After recording a massive 85pc drop in net profit, going from €524 million to only €76 million, Philip Electronics has opted to cut at least 4500 jobs to save about €800 million in order to offset the lower profits.
As the largest manufacturer of lighting in the world, and the largest consumer electronics company in Europe, Philips Electronics may have trouble conducting the planned sale of its TV business after recording relatively poor results in the third quarter of 2011. In a recently issued statement, the company noted that although sale negotiations with the Chinese company, TPV, have been “intensive and constructive,” the sales process is becoming more time-consuming than planned.
According to Philips Electronics chief executive, Frans Van Houten, in the event that an agreement cannot be made with TPV, “alternative options” will be considered. The recent steep drop in profits is said to have been caused by the rising cost of manufacturing materials combined with a lower demand for household electronics due to conservative consumer spending. Van Houten also stated that the company was not “satisfied with” their financial results, particularly considering the current eurozone debt crisis and associated “operational issues.”
Of the 4500 employees that are expected to be terminated, 1400 of them will be cut from Dutch facilities, and although it is not clear how many jobs will be eliminated in the United Kingdom, Philips Electronics currently has approximately 2000 employees in Great Britain. Mr. Van Houten specialises in corporate restructuring, and was specifically hired by the company in March 2011 to help restore profit levels. Nonetheless, since that time the company has had to issue two profit warnings, has had its stock drop by 40pc in the past 12 months, and has been forced to project much more pessimistic long-term growth targets.
