Rolls-Royce Taking Contingency Measures for Brexit: CEO

By Robert Wall

FARNBOROUGH, England--Rolls-Royce Holdings PLC (RR.LN) Chief Executive Warren East said Tuesday that the company may need to start stockpiling parts in the fourth quarter to protect against potential Brexit-related disruptions to supply chains.

"We are taking contingency measures," Mr. East told reporters.

An agreement by the British government earlier this month to pursue a softer Brexit was "incrementally positive," he said, though steps to weaken that deal taken this week are "frustrating."

Rolls-Royce also is preparing to move the design approval for its engines to its German unit, Mr. East said. It will only make the move if Brexit talks require such action, he said at the Farnborough Air Show.

Mr. East also said Rolls-Rolls would continue to refine proposals for a new airliner Boeing Co. (BA) is considering building, though the company may have to review the financial assumptions if the plane maker wants to offer airlines competing engine types.

Boeing this week said it would decide next year whether to launch the new airliner, or middle-of-the-market plane, that would seat around 230 to 270 passengers and fly around 5,000 miles.

Rolls-Royce, no longer affiliated with the luxury car maker, is among the engine makers to have responded to Boeing to offer an engine based on development activities already underway. Mr. East called the program "an interesting aircraft."

Boeing has said it is still studying the business case and hasn't indicated whether it would offer one or two engines options. Mr. East said "we would have to reconsider our numbers if it were two" suppliers.

David Joyce, the chief executive of General Electric's (GE) aviation arm, this week said the company wouldn't get in a three-horse engine race.

Mr. East also said Rolls-Royce was making progress in working on fixes for Trent 1000 component problems that have hobbled airlines and raised costs for the engine maker. Tests of one of the main components that is being redesigned are "very positive," he said.

Write to Robert Wall at robert.wall@wsj.com

(END) Dow Jones Newswires

July 17, 2018 08:22 ET (12:22 GMT)

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