Philips to cut workforce by 4,500

17 Oct 2011

Dutch electronics giant Philips is to reduce its workforce by 4,500 people as it seeks to make €800m in savings.

The company made the announcement today as it posted third quarter net profits of €74m, down from €524m in the same quarter in 2010.

Sales for the quarter were €5.394bn, down from €5,46bn a year ago. The company said comparable sales were up 6pc, led by 8pc growth in its lighting division and 7pc growth in healthcare.

“We are focused on improving the performance of Philips, driven by our change programe Accelerate!,” said chief executive, Frans Van Houten. “We see the first signs of traction to accelerate growth through step-ups of investments in innovation and to win customers. We are still in the early stages of a multi-year overhaul to become a more entrepreneurial and lean company, but we are encouraged by the response of our employees.”

Van Houten said the company’s cost reduction plan of €800m has now been detailed, and is being deployed across the organisation as “all overhead and support costs not directly involved in the operational customer value chain” are optimised.

“The cost savings programme will lead to the loss of approximately 4,500 jobs, which is a regrettable but inevitable step to improve our operating model to become more agile, lean and competitive.”

The company said 1,400 of the jobs would be lost in the Netherlands and that 60pc of the cost savings are people-related, with the remaining 40pc relating to other structural costs.

Van Houten also said the negotiations with TPV to create a television joint venture are “intense and constructive”.

“Although these negotiations are taking longer than expected, we continue to work together to come to definitive agreements soon. For the eventuality that a final agreement cannot be reached, Philips will consider its alternative options. The process of disentangling the TV business from the rest of consumer lifestyle is progressing well and according to plan.”

“We are not yet satisfied with our current financial performance given the ongoing economic challenges, especially in Europe, and operational issues and risks,” concluded Van Houten. “We do not expect to realise a material performance improvement in the near term.

“Our renewed focus on innovation and customer intimacy, supported by a changing culture that embraces entrepreneurship and accountability, will unlock the full potential of our portfolio and set the stage for profitable growth. We are taking the right steps to achieve our 2013 mid-term financial targets.”

Article courtesy of BusinessandLeadership.com

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