Philips is planning to cut five per cent of its workforce, globally. That means, about 4,000 employees will be asked to leave. The tech company’s performance has not been up to the mark in terms of revenue generation. In fact, the Dutch multinational conglomerate incurred heavy losses when it had to recall its defective sleep respirators.
In the third quarter of this year, the mass recall cost the Company about $1.28 billion. The defective respirators had proved to be a risk to the lives of sleep apnea patients, and had led to lawsuits being filed against the Company. Negotiations are reportedly still on with American authorities pertaining to a final settlement in these lawsuits.
Roy Jakobs, who took over as CEO of the Company recently, is therefore faced with many challenges, the primary one being to improve productivity and increase profitability.
Over the last decade or so, Philips had successfully transitioned from being a consumer electronics company to a medical device manufacturer.
By laying off some of its employees, the Company hopes to become more productive and agile.
This is an attempt at turning the company around and making it more profitable.
It is reported that about €300 million or $295 million will be spent on severance packages of the laid off employees.
Budgets for research and development (R&D), sourcing of materials and consolidation of suppliers and warehouses have also been reduced as part of the cost-cutting measures.