Rolls-Royce plc

65 Buckingham Gate
London SW1E SAT
England
+ 44 171 222 9020
Fax: +44 171 233 1733
Web site: http://www.rolls-royce.com

Public Company
Incorporated: 1884 as F.H. Royce and Company
Employees: 42,600
Sales: £4.3 billion (US$6.9 billion)(1996)
Stock Exchanges: London
SICs: 3724 Aircraft Engines & Engine Parts; 3728 Aircraft; 3510 Engines & Turbines; 8711 Engineering Services; Parts & Equipment, Not Elsewhere Classified; 3511 Turbines & Turbine Generator Sets; 3519 Internal Combustion Engines, Not Elsewhere Classified; 3559 Special Industry Machinery, Not Elsewhere Classified; 3799 Transportation Equipment, Not Elsewhere Classified

Though Rolls-Royce pic is most strongly identified with classic luxury automobiles like the Silver Ghost and the Phantom, aircraft engines have been the company’s chief business since the late 1920s. Rolls-Royce made both cars and plane engines until 1971, when the British government nationalized the aircraft engine manufacturer as Rolls-Royce Ltd. and sold the car company to Vickers pic as Rolls-Royce Motor Cars Ltd. After going public in 1987, Rolls-Royce acquired Northern Engineering Industries, a builder of power plants. The aerospace group produces gas turbine engines for civil and military aircraft, and its industrial power group designs and builds power generation, transmission, and distribution systems worldwide. In the early 1990s, Rolls-Royce was the world’s third largest manufacturer of aircraft engines, behind General Electric Co. and United Technologies’ Pratt & Whitney division.

Late Nineteenth-Century Origins

The origins of Rolls-Royce date back to its founder, Sir Frederick Henry Royce, born in March 1863 in Lincolnshire, England. His rags to riches story began when as a youth he went to London to sell newspapers for W. H. Smith on a street corner. In 1872, the year of his father’s death, young Henry found himself in financial straits and augmented his newspaper selling job with work as a telegraph messenger. Five years later Royce got a job as an apprentice in a railway works near Peterborough, where he learned the basics of modern engineering. In 1880, he graduated to becoming a tester with the Electric Light and Power Company in London, and he studied the principles of electrical engineering in his spare time. In 1884 Royce and his friend Ernest Claremont began a small electrical and mechanical engineering workshop, F. H. Royce and Company, on Cooke Street in Manchester.

Business was slow and difficult at first, but before long the company became known for its electrical dynamos and cranes. Sales rose from £6,000 in 1897 to £20,000 in 1899. That year, the company’s name was changed to the Royce Company, and its capital base was increased to £30,000 to finance a new factory at Trafford Park, Manchester.

By 1902, Britain’s nascent motorcar industry caught the industrious Royce’s eye. He bought a secondhand French Decauville, stripped it down to its Parts, and studied the vehicle. Applying what would now be called “reverse engineering,” he set about building his own auto based on the Decauville. The result was a two-cylinder, ten horsepower model not much different from the French original. The first model produced from the Cooke Street works emerged in 1904, in time to catch interest from another Decauville enthusiast of the day, Charles Rolls.

Born in 1877, Charles Stewart Rolls came from a far more privileged background than Royce. After studying at Eton and Cambridge, he traveled around the Continent in the early 1890s, developing an interest in the motor car, which was then becoming popular in France. Once back in Britain, Rolls became a motorcar dealer in 1903. He sold mostly continental models, but with his dealership in fashionable Brook Street, London, and a repair shop in nearby Fulham, Rolls soon came to know the British car market well.

Rolls-Royce Formed in 1904

Rolls’s interest in becoming a dealer of British automobiles led him to Royce’s new line. The two men met, and a deal was finally struck for C. S. Rolls and Co. to become the exclusive dealer for Royce. Their December 23, 1904 agreement stipulated all cars sold by their arrangement were to be called “Rolls-Royce.” Four models went into production: the twin cylinder, ten horsepower; the three-cylinder, 15 horsepower; the four-cylinder, 20 horsepower; and the six-cylinder, 30 horsepower. All the vehicle engines shared a series of parts—pistons and rings, valves, connecting rods, springs and bearings, among others.

In 1905, the first year of production, Rolls-Royce’s four types of vehicles ranged in price from £395 to £890, and were therefore purchased only by the wealthy. Expansion of the motorcar market at this time tended to focus on innovations in engine design. In 1905, Rolls-Royce introduced its eight-cylinder, V8 engine, regarded by motoring enthusiasts as innovative for the smoother, quieter ride it allowed.

In 1906 Rolls-Royce introduced the 40/50 model, or the Silver Ghost, named for its metallic appearance and its engine that was “quiet as a ghost.” Some British journalists called it “the best car in the world.” Orders for this and earlier models climbed steadily that year, and this brought about the expansion of the company to a new factory in Derby. To fund the new plant, a subscription of new shares worth £100,000 was offered on the stock market in December 1906 under a new name: Rolls-Royce Limited. The subscription named Royce as chief engineer and works director, and Rolls as technical managing director. Ernest Claremont was appointed to chair the company.

The Derby factory opened on July 9, 1908 amid much pageantry. Proof that the new Silver Ghost was to be a success came in 1911 when the Indian government ordered eight new models for use by King George V and his entourage during the Delhi Durbar that year.

Around this time, Rolls began to distance himself from the car company as both his fame and outside interests grew. He resigned as technical managing director and became a consultant to Rolls-Royce in April 1910. Three months later, Rolls was tragically killed when his Wright biplane crashed. As a symbol of mourning, the intertwined “RR” logo on the Rolls-Royce radiator plate was changed from red to black. Soon thereafter the workaholic Royce fell seriously ill from exhaustion, and he spent much of 1912 convalescing. In time, Royce took a home in the south of France and reduced his shop floor work—but not his design contributions—to conserve his health.

Expansion into Aircraft Engines During World War I

Day-to-day responsibility of Rolls-Royce Limited then passed to Claude Johnson, who reaffirmed the long-time company commitment to producing and perfecting one model. For a company building luxury cars, the benefits of military procurement beginning at the outbreak of the First World War were not immediately apparent. But, in 1914, Rolls-Royce found itself in demand to produce chassis for armored fighting vehicles, and Rolls Royce cars soon became widely used as staff cars for the British Army.

During this time Rolls-Royce was also called upon to design aircraft engines to help with the war effort. The company’s association with aviation propulsion had begun earlier. In fact, the original 1906 agreement between Rolls and Royce had mentioned in the first paragraph that the company had a wide mandate to provide propulsion on land, at sea, and in the air. Furthermore, Royce had served as a consultant to the Royal Aircraft Factory at Farnborough. However, outside of this early interest in aviation, which Royce shared with Rolls, actual production of aero engines didn’t begin until the onset of World War I.

