Business Breakdowns Rolls-Royce: Turbines and Tribulations - [Business Breakdowns, REPLAY]
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Feb 19, 2025 Graeme Forster from Orbis Investments provides insights into Rolls-Royce's evolution from luxury cars to a leading aerospace manufacturer. He discusses the critical dynamics of aerospace engine sales and the significance of long-term service agreements. Graeme analyzes profit margins and explores strategies employed by new leadership to enhance profitability. The conversation also touches on the future of nuclear power, emphasizing the role of small modular reactors. Overall, his intellectual honesty about the company's challenges and opportunities is refreshing.
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Rolls & Royce: A Study in Contrasts
- Charles Rolls, a wealthy race car driver and aviator, co-founded Rolls-Royce with Henry Royce.
- Royce, from a working-class background, possessed an obsessive focus on engineering quality.
Connecting Tissue: The Culture of Quality
- Although the car and aerospace divisions split, a shared obsession with quality and engineering excellence persists.
- This cultural DNA connects the two seemingly disparate businesses.
Engine Lifespan vs. Service Agreements
- Aircraft engines, like the ones Rolls-Royce produces, have a lifespan of up to 30-40 years.
- Service agreements, however, are typically negotiated over shorter periods (10-13 years).