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Philips to eliminate 4,000 jobs in the wake of recall and inflation woes

by John R. Fischer, Senior Reporter | October 26, 2022
Business Affairs European News
Philips will eliminate 4,000 jobs to offset revenue losses from recalls, supply chain problems and inflation woes.
More than 4,000 jobs will be cut from Philips’ roster in response to falling sales and a recall of over 18 million respiratory masks, the company announced Monday.

The layoffs represent 5% of Philips’ 78,000 workforce and will mainly take place in the U.S. and in the Netherlands, where the company is headquartered, primarily in areas where sales are dropping, according to Reuters.

The decision comes a week after Roy Jakobs succeeded Frans van Houten as CEO. Jakobs says the cuts are “unfortunate, but necessary,” as they will allow the company to save an annual $295.41 million (€300 million), which will go toward reorganizing it in the coming quarters.

The company has experienced six major recalls in the last year and a half, including a recent one in September of over 17 million sleep apnea masks, due to a risk of their magnets interfering with implanted metal medical devices.

A subsequent one in October brought the number of mask recalls to over 18 million and resulted in a write-down value for the company’s Sleep & Respiratory Care business and a net loss of $1.29 billion (€1.3 billion) in its Q3 fiscal year, which equates to around 70% of its market value.

"We have now had five quarters of declining sales, declining profit, and now... [in the third quarter] we also have become loss-making," CEO Roy Jakobs, said in a telephone interview with Reuters.

Additionally, Philips is still in the midst of recalling 5.5 million BiPAP and CPAP machines after discovering that the sound abatement foam within them could break down and release particles that could enter a device’s airway pathway and become toxic, possibly causing cancer.

It also is dealing with inflation woes, with demand falling rapidly in China and to a lesser extent in Western Europe, while North America is “still holding strong,” says Jakobs.

And worse than anticipated, ongoing supply chain problems caused comparable sales to dip 6% to $4.2 billion (€4.3 billion) from July to September and will continue to weigh on sales in the final months of 2022, reported Reuters.

As a result, Philips has reduced its full-year outlook, expecting a weaker profit margin and for sales to decline in the mid-single-digits, compared with its initial forecast of 1%-3% sales growth, according to The Wall Street Journal.

In a statement, Jakobs said Philip’s main focus is “to improve execution so that we can start rebuilding the trust of patients, consumers and customers,” by enhancing patient safety and quality management and “urgently improving our supply chain operations.”
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fred Kirchner

Philips layoffs

October 27, 2022 10:26

Sounds like the recalls were the result of mismanagement of the production facilities,and no work arounds for supply chain issues is an industry wide problem,that no one has paid any attention to..sad but the ceo and higher ups keep their jobs..probably with a bonus check as well

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