In early 1915, Royce led a team of engineers in working out a design. Within three days of the war’s outbreak, Royce was pouring over plans for a 200 horsepower aero engine. Some of the technology—crankshaft, connecting rods, geartrains—were borrowed from the Silver Ghost motorcar engine. But more pistons were required; 12 in all. And so was born the 60 degree V12 engine that became the prototype for all machinery produced by Rolls-Royce after 1918.

Company Perspectives:

Rolls-Royce is a world leading power systems business, meeting the needs of customers, shareholders and employees for the next century. We provide cost-effectively engineered products and services to commercial and military customers in propulsion, electrical power and materials handling markets around the world. Customers from the world’s leading airlines to executive jet operators rely on our powerful range of commercial aero engines and global support network. Military customers benefit from engines for helicopters, fast jets, trainers and transport aircraft, as well as naval vessels. We provide power utilities and independent operators with innovative solutions to their electrical generation, transmission and distribution needs and serve customers in industrial, marine and nuclear engineering markets.

Testing of a 225 horsepower aero engine had begun at Derby. By 1916, the engine went into production. It was named the Eagle and was put into wartime service beginning in 1916 at 250 horsepower in size. By 1918, the Mark VIII form had risen in size to 365 horsepower. Two other engines, the Hawk and the Falcon, had been designed by Royce from his home in the south of France and relayed to his production team in Derby for manufacture. In total, 5,000 Rolls-Royce aero engines were made during the First World War, accounting for nearly half the air horsepower used by Allied forces. By the late 1920s, the company derived more profit from the manufacture of aero engines than it did from making cars.

Producing aero engines also had applications for developing motorcar engines. In 1924, for example, Rolls-Royce introduced front wheel brakes to its cars, as well as power assistance through a gearbox driven servo. The interwar years also signaled a departure from the company’s practice of producing only one car model. In 1922, the 3.5-litre, 20-horsepower model was introduced. In 1925, the “New Phantom” succeeded the Silver Ghost. While its larger seven-litre engine had overhead valves rather than side valves, the chassis and the running gear were the same as those used on the Silver Ghost.

Over the next ten years, Rolls-Royce continued to manufacture automobiles for an increasingly exclusive and wealthy clientele. In 1931, the company purchased Bentley Motor Ltd., a consistently undercapitalized English manufacturer of high-performance automobiles. Royce, who was conferred a baronetcy in 1930, died in 1933.

Just before the outbreak of World War II, the Phantom II was replaced by the Phantom III. The new model was driven by a VI2 engine, the most powerful yet. Without Royce to oversee its introduction, however, the Phantom III production had been expensive. This led in 1937 to the company’s consideration of rationalizing its design and production facilities to contain expanding operating costs.

Aircraft Engines Drive Growth During World War II

Before his death in 1933, Royce had set about designing a new generation of aero engines that surpassed 1,000 horsepower in size. The result was the PV12, a 27-litre engine eventually named the Merlin. The Merlin was first used by the Royal Air Force in 1937. Two years later, the aero engine could maintain 1,000 horsepower to 16,000 feet. Impressed with its design and output, the Royal Air Force agreed to help fund the development of three fighter planes designed around the Merlin—the Fairey Battle Bomber, the Hurricane, and the Spitfire. All performed with memorable accuracy in the famed Battle of Britain during the Second World War. Innovations to the engine during this time ensured it could attain 1,000 horsepower at more than twice the original altitude, 47,000 by the war’s end. Activity during the Second World War had greatly expanded Rolls-Royce. Factories at Crewe and Glasgow, Scotland had been opened. By 1945, the company employed well over 50,000 people.

Ernest Hives, who served as CEO of Rolls-Royce from 1936 to 1957, decided in 1945 that the future of the company lay in continuing to produce aero engines. He guided the company’s conversion from piston turbine engines to the new gas turbine engine designed by Stanley Hooker and Frank Whittle in 1940. Car production was moved from Derby to Crewe so that the Derby facilities could work almost exclusively on developing the gas turbine aero engine for the civil aviation industry.

An early customer of the Merlin engine was the Canadair DC4M, a Canadian-built aircraft. The introduction of a military engine in a civil aircraft took some tinkering before it was done successfully. Rolls-Royce used its experience to judge just how different commercial engine expectations were from military ones. In 1953, Rolls-Royce introduced the Dart propjet engine for the Vickers Viscount. This new engine had a centrifugal design and had taken over from the Merlin 60 series of engines. The last Dart engine was built in 1986, ending nearly 40 years of production.

Rolls-Royce also introduced the turbojet engine in the form of the AJ65 model, or the Avon, which powered the world’s first commercial jetliner, de Havilland’s Comet, as well as the Canberra, Hunter, and Lightning. The company’s second wholly civil aero engine was the RB141, or Medway, launched in 1959. It served the BEA and BOAC airlines for a few years before it was replaced by the Spey, a smaller version. Besides being used in the BAC One Eleven, Fokker F28, and Gulfstream II and III, the Spey made its way across the Atlantic into the American LTV A7 military aircraft.

Competition and Nationalization: 1960-70s

Hives was succeeded by Sir Denning Person in the late 1950s. Pearson was determined to penetrate the important American airliner market, but was rebuffed by fierce competition from Pratt & Whitney and General Electric. In 1966 Rolls-Royce effectively consolidated the British aircraft engine industry with the acquisition of its top domestic rival, Bristol-Siddley Engines. Two years later, the company won a key order from Lockheed to build an engine for the TriStar plane. Though the contract seemed a major coup at the time, development of this powerful new engine, dubbed the RB211, consumed far more time and money than Rolls-Royce had anticipated; so much so that in February 1971 the company faced bankruptcy and was subsequently nationalized by the British government. To reduce costs, the company spun off its carmaking division into a separate company, Rolls-Royce Motor Cars Ltd., which eventually became a subsidiary of Vickers Pic. Both companies continued to use the Rolls-Royce name and the distinctive RR symbol.

At the same time, development of the RB211 engine under the engineering leadership of Sir Stanley Hooker continued apace. By 1972, the RB211 went into production for use in the TriStar aircraft. Though it had been costly to develop, it was very adaptable and modified for uses large and (relatively) small. In 1987, Rolls-Royce announced that 75 percent of customers for the new Boeing 757 airliner had chosen the RB211 engines for propulsion. The RB211 was even used in landbased and off-shore installations, mainly by the oil and natural gas industries in drilling operations. On the military engine side of operations, Rolls-Royce took part in the three-nation Turbo-Union RB199 engine development for the Tornado aircraft during the mid-1980s. The company also provided Pegasus vectored-thrust engines for the British V-Stol Harrier aircraft, used primarily by the Royal Air Force.

Under the chairmanship of Frank Tombs from 1985 until 1992, Rolls-Royce re-emerged on the London stock market in May 1987, securing more than two million shareholders in the process. Many were from overseas, primarily Americans. By the end of 1988, a more hopeful business climate produced an order book for Rolls-Royce of £4.1 billion, compared with the £2.7 billion a year earlier. Sales for the company were slightly down, however, on 1987 figures, as were the operating profits, at £333 million.

