Philips rides layoff wave, scraps 6,000 jobs to improve profitability

Half of the job cuts will be made this year, the company said, adding that the other half will be realised by 2025

Embattled Dutch medical tech maker Philips said on Monday it will slash 6,000 more jobs worldwide in a bid to restore profitability after a massive recall of faulty sleep respirators.

The Amsterdam-based firm revealed the "difficult but necessary" job cuts as it announced losses of 1.6 billion euros ($1.7 billion) in 2022, largely on the back of the safety issue. The fresh layoffs come just months after Philips announced the loss of another 4,000 posts, against a total workforce of just under 80,000 employees around the globe.

Philips is now facing investigations and lawsuits in the United States after it was forced to recall appliances to treat people with sleep problems that put people at risk of inhaling toxic foam.

Chief Executive Roy Jakobs, who took over in October, said Philips had no choice but to make the "difficult, but necessary further reduction of our workforce by around 6,000 roles globally by 2025."

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"2022 has been a very difficult year for Philips and our stakeholders, and we are taking firm actions to improve our execution and step up performance with urgency," Jakobs said in a statement. Half of the jobs will be cut in 2023. Philips unveiled net losses of 105 million euros ($114 million) for the fourth quarter of 2022 and 1.6 billion euros for last year as a whole.

Starting off as a lighting company more than 130 years ago, Philips has undergone major changes in recent years, selling off assets to focus on making high-end electronic healthcare products, often for use remotely.

But that shift has been called into question by the giant recall that has pushed it into loss and seen the previous CEO Frans van Houten step down.

Philips announced the global recall in 2021 of its appliances to help people suffering from sleep apnoea, a disorder in which breathing stops and starts when people sleep.

The company said sound-degrading foam in the machines could degrade, causing people to inhale or swallow pieces of the foam with "possible toxic and carcinogenic effects".

Asked if Philips faced an existential risk from the issue, Jakobs acknowledged the firm faced "serious" challenges.

"What we present today is a very strong plan to secure the future of Philips," Jakobs said in a call with reporters.

"Yes, the challenges we have are serious, and we are addressing them head-on." Philips would focus in particular on product innovation, and on dealing with supply chain issues that were holding up its ability to fulfil its order book, Jakobs said.

The firm needed to "improve performance and simplify our way of working to improve our agility and productivity," he said.

But Jakobs said Philips would also focus on "strengthening our patient safety and quality management" and completing the respirator recall. The firm has produced around 90 percent of the replacement devices it needs to shop to patients, the company said.

However, it is also increasing the number of replacements, requiring the company to set aside a further 85 million euros.

The company is now under investigation by the US Department of Justice over the respirator issue and is negotiating with US authorities over a financial settlement.

Philips is also the defendant in several class-action lawsuits in the US. The firm said it had not yet included possible US payouts in its accounts due to the "uncertain nature" of the eventual amounts.

In December, Jakobs told AFP that testing on the recalled respirators showed they were "within safety limits" for use but that a final verdict rested with global regulatory authorities.