suppliers in a bid to avoid a repeat of this years production shutdowns.

Originally posted as part of the Finimize daily email.

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