In 1988, the company launched the RB211-524L civil turbofan engine. In addition, Rolls-Royce signed an agreement to provide the European Fighter Aircraft, a three-member European military production project, with the EJ200 engine. The company had a 33 percent stake in the project.

After its refloatation, Rolls-Royce set about diversifying away from its sole emphasis on aero engines. To that end, in May 1989, the company merged with Northern Engineering Industries Pic (NEI), which designed and constructed capital plant and equipment, particularly for the power generation industry. That year Frank Turner, director of civil engineers at Rolls-Royce, welcomed the diversification, which ensured the company would now derive 35 percent of its sales from non-aero engine business. He commented: “Through the sixteen years of state ownership, we were constrained … in obtaining approval for anything new. In effect, our gun arm was strapped. We found ourselves only able to react to the initiatives of our competitors, and then only when it was very late in the day.”

The company announced in 1989 the formation of a joint venture between NEI and Asea Brown Boveri, the Swiss-based engineering group. The venture, NEI ABB Gas Turbines Ltd, was to be based in Newcastle in northern England. In the same year, Rolls-Royce introduced a new incarnation of the RB211 dubbed the Trent engine, to carry it into the new decade. The Trent helped Rolls-Royce capture important orders for wide-body aircraft, such as the McDonnell Douglas-11 and the Airbus 330. Boeing subsequently announced it would carry the Trent engines on its 767-X aircraft.

Early 1990s Recession Drives Reorganization

A stunning array of problems greeted Rolls-Royce and its rivals in the 1990s. The disruption of the global airline industry from the Persian Gulf conflict battered the airline industry and its suppliers in the early 1990s. Due to an embargo, NEI had to postpone the sale of four steam-turbine generators to the aggressor, Iraq. With a deepening global recession came reduced air travel. Loss-plagued civil airlines cautiously postponed or canceled new plane orders, forcing the three largest aerospace engine manufacturers into what one analyst called “suicidal price competition.” Once the Gulf War was settled, leading nations around the world resumed downsizing their military budgets, slashing new aircraft orders. Sales for Rolls-Royce in 1991 fell four percent to £3.51, and pre-tax profits fell more sharply to £51 million, compared with £176 million a year earlier.

Better times appeared to be on Rolls-Royce’s horizon, however, as the company’s order book rose to record levels on the success of its Trent engine. In fact, the company’s share of the civil aviation market had grown from ten percent at the time of its refloatation in 1987 to 23 percent at the beginning of 1993. That same year, the company opened what it claimed was the world’s largest airline engine testing facility, a £20 million (US$30 million) test cell that was a big as a soccer field.

Sir Ralph Robins, who capped a lifetime career at Rolls-Royce with his advancement from CEO to chairman in 1992, realized that the company would not simply grow its way out of the industrywide crisis. He continued a reorganization set in motion by his predecessor, targeting across-the-board cost cuts. The company reduced development time by involving design and production engineers in the entire process and embarked on strategic joint ventures to pare research and development costs. The employee rolls received the most drastic surgery; the work force was cut by more than one-third, from nearly 65,000 in 1989 to 42,600 by the end of 1996.

Robins’ strategies for winning increased market share—and with it sales and profits—included emphases on the aftermarket segment, the fast-growing Asia-Pacific market, and the new class of super jumbo jets. Since price competition among the big-three aero engine makers had slashed that segment’s profitability, Rolls-Royce focused on providing higher-margin parts and service to the world’s airlines, hoping to double that business by the turn of the 21st century. Emphasis on sales to Asian airlines paid off handsomely; by the mid-1990s, the company had captured one-third of China’s aero engine orders. Its Trent 800 became the engine of choice for Boeing 777s sold to Southeast Asian airlines, giving it a 32 percent share of the market for powering that model worldwide. The US$525 million acquisition of America’s Allison Engine Company boosted Rolls-Royce’s presence in that still-vital market, prompting the parent company to expect a US$1.5 billion contract to retrofit US Air Force B-52s.

The company’s £400 million investment in the next-generation Trent mega-thrust engines (80,000 pounds and up) also proved sound. Rolls-Royce emerged with the industry’s lightest, most fuel-efficient engine made for the super jumbo jets being designed by Boeing Co. These massive planes were expected to ferry up to 550 passengers as far as 10,000 miles at a stretch. Rolls-Royce hoped to power 50 percent of the 1,200 of these giants planes projected to be built by the middle of the 2010s.

Following a pre-tax loss of £184 million on revenues of £3.6 billion in 1992, revenues rose slightly, to £3.6 billion in 1995, but the company achieved a pre-tax profit of £175 million. Results for 1996 were adversely affected by the company’s decision to divest its steam power generation interests; costs related to the sale pushed Rolls-Royce to a pre-tax loss of £28 million, but Sir Robins noted that ongoing holdings chalked up an operating profit of £242 million on the year. Despite the less-than-stellar bottom-line results, top executives were upbeat about the company’s future prospects. Robins was expected to retire in 1998 and be succeeded by CEO John Rose.

