Struggling Dutchman Philips announced on Monday the loss of 6,000 more jobs worldwide due to a recall of sleep apnea breathing devices, which plunged the group into the red in 2022.
The Amsterdam-based company unveiled the job cuts, described as “difficult, but necessary”, when publishing its annual results: a net loss of 1.6 billion euros in 2022, largely to cause of the respirator safety issue.
The further downsizing comes on top of the loss of 4,000 jobs announced in October by the group – which currently employs nearly 80,000 people worldwide – Philips CEO Roy Jakobs said in a statement.
The company is the subject of investigations and legal action in the United States after being forced to recall in June 2021 breathing devices for people suffering from sleep problems.
Users risked inhaling or swallowing pieces of toxic sound-deadening foam that could cause irritation and headaches. The group then also mentioned a “potential” risk of long-term cancer.
Philips has since recently assured that, according to extensive tests, the devices were “within safe limits” while specifying that its advice to patients and doctors remains unchanged: stop using the ventilator and consider alternative treatments.
According to Roy Jakobs, who took office in October, Philips has no choice but to proceed with the “difficult but necessary further reduction of our workforce by approximately 6,000 positions worldwide by 2025”.
“2022 has been a very difficult year for Philips and its shareholders. We are taking firm steps to improve our performance urgently,” he said.
About 3,000 of the 6,000 cuts announced on Monday will be implemented in 2023. The rest will be by 2025, added the former electronics giant, turned health care company.
“Serious Challenges”
The group suffered a net loss of 105 million euros in the fourth quarter of 2022, compared to a net profit of 151 million in the last quarter of 2021. Over the year 2022, the net loss is 1.6 billion euros, against a net profit of 3.3 billion in 2021. It is largely linked to the recall of respirators.
The group is focusing on its desire to “strengthen patient safety and the quality of management” following the recall, said Mr. Jakobs.
Philips has produced around 90% of the replacement devices it needs to supply to patients, but it is increasing the number of replacements, resulting in an additional €85 million provision.
In addition, the group has not yet included in its accounts any compensation it will have to pay in the United States, because the amounts remain “uncertain”.
“What we are presenting today is a very solid plan to secure the future of Philips,” Mr. Jakobs said in an interview with reporters later Monday.
“The challenges we have are serious, and we are tackling them head-on,” he added.
Philips Respironics is under investigation by the US Department of Justice (DoJ). He is a defendant in several class action and individual personal injury claims and is in talks with the US health authority FDA about a final settlement over the defective respirators.