Rolls-Royce is shutting down its digital artificial intelligence start-up after talks with two potential buyers are completed and the company’s new chief executive puts his stamp on Britain’s flagship engineering company.
The R2 factory venture, which celebrated its first anniversary this week, is the first casualty under Tufan Erginbiljic, who briefly took the helm in January to drive performance and cost cuts at the FTSE 100 group.
The company blamed the closure on a “tough economic environment and the embryonic nature of the business”, which made it difficult to secure investment.
Erginbiljic, who described Rolls-Royce as a “burning platform” in a speech to staff in January, has made no secret of his plans to shake up the company, which makes civil engines that power many of the world’s largest aircraft.
The former BP executive almost immediately launched an internal plan to transform the way the company operated and identify potential cost savings across the group.
R2 Factory is a branch of R2 Data Labs, Rolls-Royce’s innovation hub to help the company implement advanced data analytics and artificial intelligence in supply chain, fuel efficiency and other areas.
The R2 factory, chaired by Rolls-Royce Chief Technology Officer Grazia Vittadini, was intended to provide a similar service to large industrial customers.
While an eventual spinout of the business was always planned, Erginbiljic’s impending arrival was seen as a catalyst for talks with potential buyers to begin late last year, according to people familiar with the venture.
There were also concerns in some circles about the level of spending by R2 Factory on dinners and other hospitality events, people familiar with the group added.
Outlined as a community of digital members, R2 Factory was based in an embassy-style townhouse at Portland Place in central London.
A person close to the business said the building was a “core part of the identity”, a place to meet and help attract paying members. It had reduced its budget for 2022, the person added.
Recent customers include pharmaceutical group AstraZeneca, which is looking to improve its data analytics and artificial intelligence capabilities in its factory processes.
The team’s broader work includes looking at how to use AI to create more adaptive supply chains and robotically inspect components in factories.
The business was in talks with a private equity backer about a potential management buyout, as well as talking to a competitor about a sale, according to people familiar with the venture.
Staff, who were told this week that negotiations had broken down and the venture was being hurt, were shocked by the sudden decision. The company is still hiring new people as recently as two to three weeks ago.
The move threatens a 50-strong team of data and software engineers, scientists and support staff, and companies are scrambling to integrate AI technology into products and services to boost productivity.
Rolls-Royce said: “We have decided to close the R2 factory, our digital start-up. It is a business that was created and designed to be phased out in 2022 as a non-core innovation opportunity.
He added that he would “try to find relocation opportunities for our people at Rolls-Royce”.