Principal Subsidiaries

Rolls E.L. Turbofans Limited; Rolls-Royce Aero Engine Services Limited; Rolls-Royce Commercial Aero Engines Limited; Rolls-Royce Engine Controls Limited; Rolls-Royce International Support Services Limited; Rolls-Royce Military Aero Engines Limited; Sawley Packaging Company Limited; Allen Power Engineering Limited; Clarke Chapman Limited; Cochran Boilers Limited; International Combustion Limited; NEI Brantford International Limited (51%); NEI Overseas Holdings Limited; Parsons Power Generation Systems Limited; Peebles Electric Limited; Reyrolle Limited; Reyrolle Projects Limited; Rolls-Royce and Associates Limited; Rolls-Royce Industrial & Marie Gas Turbines Limited; Rolls-Royce Industrial & Marine Power Limited; Rolls-Royce Industrial Power (India) Limited; Rolls-Royce Industrial Power (Overseas Projects) Limited; Rolls-Royce Industrial Power Systems Limited; Rolls-Royce Materials Handling Limited; Rolls-Royce Nuclear Engineering Limited; Rolls-Royce Nuclear Engineering Services Limited; Rolls-Royce Power Engineering pie; Rolls-Royce Popwer Generation Limited; Rolls-Royce Transmission & Distribution Limited; R-R Industrial Controls Limited; Thompson Kennicott Limited; Middle East Equity Partners Limited; Rolls-Royce & Partners Finance Limited; Rolls-Royce Capital Limited; Rolls-Royce International Limited; Rolls-Royce Leasing Limited; Rolls-Royce Overseas Holdings Limited; RRPF Engine Leasing Limited; RRPF Engine Leasing (No. 2) Limited; Motores Rolls-Royce Limitada (Brazil); Rolls-Royce Technical Support SARL (France); Allison Engine Company, Inc. (U.S.); Rolls-Royce Industrial Power (Pacific) Limited (Australia); Bristol Aerospace Limited (Canada); Ferranti-Packard Transformers Limited (Canada); Parsons Turbine Generators Canada Limited (Canada); Rolls-Royce Canada Limited; Rolls-Royce Gas Turbines Engines (Canada) Inc; Rolls-Royce Holdings Canada Inc.; Rolls-Royce Industries Canada Inc.; Fushun & Reyrolle Bushing Co Limited (China; 50.4%); Caillard SA (France); Ferranti-Packard de Mexico SA de CV; Rolls-Royce Industrial Power (New Zealand) Limited; NEI Africa Holdings Limited (South Africa; 60.33%); Northern Engineering Industries Africa Limited (South Africa; 56.36%); Rolls-Royce Industrial & Marine Power Inc. (U.S.); Cutler Hammer Zambia Limited; NEI Zambia Limited; NEI Holdings Zimbabwe (Private) Limited; Rolls-Royce of Australia Pty. Limited; Nightingale Insurance Limited; Rolls-Royce & Partners Finance (Netherlands) BY; Rolls-Royce International Turbines (Saudi Arabia) Limited (51%); Rolls-Royce North America Inc. (U.S.); Rolls-Royce Inc. (U.S.); Rolls-Royce Capital Inc. (U.S.). Principal Affiliates: Rolls-Royce Turbomeca Limited (50%); Rolls Smiths Engine Controls Limited (50%); Turbo-Union Limited (40%); Clarke Chapman Portia Port Services Limited (50%); Cooper Rolls Limited (50%); Derby Cogenera-tion Limited (50%); Rolls Laval Heat Exchangers Limited (50%); Rolls Wood Group (Repair & Overhauls) Limited (50%); Viking Power Limited (50%); Xian XR Aero Components Co Limited (China; 49%); BMW Rolls-Royce GmbH (Germany; 49.5%); EUROJET Turbo GmbH (Germany; 33%); MTU, Turbomeca, Rolls-Royce GmbH (Germany; 33.3%); Hong Kong Aero Engine Services Limited (50%); Industria de Turbo Propulsores SA (Spain; 45%); IAE International Aero Engines AG (Switzerland; 30%); Williams-Rolls Inc. (U.S.; 15%); Cooper, Rolls Corporation (Canada; 50%); Bellis India Limited (40%); Easun Reyrolle Relays and Devices Limited (India; 25%); RPG-RR Power Engineering Private Limited (India; 50%); EPE Reyrolle (Malaysia) Sdn Bnd (50%); Cooper Rolls Incorporated (U.S.; 50%); Sama Leasing Company Limited (Cayman Islands; 50%); RS Leasing Limited (50%); Aircraft Financing and Trading Holdings BV (Netherlands; 50%); Middle East Propulsion Company Limited (Saudi Arabia; 16.6%); R-H Component Technologies, L.C. (U.S.; 50%).

Further Reading

Bangsberg, P.T., “Rolls-Royce Gearing Up to Sell More Aircraft Engines to China,” Journal of Commerce and Commercial, November 18, 1993, p. 3B.

Banks, Howard, “Rolls On A Roll,” Forbes, October 7, 1996, pp. 118-19.

Bird, Anthony, and Ian Hallows, The Rolls Royce Motor Car, London: B. T. Batsford Ltd, 1972.

“Fighting the Flab: Rolls-Royce,” The Economist, April 3, 1993, pp. 58-59.

Flint, Perry, “No More Three On A Wing’,” Air Transport World, August 1996, pp. 58-62.

Foster, Geoffrey, “Three Over Thirty,” Management Today, May 1996, pp. 64-66.

Gray, Robert, Rolls On the Rocks: The History of Rolls-Royce, Salisbury, Eng.: Compton Press Ltd., 1971.

Gunston, Bill, Rolls-Royce Aero Engines, Wellingborough, Eng.: Patrick Stephens, 1989.

Hodson, Roy, “The Eligible Engineer,” International Management, February 1992, pp. 30-32.

House, Richard, “Sir Ralph Robins of Rolls-Royce: An Astonishing Turn of Speed,” Institutional Investor, July 1996, pp. 23-24.

Johnson, Claude Goodman, The Early History of Motoring, London: Burrow [n.d].

Kay, William, “On a Rolls,” Barron’s, July 16, 1990, pp. 18-19.

“Knocking Engineers into New Shape,” The Economist, April 15, 1989, pp. 67-68.

Lloyd, R. Ian, Rolls-Royce, The Years Of Endeavour, London: Mac-millan Press, 1978.

Morgan, Bryan, The Rolls-Royce Story, London: Collins, 1971.

Reed, Arthur, “Rolls’s Post-Trent Planning,” Air Transport World, November 1993, pp. 83-84.

Robotham, William Arthur, Silver Ghosts & Silver Dawn, London: Constable, 1970.

Rowland, John, The Rolls-Royce Men: The Story of Charles Rolls and Henry Royce, London: Lutterworth Press, 1969.

Smart, Tim, “Clash of the Flying Titans,” Business Week, November 22, 1993, pp. 64-66.

Verchere, Ian, “Rolls-Royce Runs Leaner and Meaner,” Interavia, January 1992, pp. 33-37.

—Etan Vlessing

—updated by April Dougal Gasbarre

Rolls-Royce Plc

65 Buckingham Gate
London SW1E 6AT
England
01-222 9020

Public Company
Incorporated: 1971
Employees: 41,500
Sales: £1.802 billion (US$ 2.901 billion)
Market value: £1.36 billion (US$ 2.18 billion)
Stock Index: London

Rolls-Royce plc., the aeroengine manufacturer, has a common origin with Rolls-Royce Motors, the manufacturer of what many people regard as the finest automobiles in the world. Both companies were divisions of Rolls-Royce Ltd. until 1971, when they were separated by the British government as a means of solving the company’s financial crisis. Although the distinction between the two companies can often be a source of confusion, Rolls-Royce plc concerns itself primarily with the manufacture of jet engines.

Rolls-Royce was founded in 1906 by Frederick Henry Royce, an engineer, and Charles Stewart Rolls, a London automobile dealer. Through their partnership, Rolls and Royce established a new standard in automobile production. Rolls was particularly interested in the development of powered aircraft, and in 1907 inaugurated production of aircraft engines. Subsequent models were used in some of the world’s first aircraft, and Rolls-Royce gained the distinction of being one of the world’s first aircraft engine manufacturers.

Charles Rolls was tragically killed in 1910 when his Wright biplane crashed from a height of only 23 feet. Royce, who did not like aircraft, nevertheless maintained his company’s interest in aircraft engines. The intertwined “RR” logo, which had appeared on the company’s automobile grilles in red, was changed to black by Frederick Royce as a symbol of mourning for his partner.

When World War I broke out in Europe in 1914, Britain was drawn into the fighting as a result of a number of secret diplomatic agreements with France and Czarist Russia. As armies began to employ more aircraft for reconnaissance and battle missions, they created more demand for Rolls-Royce engines. The company’s Hawk engine was superseded by the Falcon, and later by the Eagle. By the time the war ended in 1919, Rolls-Royce accounted for more than half of Britain’s total aeroengine production.

