Philips to sack 6,000 employees; CEO says 'difficult but necessary' decision

Months after announcing the first round of layoffs, Dutch health technology company Philips on Monday announced plans to lay off another 6,000 employees or 5% of the company's global workforce by 2025. This will be the second round of layoffs by the company following its decision to slash 4,000 roles in October last year.

The company says in a statement, "In addition to the reduction of its workforce by 4,000 roles announced in October 2022, which is being implemented as planned, Philips will reduce its workforce by an additional 6,000 roles globally by 2025, of which 3,000 will be implemented in 2023 in line with the relevant local regulations and processes."

"The simplified operating model will make Philips more agile and competitive, enabling the company to deliver more impactful innovations for customers, patients and consumers, guided by a clear, but reduced number of KPIs. Equally important, Philips’ leaner and more focused organization will have a significantly reduced cost structure," it adds. 

As per reports, the decision has been taken in order to restore the company’s profitability following its decision to recall the respiratory devices, which constitute 70% of the market value. The decision to recall respiratory devices has been taken in line with the company’s decision to recall millions of ventilators (which are used for apnea), over concerns the foam used in these devices would be toxic. 

"Philips will change its operating model to end-to-end businesses with single accountability. They will be supported by lean central functions and strong customer facing organizations in the countries and regions. To this end, the company will right size the central functions, which will include organizational delayering and reallocating part of its corporate innovation activities to the businesses," the company says. 

Roy Jakobs, the new chief executive officer of Philips says that the "difficult but necessary" decision has been taken to enhance the supply chain reliability to improve performance.

"Philips is not capitalising on the full potential of strong market positions as it faces a number of significant operational challenges," he says. 

"I am confident that these comprehensive actions will put Philips on a progressive path to value creation with a sustainable impact to achieve mid-single-digit comparable sales growth and a low-teens Adjusted EBITA margin by 2025, further expanding to a mid-to-high-teens margin beyond 2025," he adds.

Last week, software giants IBM and SAP also announced their plans to lay off employees. IBM Corp sacked 3,900 employees of its global workforce across its Kyndryl business and its Watson Health units, which is the company’s artificial intelligence segment, as part of its disinvestment strategy. German software giant SAP will slash 3,000 jobs, or 2.5% of its global workforce, as the company looks to cut costs and instead focus on its cloud business.