Philips to cut 4,000 jobs as recall losses deepen

Dutch medical device manufacturer Philips said Monday it will slash 4,000 jobs after a massive financial hit for a recall of faulty sleep respirators pushed it into loss.

The 1.3-billion-euro ($1.28 billion) write-down for the defective machines pushed the firm, which currently has nearly 80,000 employees worldwide, into a net loss of the same amount.

Philips is negotiating with US authorities over a final settlement on the faulty devices that put users with sleep apnea at risk of inhaling toxic foam, and faces a number of lawsuits.

“We do face multiple challenges,” said new chief executive Roy Jakobs, who only took over earlier this month, adding that the firm had to take “immediate steps” to cut costs.

“This includes the difficult but necessary decision to immediately reduce our workforce by around 4,000 roles globally... a decision we do not take lightly,” he said in a call with investors.

The job losses would mainly be in the United States, the Netherlands, India and China, he said.

Shares in Philips dropped 0.75 per cent on the Amsterdam stock exchange in morning trading. 

The firm’s previous CEO Frans van Houten stepped down earlier this month after leading the company’s transition from a consumer electronics to medical device manufacturer over the past 12 years.

Dutchman Jakobs admitted that Amsterdam-based Philips had to “rebuild trust” and had not “lived up to... expectations” of its shareholders in recent years.

“These initial actions are needed to start turning the company around in order to realise Philips’ profitable growth potential and create value for all our stakeholders,” Jakobs said.

Philips first announced a recall in June 2021 after sound-dampening foam on some of its sleep respirators was found to degrade under certain conditions.