Philips will cut another 6,000 jobs worldwide as part of a turnaround plan after a recall of its respiratory devices and supply chain woes cut into the health tech giant’s financials.
Philips said the workforce reductions will take place by 2025, with half of the cuts coming this year. The company had previously announced it would lay off 4,000 employees in October, shortly after its new CEO Roy Jakobs took on the role.
In addition to the cuts, Philips said it would use more of its resources for research and development and focus on fewer, “more impactful” projects.
“Our strategy will focus on organic growth through patient and people-centric innovation at scale, with a strong improvement in execution as a key value driver. This will be enabled by strengthening our patient safety and quality management and completing the Respironics recall,” Jakobs said in a statement. “We will also urgently enhance the supply chain reliability to improve performance and simplify our way of working to improve our agility and productivity. This includes the difficult, but necessary further reduction of our workforce by around 6,000 roles globally by 2025.”
THE LARGER TREND
During Philips’ earnings call, Jakobs noted 2022 was a “tough year” for the health tech company. Full-year sales declined 3% to €17.8 billion, which Philips said was driven by operational and supply chain challenges, low sales in China, the recall and the war in Ukraine. Philips posted an operating loss of €1.5 billion compared with income of €553 million in 2021.
Philips began recalling certain ventilators, BiPAP machines and CPAP machines in summer 2021. Foam used in the devices could break down and be swallowed or breathed in by patients. The company is facing several lawsuits related to the defects, as well a potential consent decree from the U.S. Department of Justice.
“As you already know, various civil complaints have been filed in jurisdictions across the world, alleging economic loss, personal injury and the need for medical monitoring related to the devices subject to the recall. While the litigation is progressing, it’s too early to speculate about any potential impact or exposure,” Jakobs said during the call. “We are dealing with the investigations and reviews from the competent authorities and the U.S. Department of Justice. We are also still in discussions with the DOJ on the proposed consent decree and cannot provide details at this time.”