Philips 4,500 jobs axe to hit region

Global electronics giant Royal Philips Electronics’ decision to cut 4,500 jobs globally as part of an €800-million cost-cutting programme will leave an impact on its Middle East operations.

While the company did not clarify how many jobs will be shed in the region, the chairman of Philips Middle East told Emirates 24/7 that the company will maintain prudence in its expenditure allocation.

“Philips has a change and performance program in place to accelerate growth. Part of the program is dedicated to reducing the overhead cost of Philips, which is primarily targeted at layers above the business,” Harjit Gill, Chairman of Philips Middle East, said in emailed comments to this website. Even as Gill did not elaborate on the number of jobs that might be lost in the region, she said that the company would “remain prudent on how we allocate our spending across all Philips sectors, which is the case in most companies, considering the current economic status.”

Earlier yesterday, Frans van Houten, Philips’ global CEO, said: “Our cost reduction plan of €800 million has now been detailed, and we are in the process of deploying it across the organisation as we optimise all overhead and support costs not directly involved in the operational customer value chain. The cost savings program 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.”

According to Zawya data, Philips currently has some 260 employees in MENA region and its chairman reiterated that the region will remain a focus area for the company. “The Middle East will remain a growing and emerging market for Philips,” Gill said.

Philips yesterday announced that of the €800 million it plans to save by 2014, 60 per cent, or €480 million, of the savings would come via job cuts and the remaining 40 per cent from other structural costs. Of the 4,500 jobs that are slated to be shed, 1,400 positions will be in the Netherlands, its headquarters. “The job cuts will happen mainly in Europe and the US,” a Philips Middle East spokesperson added. A lingering economic slowdown in the US and the European sovereign debt crisis is impacting the fortunes of the corporate world there.

“We are not yet satisfied with our current financial performance given the ongoing economic challenges, especially in Europe, and operational issues and risks,” van Houten was quoted as saying yesterday when he announced the company’s third quarter results.

Philips announced a net loss of €1.13 billion for the nine-month period ended September 30, 2011, compared with a profit of €983 million for the corresponding period last year.

“We do not expect to realize 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,” van Houten concluded.

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