Rolls-Royce was once the darling of the aerospace sector. But heavy financial losses and a corruption scandal present challenges for the new CEO, and sheds light on risks and behaviour in the defence industry.
Rolls-Royce, it is said, is essentially a hedge fund with an aero engine-maker attached. The past few months, however, show where the company’s risks really lie. First came January’s announcement that the company is to pay £671m to settle corruption cases with UK and US authorities spanning nearly 25 years. Then in February, it emerged that the financial thorns and bushes that the 113-year-old aerospace business carefully tends ended up scarred, in a £4.4bn write-off in the aftermath of sterling’s fall following last summer’s Brexit referendum. The result was a pre-tax loss of £4.6bn for 2016 by the company that is supposed to house Britain’s engineering crown jewels. So what exactly went wrong at Rolls? Can it recover an