Multinational corporation Philips intends to cull thousands of jobs in a bid to boost profitability as the company tries to refocus on health technology, a decision which comes after shares crashed following a recall of its respiratory devices in 2021.
Amsterdam-based Philips plans on scrapping 6,000 jobs, with half of the cuts to be implemented this year and the remaining half by 2025, the company said on Monday. The 6,000-job reduction comes atop an earlier announcement made in October when the company had said that it would reduce its workforce by 5 percent, or roughly 4,000 jobs.
The company expects the workforce reduction to boost profit margins by a low-teens number by 2025. Beyond that year, profit margins are expected to hit the mid-teens.
The company has been “working very hard” to refocus on health technology, he noted. “We have now built a very strong portfolio there where we have 70 percent of number-one or -two positions.”
Product Recall, Share Crash
The cost-cutting measures are aimed at offsetting charges related to Philips’ faulty sleep therapy devices. On June 14, 2021, the company had announced a recall of some of its breathing devices and ventilators after concerns that the foam which was used in these devices might degrade and turn toxic, even resulting in cancer.At the time, Philips had announced that up to three to four million devices would be recalled. The company had set aside €885 million ($964 million) for recall-related charges. It recently bumped up the amount by an additional €85 million ($92.60 million).
Though the company registered profitable third and fourth quarters in 2021, it has largely been downhill since 2022. In the first quarter last year, for example, it registered an operating loss of €181 million ($197 million), followed by an €11 million ($12 million) profit in the second quarter, and a massive loss of €1.53 billion ($1.67 billion) in the third quarter.
Layoffs
Philips’ job cuts follow layoffs announced by other major global firms. Alphabet, for example, will be terminating 12,000 employees in 2023, Amazon 18,000, Microsoft 10,000, Salesforce 8,000, and IBM 3,900 workers.Video-sharing platform Vimeo intends to lay off 11 percent of its headcount. Goldman Sachs will be cutting 3,200 employees to limit expenses. BlackRock, the world’s largest asset manager, plans to fire 500 workers, amounting to 3 percent of its workforce.
Used-car seller Carvana will be laying off 4,000 employees, which comes as the firm is facing a sales slowdown and more than $7 billion in debt. Cryptocurrency exchange platform Coinbase plans on eliminating 20 percent of its staff as a cost-saving measure.
