Philips announces 5% workforce cut in US and Netherlands

Philips Chief Executive Roy Jakobs announced on Monday (24) cuts of about 4,000 jobs after the company’s sales slump and a massive recall that reduced about 70% of the market value of the Dutch manufacturer of medical equipment last year.

“We’ve already had five quarters of falling sales, falling profit and now … (in the third quarter) we’ve also become a lossmaker,” said Jakobs, who has only been in the job for a week.

He described the layoffs, which will focus on the United States and the Netherlands and will primarily affect lines of business with declining sales, as “unfortunate but necessary”.

Philips’ chairman said the company is seeing demand slowing rapidly in China and to a lesser extent in Western Europe due to inflation, with North America “still holding strong”.

The cuts represent just over 5% of the company’s workforce based on a total of 78,000 employees last year.

Philips said it expects the reorganization to cost around 300 million euros in the coming quarters.

The company reported a net loss of 1.3 billion euros in the third quarter due to a reduction in the value of the respiratory care products division, which makes the recalled machines.

Comparable sales fell 6% to 4.3 billion euros between July and September. Philips said supply chain issues were worse than anticipated and will continue to weigh on sales in the final months of 2022.

Jakobs said his top priorities are repairing the company’s reputation, ensuring the recall is completed as quickly as possible and resolving supply chain issues.

Philips has lost around €30 billion in market value since it shocked investors last June by recalling 5.5 million ventilators used to treat sleep apnea, amid concerns that the foam used in machines can become toxic.

(By Bart Meijer and Charlotte Van Campenhout)