Philips to cut 4,000 jobs as recall losses worsen

Philips has shifted its focus from consumer electronics to healthcare in recent years

Philips has shifted its focus from consumer electronics to healthcare in recent years.

Dutch medical device maker Philips on Monday said it would cut 4,000 jobs after massive financial losses from a recall of faulty sleep masks pushed it into a loss.

The €1.3 billion ($1.28 billion) payout for the faulty machinery pushed the company, which now has nearly 80,000 employees worldwide, into a comparable net loss.

Philips is in talks with US authorities for a final settlement on faulty devices that cause users sleep apnea risk inhaling toxic foam, and face a number of lawsuits.

“We face many challenges,” said new chief executive Roy Jakobs, who took office earlier this month, adding that the company must take “immediate steps” to cut costs. .

“This includes the difficult but necessary decision to immediately reduce our workforce by approximately 4,000 roles globally … a decision we do not take lightly,” he said in an interview. Call investors.

Those who lose their jobs will be mainly in the United States, the Netherlands, India and China, he said.

Shares of Philips fell 0.75% on the Amsterdam stock exchange in morning trading.

The company’s previous CEO Frans van Houten resigned earlier this month after leading the company’s transition from consumer electronics for medical device manufacturers over the past 12 years.

Mr. Jakobs, from the Netherlands, acknowledged that Amsterdam-based Philips had to “rebuild trust” and had failed to “meet … expectations” of shareholders in recent years.

“These initial actions are necessary to start turning the company around to realize Philips’ beneficial growth potential and create value for all of our stakeholders,” said Jakobs.

‘Class action lawsuits’

Philips first announced the recall in June 2021 after the sound-reducing foam on some of its sleeping masks was found to degrade under certain conditions.

This problem puts users at risk of inhaling or ingesting debris with what the company calls a “possibly carcinogenic and toxic effect”.

It says it has since produced four million replacement devices and repair kits.

But Philips is currently facing investigation by the US Department of Justice and is in talks with US authorities about a proposed financial solution as of July 2022.

The company said it also faces “several class action lawsuits and personal injury claims.”

Philips has spent 900 million euros on defective respirators and warned two weeks ago that it would have to pay a 1.3 billion euro charge this quarter for the problem.

But it said it could not give a final overall figure for the respirator problem “given the uncertain nature and timing of the events involved.”

Philips expects an additional 300 million euros in fees in the coming quarters as it conducts the restructuring, although it expects those measures to result in similar savings.

The company posted a net profit reached 3 billion euros in the third quarter of last year, but this figure was boosted by the sale of the home appliance business.

Sales reached 4.3 billion euros in the July-September period, down 5% year-on-year due to supply chain problems.

This is partly due to “operational and supply challenges, inflationary pressures, the COVID situation in China, and the Russia-Ukraine war,” the company said.

Philips currently has nearly 80,000 employees in 100 countries.

It started out as a lighting company more than 100 years ago but has undergone major changes in recent years, with a particular focus on telehealth.

Philips warns of new impact from respirator recall

© 2022 AFP

Quote: Philips to cut 4,000 jobs as recall losses worsen (2022, October 24) retrieved October 24, 2022 from -jobs-recall-losses-deepen.html

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