A version of the Eagle engine, the 360-horsepower Eagle VII, powered the aircraft which carried Capt. (later Sir) John Alcock across the Atlantic in 1919. A new engine, the Phantom, was introduced in 1925, and among other things served as an important prototype for subsequent models.

Royce was created Sir Henry in 1930 in recognition of his contributions to Britain’s automotive and aeronautic industries. He became ill late in 1932, but continued to work on new engineering projects from his bed. His health, however, deteriorated, and he died in 1933.

During this period the aeroengine division of Rolls-Royce developed a new engine called the Kestrel. Demand for these engines remained relatively low, despite the rapid rearmament of the increasingly belligerent Nazi regime in Germany. The British government refused to acknowledge the danger that Germany posed. When the “appeasement” policies of Prime Minister Neville Chamberlain appeared to have failed, it became increasingly apparent that Britain would be drawn into a second war with Germany. When German armies invaded Poland in 1939, Britain and France declared war on Germany. France was defeated the following year, and Britain prepared for an intense aerial war against the numerically superior forces of the German Luftwaffe.

At this time Rolls-Royce introduced a new 1260-horse-power engine called the Merlin. This engine was used to power Supermarine Spitfire and Hawker Hurricane fighters. The Merlin also powered a variety of bombers manufactured by Avro, most notably the Lancaster. The Packard Company built Merlin engines in the United States for Avro and North American Aviation, which used the engine in its Mustang fighter.

Rolls-Royce suspended its automobile operations to devote all its production capability to the manufacture of aircraft engines. During the “Battle of Britain” every first line fighter in the Royal Air Force was equipped with a Merlin engine. German aircraft initially resorted to low-altitude flying in order to avoid anti-aircraft fire during raids on Britain. Rolls-Royce responded by modifying the Merlin’s supercharger to give it increased power at lower altitudes. German aircraft were forced to fly at the higher altitudes at which they could more easily be shot down.

In 1941 Rolls-Royce was instructed by the Ministry of Aircraft Production to engage in the manufacture of jet engines of the kind originally developed by the inventor Sir Frank Whittle. In conjunction with Power Jets Ltd. and the Rover Company, Rolls-Royce perfected its first jet engine, the Welland, in April of 1943.

With involvement of the Soviet Union and the United States, the war began to turn against Nazi Germany. The power of British aircraft was greatly increased after Rolls-Royce introduced its 2000-horsepower Griffon engine. Despite its introduction of formidable Messerschmitt jets in the last months of World War II, Germany was forced to surrender in May of 1945. By that time, Rolls-Royce had manufactured more than 150,000 Merlin engines.

Rolls-Royce began to make deliveries of the Welland engine in 1944, but the aircraft it was intended for, the Gloster Meteor, arrived too late for use during World War II. The Welland was superseded by the more durable Derwent engine. A parallel project produced the Nene engine, out of which developed the Tay.

Rolls-Royce resumed auto production after the war, and established a diesel engine division. Most of the company’s resources, however, were employed with the production of aircraft engines. Rolls-Royce was interested only in the development of aircraft engines specifically for the military until the late 1940’s, when it introduced a new turboprop engine. The turboprop provoked such strong interest from commercial aircraft manufacturers that it was introduced in commercial form in 1952 under the model name Dart.

Rolls-Royce was similarly persuaded to alter the design of its Avon jet engine for commercial purposes. The Avon was later chosen by de Havilland for its new Comet jetliner, the world’s first passenger jet, and by Nord Aviation, the French manufacturer, for the Caravelle.

In 1947 Rolls-Royce signed a 10-year licensing agreement with Pratt & Whitney, which allowed that company to manufacture Tay and Nene jet engines in the United States. A subsequent agreement was signed in 1953 with Westinghouse (whose F-40 jet engine proved a failure), giving them American production rights to all Rolls-Royce jet and turboprop engines, except the Tay and Nene. Westinghouse and Rolls-Royce collaborated on a number of projects, which placed Rolls-Royce in a leading position in aircraft engine development on both sides of the Atlantic.

The Dart turboprop came widely into use in 1955 when Fokker began production of its successful F-27 Friendship. A new turboprop engine called the Tyne was chosen by Vickers to power its Vanguard when it entered service in 1960. A newer jet engine called the Conway was developed in the late 1950’s and was specifically intended for use on the forthcoming Douglas DC-8 and Boeing 707 jetliners.

Rolls-Royce formed a joint venture company with Vickers and Foster Wheeler in early 1956 called Vickers Nuclear Engineering Ltd. Like similar companies in the United States, particularly Convair, the joint venture was specifically interested in investigating the feasibility of a nuclear-powered jet engine. Like Convair, however, the project was abandoned when certain logistical problems proved unresolvable.

At the beginning of the 1960’s, more than 80% of Rolls-Royce’s revenues were generated by the aeroengine division. The company decided to more aggressively market its aircraft engines in the United States, where companies such as Boeing, Douglas, and Lockheed were developing a variety of new jetliners, all of which were expected to have very long lives. The company chose to concentrate on the promising jumbo jet market, for which a more powerful jet engine had not yet been developed. With experience gained from the recent Spey engine program, Rolls-Royce engineers began the expensive process of designing their largest, most powerful engine to date, the RB.211.

When the design was completed in 1966, Rolls-Royce began to negotiate sales agreements with several aircraft manufacturers and airline companies. One Rolls-Royce target was the Lockheed Corporation’s L-1011 Tristar. Another objective was a share of the Boeing 747 program. Strong competition with General Electric forced Rolls-Royce to greatly reduce the price of the RB.211. Company officials decided to underbid General Electric in order to gain a share of the American market and to put the RB.211 into production. Lockheed emerged as the largest customer in March of 1968; it ordered 555 engines.

Increasing development costs forced the company to divert all its profits from automobile production into the aeroengine division. The first RB.211 was assembled in the summer of 1969. After rigorous testing, however, a number of design errors were discovered, most notably with the forward compression fan. The necessary corrections consumed an even greater amount of money and placed the program far behind schedule. As a result of penalty clauses written into its contracts, Rolls-Royce was forced to compensate Lockheed and its other customers. Privately, the British financial community began to question whether Rolls-Royce could meet its obligations. The only outward sign that the program was in trouble was the company’s announcement that its dividend was being reduced from four to three percent.

In November 1970 the British government suddenly announced that it was arranging a loan of £60 million to Rolls-Royce. Company officials simultaneously revealed that they were writing off £45 million for anticipated losses on the RB.211 project. The company’s board of directors turned managerial control over to a four-man committee, and shareholder dividends were further reduced. Two days later the government announced in the House of Commons that it would nationalize Rolls-Royce.

The government implemented a reorganization of Rolls-Royce, which included a recommendation that the financially solvent automobile division be separated from the company and returned to the private sector. The recommendation was accepted in 1973, and Rolls-Royce Motors Ltd. was created as a public company.

