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RRPS2018: HIGHER PROFITS WITH FEWER 1600 VARIANTS

Rolls-Royce Power Systems is to discontinue production of the 10V and 12V variants of its Series 1600 engines in applications that do not present
sufficient growth potential. This measure is a direct consequence of market and product analyses carried out by Workstream 1 in the RRPS2018
'Shaping Our Future' program. The segments concerned are C&I, Oil & Gas and locomotive engine applications and the cut-off date for the closing of
production is 31 October 2018.  However Series 1600 10V and 12V will continue to be built for generating electrical power (PowerGen) and for use in rail
PowerPacks. Rolls-Royce Power Systems sees excellent chances for profitable growth on these markets – growth which will also be driven by Series
1600.   

In precise terms, this means that MTU will continue to use Series 1600 10V and 12V for its PowerGen activities while the 12V 1600 alone will be relevant
for underfloor rail drives. MTU will also be retaining Daimler 'delegated assembly' engines in its portfolio for serving the C&I and Oil & Gas industries.  

Focus on profitable engine variants

"Our RRPS2018 'Shaping our Future' program provided us with a framework for achieving our goal of clarifying structures and optimizing our processes
in order to create a customer-centred portfolio that makes us more flexible and more competitive," said Petar Pelemis, product portfolio chief at Rolls-
Royce Power Systems and co-leader of Workstream 1 along with Tobias Ostermaier. "We have invested too much time and effort on building engine
variants that barely contribute to revenue. Some of them have even been loss-making. That absolutely has to change and among other things, we have
to start channelling our energies into engines for which there is a healthy demand and the prospect of profit," he explained.  In fact a decision was
already taken at the end of 2016 with regard to the 1600 6-cylinder inline and 8-cylinder Vee variants for power generation and marine applications.
These are still being built in 2017, but will then be taken out of the MTU portfolio. This course of action is one of the outcomes of the RRPS2018
transformation program that seeks to make the business faster, more agile and more profitable. 

Growth potential of power generation segment

"There is no doubt that in terms of build quality and technology, our Series 1600 is a superlative product that has proven itself well in practice," said
Tobias Ostermaier, head of corporate strategy at Rolls-Royce Power Systems and co-leader of Workstream 1. "But volumes and yields have simply not
been meeting expectations." Petar Pelemis was at pains to point out that the company is by no means completely abandoning the Series 1600 engine.
"We are simply putting the brakes on our activities in the less profitable segments to allow us to concentrate on applications that promise to be more
lucrative."  Which according to Pelemis is first and foremost PowerGen.  

Long-term servicing of Series 1600 assured

Customers will still be able to place orders for Series 1600 10V and 12V engines up to 30 April 2018.  Production of engines under order will continue
until 31 October 2018. The product portfolio changes are not to affect the operational availability of engines currently in the field, since MTU and its
distributors will continue to provide service for them.   

Jobs safe  

Staff working in Series 1600 development and assembly will continue to be employed at MTU Friedrichshafen in line with the location and employment
guarantees currently in place.

8/1/2017

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