Philips to cut 6 000 more jobs as product recall costs mount
Royal Philips NV is cutting another 6 000 positions, or around 8% of the total, as the maker of medical equipment is reducing expenses while wrestling with costly recalls of some of its consumer products.
The reductions, half of which will be implemented in 2023, come on top of 4 000 job cuts already announced last year, a plan Philips said would result in about €300 million ($326 million) in costs in the coming quarters.
“That’s a sizable and impactful measure, but we see it necessary to address the rising cost across the company and the world, but also to make us more agile,” Chief Executive Officer Roy Jakobs said Monday in an interview with Bloomberg Television.
The CEO is bracing for potential charges linked to the manufacturer’s sleep therapy devices. Philips started its first recall of the products in June 2021 and has set aside about €885 million after researchers linked their degrading foam to cancer and respiratory issues. The company said Monday it’s increasing the provisions by €85 million.
Philips is joining a growing number of manufacturers cutting costs to deal with supply-chain turmoil and inflation. Dow Inc. said last week it’s reducing around 2 000 positions to offset rising energy expenses. Germany’s BASF SE last year said it would adjust its European production network after domestic facilities began losing money.
Philips expects to deliver low single-digit comparable sales growth and a high single-digit adjusted operating profit margin this year as supply chains improve. The company also reported better-than-expected sales and operating profit in the fourth quarter.
Tests carried out by Philips showed its recalled products are unlikely to result in “an appreciable harm” to the health of patients, the company said in a December statement that sent shares surging at the time.
Jakobs, who replaced longtime CEO Frans van Houten in October, said he hopes to get more details on the impact of any potential litigation in the second half of 2023.
“When we have that detail, we will immediately come forward,” he said. “We will make sure that we put all the efforts to get this to the best resolution.”
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