With its flaws corrected, the RB.211 entered service in 1972, but not before having nearly ruined Rolls-Royce and heavily damaging Lockheed in its attempt to secure its projected L-1011 market share. The RB.211 did, however, demonstrate several advantages over other engines, including durability, efficiency, and easy maintenance.

Although the L-1011 was widely recognized as the best wide-body aircraft available, economic realities forced Lockheed to phase out the production of their plane in the early 1980’s after only 250 had been delivered. With the loss of Lockheed as a customer, Rolls-Royce was forced to rely on Boeing, which had chosen the RB.211 as an alternate engine for its 747.

In the mid-1970’s Boeing initiated two new commercial aircraft programs, the 757 and 767. In a move which confirmed the strong merits of the Rolls-Royce engine, Boeing chose the RB.211 for the 757. The production run of the RB.211 (currently at about 1200 engines) has been extended indefinitely.

In 1979 the chairman of Rolls-Royce, Sir Kenneth Keith, resigned in protest at the government’s policies toward the company, which he characterized as a “bureaucratic contraceptive.” He was replaced by Francis Scott (Frank) McFadzean, a former managing director of Royal Dutch/Shell and chairman of British Airways.

When Conservatives regained control of Parliament in 1979, the government of Prime Minister Margaret Thatcher, an adamant opponent of nationalized industry, prepared a schedule of companies for “privatization.” One of those companies was Rolls-Royce.

A delegation of workers and managers from Rolls-Royce toured their competitors’ facilities in the United States in 1978 and discovered productivity rates as much as 50% greater than their own. Rolls-Royce production facilities were restructured, emphasizing automation and eliminating redundant labor. Several thousand workers were retired or released, but by the end of 1980 productivity had risen by 25%. Between 1981 and 1983 a further 20,000 workers were released.

Frank McFadzean retired in March of 1983 and was replaced by Sir William Duncan. Sir William was selected specifically to help prepare Rolls-Royce for privatization. He died unexpectedly the following November. Norman Tebbitt, the secretary for Trade and Industry, and the only man who could authorize the appointment of a successor to Sir William, was injured during an attempted assassination of Mrs. Thatcher at a hotel in Brighton. Because of these events, privatization was deferred. Despite the delay, Rolls-Royce proceeded to engage in joint ventures with General Electric and Pratt & Whitney, both of which had been established under Sir William. Then in May 1986, after years of preparation, Rolls-Royce was reregistered as a public limited company and 801.5 million shares of stock were offered for sale to the public. The government’s assigned value was well below market value, causing oversubscription by speculators and triggering a “clawback” rationing provision that effectively eliminated institutional investors from the offering. The method of Rolls-Royce’s privatization provoked the criticism that private investors were allowed an immediate windfall profit at the expense of the taxpayers.

Today, Rolls-Royce pic remains almost exclusively involved in the production of aircraft engines. Some models, however, have been modified for a variety of applications, including use in industrial and marine equipment.

Principal Subsidiaries

Rolls-Royce (hereafter “RR”) of Australia Pty. Ltd. (Australia); RR (Canada) Ltd. (Canada); RR Capital, Inc. (USA); RR (China) Ltd. (PRC); RR Credit Corp. (USA); RR Developments, Ltd.; RR Diesels, Ltd.; RR de España S.A. (Spain); RR Far East Ltd.; RR Finance Ltd.; RR (France) Ltd.; RR Holdings, Inc. (USA); RR Inc. (USA); RR India Inc.; RR Industrial & Marine Ltd. (Canada); RR Industrial Turbines (Saudi Arabia) Ltd. (Saudi Arabia); RR Industries Canada Inc. (Canada); RR and Japanese Aero Engines Ltd.; RR Leasing Ltd.; RR (Middle East) E.C. (Bahrain); RR Plant Leasing Ltd.; RR Turbomeca do Brasil Ltda. (Brazil); RR Turbomeca International S.A. (France); RR Turbomeca Ltd.

Further Reading

The Engines Were Rolls-Royce: An Informal History of That Famous Company by Ronald W. Harker, New York, Macmillan, 1979.

Rolls-Royce Plc

65 Buckingham Gate
London SW1E SAT
United Kingdom
(071) 222 9020
Fax: (071) 222 9020

Public Company
Incorporated: 1884 as F.H. Royce and Company
Employees: 61,000
Sales: £3.51 billion (US$5.09 billion)
Stock Exchanges: London
SICs: 3724 Aircraft Engines & Engine Parts; 3728 Aircraft Parts & Equipment, Nee; 3511 Turbines & Turbine Generator Sets; 3519 Internal Combustion Engines, Nee; 3559 Special Industry Machinery, Nee; 3799 Transportation Equipment, Nee

Rolls-Royce Pic is a British aero-engine maker supplying advanced engineering products for civil and military uses. The company’s two main divisions are its aerospace group, producing gas turbine engines for civil and military aircraft, and its industrial power group, which designs and builds power generation, transmission, and distribution systems worldwide.

The origins of Rolls-Royce date back to its founder, Sir Frederick Henry Royce, born in March 1863 in Lincolnshire. His rags to riches story began when as a youth he went to London to sell newspapers for W. H. Smith on a street corner. In 1872, the year of his father’s death, young Henry found himself in financial straits and augmented his newspaper selling job with work as a telegraph messenger. Five years later Royce got a job as an apprentice in a railway works near Peterborough, where he learned the basics of modern engineering. In 1880, he graduated to becoming a tester with the Electric Light and Power Company in London, and he studied the principles of electrical engineering in his spare time. In 1884 Royce and his friend Ernest Claremont began a small electrical and mechanical engineering workshop, F. H. Royce and Company, on Cooke Street in Manchester.

Business was slow and difficult at first. But before long, the company became known for its electrical dynamos and cranes. Sales for the company rose from £6,000 in 1897 to £20,000 in 1899. That year, the company’s name was changed to the Royce Company, and its capital base was increased to £30,000 to allow a new factory to be built at Trafford Park, Manchester.

By 1902, the nascent motorcar industry in Britain caught Royce’s eye. He bought a secondhand French Decauville, stripped it down to its parts, and studied the vehicle. Then he set about building his own. The result was a two-cylinder, ten horsepower model not much different from the Decauville. The first model produced from the Cooke Street works emerged in 1904, in time to catch interest from another Decauville enthusiast of the day, Charles Rolls.

Born in 1877, Charles Stewart Rolls came from a more privileged background than Royce. After studying at Eton and Cambridge, he traveled around the Continent in the early 1890s, developing an interest in the motor car, which was then becoming popular in France. In 1903, once back in Britain, Rolls became a motorcar dealer. He sold mostly continental models, but with his dealership in fashionable Brook Street, London, and a repair shop in nearby Fulham, Rolls was coming to know the British car market well.

