Oct 24, 2022, 11:30 am
Royal Philips NV will reduce its workforce by 4,000 jobs as the Dutch company aims to reduce operating expenses while wrestling with a costly recall of its sleep-apnea treatment devices.
The severance and termination-related costs are expected to be approximately €300 million ($295 million) in the coming quarters, Philips said Monday. The restructuring comes as Roy Jakobs replaced Frans van Houten as chief executive officer this month, who had held the position for 12 years.
Philips’s priority is “to improve execution so that we can start rebuilding the trust of patients, consumers and customers," Jakobs said in a statement. These steps include strengthening patient safety and quality management as well as “urgently improving our supply chain operations."
Jakobs was put in charge of turning around the company’s Connected Care businesses in early 2020, managing the response to the Covid-19 crisis and the growing issues around the recall of medical devices to treat sleep apnea. The healthcare giant’s shares have dropped 60% this year.
Philips continues to face court cases
The company continues to face court cases over noise-dampening foam prone to disintegrating inside the ventilators that allegedly pose a cancer risk when inhaled. Philips started its first recall of the devices in June of last year and has made financial provisions of around €885 million.
Philips has also taken a €1.3 billion impairment charge for its sleep and respiratory care business.
The write-down reflects factors including changing estimates of a proposed settlement with US authorities over the sleep-apnea devices.
The company reported a net loss of €1.33 billion in the third quarter, compared with a profit of €2.97 billion in the same period a year earlier. Earlier this month, the maker of medical devices cut its outlook on the back of worse-than-expected supply-chain issues that are affecting deliveries and customer installations.