FirstFT: Rolls-Royce is ‘burning’, new chief warns

Rolls-Royce’s new chief executive has described the company as a “burning platform”, telling employees Britain’s flagship engineering group must transform how it operates to survive.

In a global address broadcast to staff, Tufan Erginbilgic warned investors were losing patience with the FTSE 100 group. “Every investment we make, we destroy value,” he said, adding that financially, “we underperform every key competitor out there”.

The brutal assessment was designed to pave the way for a big shake-up at the 117-year-old company, according to a person familiar with the address. Erginbilgic used the speech to launch a “transformation programme” with a focus on “efficiency and optimisation”, widely interpreted to signal another round of job cuts.

The Turkish-British national took over from Warren East this month with a brief to improve Rolls-Royce’s performance. It has traditionally achieved profit margins far below those of its bigger competitors, such as General Electric of the US.

Speaking at Rolls-Royce’s UK manufacturing site at Derby, Erginbilgic’s “burning platform” phrase recalled comments more than a decade ago by Nokia’s then-chief executive Stephen Elop, who also warned staff the company was standing on a “burning platform”.

Less than three years later, the Finnish company’s mobile phone business was sold to Microsoft.

Thank you to readers who took our quiz yesterday. More than three-quarters of readers polled said the west should send modern tanks to Ukraine.

Five more stories in the news

1. US economy beats expectations The US economy logged better than expected growth in the final quarter of 2022, expanding 2.9 per cent on an annualised basis, slightly higher than the 2.6 per cent forecast by economists. The results come as the Federal Reserve’s aggressive campaign to raise borrowing costs begin to weigh more heavily on business activity.

2. Kyiv rocked by explosions Russia conducted its latest barrage of missile strikes on Kyiv and other cities yesterday, nearly one year into its full-scale invasion of Ukraine. Officials said most strikes were repelled by the country’s air defence system. The attacks came a day after the US and Germany announced they would send modern battle tanks to Ukraine.

3. US extends stay of Hong Kongers at risk of Chinese repression Joe Biden has extended a programme that allows Hong Kong citizens facing potential political repression from China to remain in the US for two more years, following pressure from progressive lawmakers and human rights groups. The programme would have expired on February 5.

4. Emerging markets see near-record investment Investors are pouring $1.1bn a day into emerging equity and debt markets, as falling inflation and the reopening of China’s sprawling economy help reverse last year’s slide. The speed of cross-border flows is now second only to the surge that followed the lifting of coronavirus lockdowns in late 2020 and early 2021, surpassing previous peaks over the past two decades.

5. Tesla shares jump Tesla’s stock closed 11 per cent higher yesterday, following Elon Musk’s comments that the electric vehicle maker could deliver as many as 2mn cars this year. Musk sought to allay investor worries that demand was waning as Tesla faced rising competition and tougher economic conditions.

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The day ahead

Economic data Spain has fourth-quarter gross domestic product estimates, France publishes this month’s consumer confidence survey and the US releases personal income and spending data for last month. Norway has retail sales figures for the same month, while Italy has industrial sales data for November.

Adani share sale Indian billionaire Gautam Adani launches a Rs200bn ($2.4bn) fundraising effort, overshadowed by fraud allegations from US short seller Hindenburg Research.

Corporate results US oil major Chevron kicks off Big Oil’s earnings season. American Express, Charles Schwab, Colgate-Palmolive, H&M, HCA Healthcare, LG Electronics, Rémy Cointreau and YouGov also report.

International Holocaust Remembrance Day The world remembers the millions of Jews and other minorities murdered by Nazi Germany. ECB president Christine Lagarde is due to speak at an unveiling of a new memorial plaque in Frankfurt. (European Central Bank)

What else we’re reading

How London’s property market became an inheritocracy Life has rarely been so hard for a first-time buyer in London as it is today. Prices have shot up as real wages have stuttered, new home supply has not kept pace with demand and mortgage lending regulations have tightened. Without a leg up from parents, first-time buyers on average earnings have been forced to abandon dreams of home ownership.

South Africa’s support underscores Moscow’s propaganda success Fears of Russian influence in Africa often centre on what the west views as the Kremlin’s attempts to destabilise fragile countries such as Mali and Burkina Faso. But South Africa’s shifting position on the war in Ukraine reveals Moscow’s success in stoking doubt about responsibility for the conflict and how a friendly government can help spread its message.

Opinion: Britain no longer leads on open banking The UK pioneered open banking in 2017 after ordering the nine largest banks to develop standard ways to share transaction data safely with third parties, in a system now emulated around the world. But it has since stagnated, writes Helen Thomas, and the question is whether it will allow itself to be left hopelessly behind.

Is a South American common currency a good idea? Economists have questioned Brazil and Argentina’s plan to create a common currency, with former IMF chief economist Olivier Blanchard calling it “insane”. But political analysts have been less dismissive, pointing out that the desires of South America’s mainly leftwing presidents to promote regional integration and challenge the US dollar’s dominance should not be underestimated.

China’s singles fight pressure to marry Young Chinese have for decades invented creative tactics to allay parental demands for marriage and grandchildren, put off by the exorbitant costs of modern child rearing while juggling taxing jobs and sky-high property prices in large cities. But the fight is moving from the home into the political arena as the world’s most populous country enters a long-term and irreversible population decline.

Take a break from the news

Decades after his murder, the tooth of Patrice Lumumba — anti-colonial hero, pan-African nationalist and the first democratically elected Congolese prime minister — turned up in Belgium. This is the story of its return to the Democratic Republic of Congo.