Rolls’s interest in becoming a dealer of British automobiles led him to Royce’s new line. The two men met, and a deal was finally struck for C. S. Rolls and Co. to become the exclusive dealer for Royce. An agreement between the two men, dated December 23, 1904, stipulated all cars sold by their arrangement were to be called “Rolls-Royce.” Four models went into production: the twin cylinder, ten horsepower; the three-cylinder, 15 horsepower; the four-cylinder, 20 horsepower; and the six-cylinder, 30 horsepower. All the vehicle engines shared a series of parts—pistons and rings, valves, connecting rods, springs and bearings, among others.

In 1905, the first year of production, Rolls-Royce’s four types of vehicles ranged in price from £395 to £890, and were therefore purchased only by the wealthy. Expansion of the motorcar market at this time tended to focus on innovations in engine design. In 1905, Rolls-Royce introduced its eight-cylinder, V-8 engine, regarded by motoring enthusiasts as innovative for the smoother, quieter ride it allowed.

In 1906 Rolls-Royce introduced the 40/50 model, or the Silver Ghost, named for its metallic appearance and its engine that was “quiet as a ghost.” Orders for this and earlier models climbed steadily that year, and this brought about the expansion of the company to a new factory in Derby. To fund the new plant, a subscription of new shares worth £100,000 was completed on the stock market in December of 1906. The 1906 prospectus listed a new name: Rolls-Royce Limited. The subscription named Royce as chief engineer and works director, and Rolls as technical managing director. Ernest Claremont was appointed to chair the company.

The Derby factory opened on July 9, 1908 amid much pageantry. Proof that the new Silver Ghost was to be a success came in 1911 when the Indian government ordered eight new models for use by King George V and his entourage during the Delhi Durbar that year.

Around this time, Rolls began to distance himself from the car company as both his fame and outside interests grew. He resigned as technical managing director and became a consultant to Rolls-Royce in April 1910. Three months later, Rolls was tragically killed when his Wright biplane crashed. As a symbol of mourning, the intertwined “RR” logo on the Rolls-Royce radiator plate was changed from red to black. Soon thereafter Royce fell seriously ill from exhaustion, and he spent much of 1912 convalescing on the continent. In time, Royce took a home in the south of France and reduced his shop floor work at the Rolls-Royce factory in Britain to conserve his health.

Day-to-day responsibility of Rolls-Royce Limited then fell to Claude Johnson, who reaffirmed the long-time company commitment to producing and perfecting one model. For a company building luxury cars, the benefits of military procurement beginning at the outbreak of the First World War were not immediately apparent. But, in 1914, Rolls-Royce found itself in demand to produce chassis for armored fighting vehicles, and Rolls Royce cars soon became widely used as staff cars for the British Army.

During this time Rolls-Royce was also called upon to design aircraft engines to help with the war effort. The company’s association with aviation propulsion had begun earlier. In fact, the original 1906 agreement between Rolls and Royce had mentioned in the first paragraph that the company had a wide mandate to provide propulsion on land, at sea, and in the air. Furthermore, Royce had served as a consultant to the Royal Aircraft Factory at Farnborough. However, outside of this early interest in aviation, which Royce shared with Rolls, actual production of aero engines didn’t begin until the onset of the World War I.

In early 1915, Royce led a team of engineers, including A. G. Elliot, chief assistant, in working out a design. Within three days of the war’s outbreak, Royce was pouring over plans for a 200 horsepower aero engine. Some of the technology—crankshaft, connecting rods, geartrains—were borrowed from the Silver Ghost motorcar engine. But more pistons were required; 12 in all. And so was born the 60 degree VI2 engine that became the prototype for all machinery produced by Rolls-Royce after 1918.

Testing of a 225 horsepower aero engine had begun at Derby. By 1916, the engine went into production. It was named the Eagle and was put into wartime service beginning in 1916 at 250 horsepower in size. By 1918, the Mark VIII form had risen in size to 365 horsepower. Two other engines, the Hawk and the Falcon, had been designed by Royce from his home in the south of France and relayed to his production team in Derby for manufacture. In total, 5,000 Rolls-Royce aero engines were made during the First World War. By the late 1920s, the company derived more profit from continuing to make aero engines than it did from making cars.

Producing aero engines also had applications for developing motorcar engines. In 1924, for example, Rolls-Royce introduced front wheel brakes to its cars, as well as power assistance through a gearbox driven servo. The postwar years also signaled a departure from the company’s practice of producing only one car model. In 1922, the 3.5 litre, 20 horsepower model was introduced. In 1925, the “New Phantom” succeeded the Silver Ghost. While its larger seven litre engine had overhead valves rather than side valves, the chassis and the running gear were the same as those used on the Silver Ghost.

Over the next ten years, Rolls-Royce continued to manufacture automobiles for an increasingly exclusive and wealthy clintele. In 1931, the company purchased Bentley Motor Ltd., a consistently undercapitalized English manufacturer of high-performance automobiles. Royce, who was conferred a baronetcy in 1930, died in 1933.

Just before the outbreak of World War II, the Phantom II was replaced by the Phantom III. The new model was driven by a V12 engine, the most powerful yet. Without Royce to oversee its introduction, however, the Phantom III production had been expensive. This led in 1937 to the company’s consideration of rationalizing its design and production facilities to contain expanding operating costs.

Before his death in 1933, Royce had set about designing a new generation of aero engines that surpassed 1,000 horsepower in size. The result was the PV12, a 27 litre engine eventually named the Merlin. The Merlin was first used by the Royal Air Force in 1937. Two years later, the aero engine could maintain 1,000 horsepower to 16,000 feet. Impressed with its design and output, the Royal Air Force agreed to help fund the development of three fighter planes designed around the Merlin—the Fairey Battle Bomber, the Hurricane, and the Spitfire. All performed with memorable accuracy in the famed Battle of Britain during the Second World War. Innovations to the engine during this time ensured it could attain 1,000 horsepower at twice the original altitude, 36,000 feet, by 1944. The engine’s operating ceiling grew to 47,000 at the war’s end as well.

During the war, Dr. A. A. Griffith at the Royal Aircraft Establishment was recruited by Rolls-Royce to design an innovative contrafan engine for the company. Other inventions by Rolls-Royce engineers included the early gas turbine engine for aerospace travel designed by Stanley Hooker and Frank Whittle in 1940.

In 1945, Ernest Hives, general manager of Rolls-Royce, decided that the future of the company lay in continuing to produce aero engines, and that the next frontier would lay in gas turbine engines, signaling an immediate cessation to the production of the piston turbine engine. Activity during the Second World War had greatly expanded Rolls-Royce. Factories at Crewe and Glasgow, Scotland had been opened. By 1945, the company employed well over 50,000 people, and car production was moved from Derby to Crewe, so that the Derby facilities could work almost exclusively on developing the gas turbine aero engine, particularly for the civil aviation industry.

An early customer of the Merlin engine was the Canadair DC4M, a Canadian-built aircraft. The introduction of a military engine in a civil aircraft took some tinkering before it was done successfully. Rolls-Royce used its experience to judge just how different commercial engine expectations were from military ones.

