What’s going on at Philips?
The company is best known to the Dutch for consumer products such as shaving machines and televisions. But Philips is now mainly active in the health sector, after selling the consumer branch. For example, the company makes ventilators and special apnea devices that people with an apnea disorder use at night to prevent them from stopping breathing in their sleep.
In June 2021, Philips announced that there may be something wrong with some of those ventilators. The foam in it could crumble, after which people could inhale it. A major exchange campaign of the millions of devices that are in circulation has started worldwide.
What are the consequences of this recall?
The exchange action creates a huge cost item. In October last year, 1.3 billion euros written off on the business unit that makes sleep apnea devices. The write-off comes on top of the almost 900 million euros that Philips previously set aside for the repair of sleep apnea devices.
Moreover, especially in America, thousands of apnea patients have gone to court to claim compensation. This is also expected to cost the company a lot of dollars. It can be one of the largest medical lawsuits ever be.
Below you can see how Philips turned into a health tech player:
But isn’t Philips also receiving money?
Mwoah. Sales of consumer products are disappointing. There is a shortage of parts such as computer chips. Due to all the problems, turnover fell by 5 percent in the third quarter of 2022 up to 4.3 billion euros.
The company’s total sales arm is expected to have sold 17.4 billion euros worth of products in 2022, a decrease of 5 percent compared to 2021. Analysts expect a loss of billions for the past year. The formal figures for the fourth quarter and thus for the full year will be announced on Monday.
Why another round of layoffs now?
Last October, Philips already announced that it was going to reorganize. Worldwide, 4000 jobs would be cut, of which 800 in the Netherlands. According to the CNV trade union, this mainly concerned temporary contracts that were not renewed and natural wastage. Roughly 160 people were forced to leave.
Philips CEO Frans van Houten stepped down due to the apnea issue. His successor, Roy Jakobs, said in October that he wanted to help Philips ‘back to a strong future’. This also meant that he would review all divisions and that further layoffs might be announced at the end of January, said FNV director Arjan Dijkstra.
The dismissal round seems to be coming now. The unions active at Philips have not yet been informed about the number of redundancies. “We hope it will remain limited,” says Suat Koetloe of De Unie, who indicates that there has been uncertainty among the staff for some time.
Which departments are the new layoffs?
That is not yet clear. Philips itself does not even want to deny or confirm that there will be new layoffs, although the unions say so. They would get more details on Sunday night. In the previous round of layoffs, layoffs were across the entire company.
CNV trade union director Arjan Huizinga: “Philips has twelve works councils, for example for the IT department, development and production. In October, each works council was asked to state how many positions could be eliminated. in some places it didn’t make sense to let people leave. But every department has surrendered and I expect it to be the same again..”
There are a total of 11,000 jobs in the Netherlands, of which 7,700 in Best near Eindhoven. So it is not the case that a true exodus follows a round of layoffs. “Although more permanent employees will probably have to leave now than last time, simply because the flexible shell was already cut back then,” says Huizinga.
Can’t Philips just divest the problem branch that includes ventilators?
That is not possible, expects RTL stock market analyst Durk Veenstra. “First of all, Philips probably doesn’t want that itself, the company is focusing on healthcare. When you sell Respironics, you also destroy the core of your company. Besides, who wants it? You will even if you sell it for free , have to give the buyer a bag of money that contains billions to cover claims and future costs.”
Those apnea devices, are they actually dangerous or not?
Opinions differ on that. Since the recall, Philips has been under the magnifying glass of the American health care watchdog FDA. He is therefore studying the data supplied by Philips at the end of last year regarding the safety of the devices. According to Philips, it is a safety risk very small.
“The FDA is still studying Philips’ data and analysis, but we may come to a different conclusion,” an FDA spokesperson told RTL Z.
That 2022 was a disaster year for Philips, stock market commentator Durk Veenstra explains in the video below:
