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Philips layoffs as supply chain, recall bites

Philips layoffs as supply chain, recall bites

Business news |
By Nick Flaherty



Philips in The Netherlands is to lay off 4000 staff, citing continuing supply chain issues as well as global recession and a major recall of equipment.

New CEO Roy Jakobs, only took over last week, is cutting R&D, consolidating suppliers and warehouses as well as adding dual sourcing of components.

The company has shifted away from consumer electronics to healthcare, including AI and cloud software, and aims to focus on less research projects. The company had 78189 staff worldwide at the end of 2021, marking a reduction of 5%, with warnings of more to come.

The news came in the Q3 figures, which saw a fall of 5% in sales to €4.3bn. It also expects a similar fall in Q4.

 “We face multiple challenges and our Q3 2022 performance reflects this. Although Philips’ strategy and solutions resonate with our stakeholders, we have not lived up to their expectations in recent years,” said Jakobs.

“My immediate priority is therefore to improve execution so that we can start rebuilding the trust of patients, consumers and customers, as well as shareholders and our other stakeholders.”

This includes urgently improving its supply chain operations and simplifying its way of working to improve productivity and increase agility.

“This includes the difficult, but necessary decision to immediately reduce our workforce by around 4,000 roles globally, which we do not take lightly and will implement with respect towards impacted colleagues. These initial actions are needed to start turning the company around in order to realize Philips’ profitable growth potential and create value for all our stakeholders,” he said.

“We will elaborate further on our plans for Philips at our fourth quarter and annual results publication in January 2023.”

The recall of its Respironics ventilators in the US has also hit the company. It has replaced or repaired 4 million units, and aims to complete around 90% of the production and shipments to customers in 2022. Philips is recording a €1.3bn non-cash charge in the third quarter for the impairment of goodwill of this business as a result, but this is a good time for the new CEO to take this hit.

Philips Respironics is also subject to an investigation by the US Department of Justice, is a defendant in several class-action lawsuits and individual personal injury claims, and is in ongoing discussions with the FDA regarding a proposed consent decree to improve production.

Jakobs says the company it will continue to review areas to further improve its supply operations and simplify the way of working and remove organizational complexity, which is expected to result in additional restructuring and associated costs in 2023.

www.philips.com

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