In 1953, Rolls-Royce introduced the Dart propjet engine for the Vickers Viscount. This new engine had a centrifugal design and had taken over from the Merlin 60 series of engines. The last Dart engine was built in 1986, producing nearly 40 years of production. The last Merlin, on the other hand, was built 16 years after the first one.

Rolls-Royce also introduced the turbojet engine in the form of the AJ65 model, or the Avon. Beginning in the 1950s, it powered such aircraft of the day as the Canberra, Hunter, and Lightning. The company’s second wholly civil aero engine was the RB141, or Medway, launched in 1959. It served the BEA and BOAC airlines for a few years before it was replaced by the Spey, a smaller version. Besides being used in the BAC One Eleven, Fokker F28, and Gulfstream II and III, the Spey made its way across the Atlantic into the American LTV A7 military aircraft.

By the end of the 1960s, Rolls-Royce was facing increasing competition from American aero engine makers Pratt & Whitney and General Electric. To maintain its technological edge, Rolls-Royce introduced the Tay, successor to the Spey. Developing new aero engines, however, consumed much time and money. So much so that in February 1971 the company faced financial collapse and was subsequently nationalized by the British government.

To reduce costs, the company spun off its carmaking division into a separate company, Rolls-Royce Motor Cars Ltd., a subsidiary of Vickers Pic. The new company, operating under license to Rolls-Royce Ltd, continued the use of the Rolls-Royce name and the distinctive RR symbol.

At the same time, development of the RB211 engine under the engineering leadership of Sir Stanley Hooker, continued apace. By 1972, the RB211 went into production for use in the Tristar aircraft. It has since been utilized in Boeing 757s and 747-400s, the latest generation of civil aircraft, and through continued improvements provides 65 percent more thrust than the original engine model introduced in 1972. In 1987, Rolls-Royce announced that 75 percent of customers for the new Boeing 757 airliner had chosen the RB211 engines for propulsion.

On the military engine side of operations, Rolls-Royce took part in the three-nation Turbo-Union RB199 engine development for the Tornado aircraft during the mid-1980s. The company also provided Pegasus vectored-thrust engines for the British V-Stol Harrier aircraft, used primarily by the Royal Air Force.

Rolls-Royce engines have also been used in marine crafts. The year 1987 saw the 100th industry RB211 engine used in land-based and off-shore installations, mainly by the oil and natural gas industries in drilling operations. Furthermore, as of 1988, more than 25 naval forces worldwide were powering their vessels with Rolls-Royce gas turbine engines.

In May 1987, the British government refloated Rolls-Royce on the London stock market, securing more than two million shareholders in the process. Many were from overseas, primarily Americans.

By the end of 1988, a more hopeful business climate produced an order book for Rolls-Royce of £4.1 billion, compared with the £2.7 billion a year earlier. Sales for the company were slightly down, however, on 1987 figures, as was the operating profit at £333 million.

In 1988, the company launched the RB211-524L civil turbofan engine. In addition, Rolls-Royce signed an agreement to provide the European Fighter Aircraft, a three-member European military production project, with the EJ200 engine. The company had a 33 percent stake in the project.

After its refloatation, Rolls-Royce set about diversifying away from its sole emphasis on aero engines. To that end, in May 1989, the company merged with Northern Engineering Industries Pic (NEI), which designed and constructed capital plant and equipment, particularly for the power generation industry. The merger brought Terry Harrison, managing director of NEI, and Dr. Robert Hawley, managing director of operations at NEI, to the Rolls-Royce board.

That year Frank Turner, director of civil engineers at Rolls-Royce, welcomed the diversification from NEI which ensured the company would now derive 35 percent of its sales from non-aero engine business. He commented: ‘Through the sixteen years of state ownership, we were constrained … in obtaining approval for anything new. In effect, our gun arm was strapped. We found ourselves only able to react to the initiatives of our competitors, and then only when it was very late in the day.”

The company announced in 1989 the formation of a joint venture between NEI and Asea Brown Boveri, the Swiss-based engineering group. The venture, NEI ABB Gas Turbines Ltd, was to be based in Newcastle in northern England. In the same year, Rolls-Royce launched its next generation of technology, the Trent engine, to pick up where the RB211 series left off. The first orders went to wide-body aircraft, such as the McDonnell Douglas-11 and the Airbus 330. Boeing subsequently announced it would carry the Trent engines on its 767-X aircraft.

In 1990 Lord Tombs, chairperson of Rolls-Royce, spoke of the possible consequences of the approaching world recession, and disruption to the global airline industry from the unfolding Persian Gulf conflict, commenting that “the industrial climate in the UK is a very difficult one. Much … depends on the international economic situation after the resolution of the Gulf conflict and upon the health of the airline industry.” The next year saw a worsened economic climate for Rolls Royce. The worldwide recession deepened, and airline passenger travel fell, hitting the fortunes of airline carriers and causing a decrease in orders for aircraft. The mining and engineering industries also slumped, affecting the company’s fortunes similarly.

Sales for Rolls-Royce in 1991 fell 4 percent to £3.51, but pretax profits fell more sharply to £51 million, compared with £176 million a year earlier. At the same time, the company’s order book rose to a record £6.6 million. Additional orders were made for the Trent engines to go into new Boeing 777s bought by Thai Airways International and Emirates.

As Rolls-Royce looks to the future, an end to the world recession would naturally benefit the company’s engineering endeavors. Regarding aerospace, reduced defence spending worldwide will adversely affect the sale of engines to military aircraft companies. Growth in the civil aviation industry remains uncertain. While the commercial airline industry has recovered from the effects of the Persian Gulf conflict, it remains ailing under the weight of excessive debt loads and forced restructurings. Nevertheless, the company’s share of the civil aviation market grew from ten percent at the time of its refloatation in 1987 to 23 percent at the beginning of 1993. And its research and development side is gearing up to supply the market for second-generation supersonic travel anticipated to begin by the turn of the century.

Principal Subsidiaries

Deeside Titanium Ltd; Rolls-Royce Associates Ltd; Rolls-Royce Business Ventures Ltd; Rolls-Royce China Ltd; Rolls-Royce Far East Ltd; Rolls-Royce France Ltd; Rolls-Royce India Ltd; Rolls-Royce Leasing Ltd; Rolls-Royce Plant Leasing Ltd; Sawley Packaging Company Ltd; Stresswave Technology Ltd; Cooper Rolls Ltd; Rolls-Royce Turbomeca Ltd; Turbo-Union Ltd; Turbine Components Australia; Eurojet Turbo GmbH; IAE International Aero Engines AG; Cooper Rolls Inc.

Further Reading

Bird, Anthony, and Ian Hallows, The Rolls Royce Motor Car, London, B. T. Batsford Ltd, 1972; Turner, Frank, “Rolls-Royce in Perspective Past, Present and Future,” 1991, R. J.

—Etan Vlessing