US ends Philips ventilator contract early

Business news |
By Nick Flaherty

The US government has ended its contract with Philips to supply ventilator systems to tackle the Covid-19 pandemic. The move follows a critical government report on the handling of the contracts.

Philips had been contracted in in April to supply 43,000 EV300 ventilator systems. That contact ends today with the company having shipped 12,300 systems to the US Strategic National Stockpile. “I am proud that with great urgency and under intense pressure, we achieved a fourfold ventilator production expansion with substantial investments,” said Frans van Houten, CEO of Royal Philips. “We hired hundreds of new colleagues for our factories in the US and called upon our supply chain partners to massively step up, all in response to the Covid-19 pandemic.”

Ramping up the supply chain has been a key issue for ventilator system makers.

“While we continue to see uncertainty and volatility related to the impact of Covid-19 across the world, our order book remains solid,” he said. “The reduction in our ventilator deliveries to HHS will obviously impact Philips’ financial performance, but we continue to expect to return to growth and improved profitability in the second half of the year, starting in the third quarter. For the full year 2020, we now expect to deliver modest comparable sales growth.”

The contract with HHS was one of several for the production and delivery of a total of more than 156,000 ventilators to the Strategic National Stockpile by the end of August 2020, and a total of more than 187,000 ventilators by the end of the year. 

The early termination comes after Philips was criticised in a US government report on previous contracts.

“To date, we have delivered on our commitments to HHS,” said van Houten. “While we are disappointed in light of these vast efforts, we will adjust our plans and work with HHS to effectuate the partial termination of this contract.”

“The COVID-19 pandemic is far from over, and we will continue to focus on our triple duty of care: meeting critical customer needs, ensuring business continuity, and safeguarding the health and safety of our employees. In the US, Philips is committed to work with the government and several of its agencies to support healthcare providers with the diagnosis, treatment, monitoring and management of Covid-19 patients, as well as the provision of regular health care.”

From March 2020, Philips increased its ventilator production fourfold, adding production lines in the U.S. as well as creating hundreds of new jobs at factories in Western Pennsylvania and California.

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