Philips parts ways with CEO in midst of massive recall

  • Van Houten leaves after almost 12 years at the helm
  • Will be replaced on October 15 by Jakobs, Head of Connected Care
  • Share up 2%, but down more than 50% since product recall

AMSTERDAM, Aug 16 (Reuters) – Philips (PHG.AS) Chief executive Frans van Houten will leave the company in October, the Dutch health-tech company announced on Tuesday, after a key product recall cut its market value by more than half over the past year.

Philips said Van Houten would be replaced on October 15 by Roy Jakobs, head of the company’s Connected Care business. Van Houten’s third term as CEO was due to end in April.

Jakobs, 48, is currently overseeing the company’s recall of millions of ventilators and sleep apnea treatment machines. This process has reduced the value of Philips by nearly $30 billion, with investors fearing large claims.

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“Now is the time to change direction,” Philips said in a statement.

Shares of Philips rose 2% in afternoon trading but are still down nearly 60% since warning in June 2021 that foam used for soundproofing could release toxic gases that could lead to cancer risks. Read more

When it launched the recall in September last year, Philips said it expected to complete the replacement and repair of all affected machines within a year.

But after expanding the scope of the operation to around 5.5 million devices worldwide, Philips said in June that the work was only halfway done.


The U.S. Food and Drug Administration (FDA) in January classified the recall as a Class 1, or most serious type, posing a threat of injury or death.

The FDA said on Tuesday it received 48,000 new medical device reports containing complaints about potential injuries related to Philips devices, including 44 deaths, between May 1 and July 31 of this year. Read more

That’s more than twice as many reports it received for the whole year to April 30, 2022, which totaled over 21,000. They included 124 deaths.

CEO Frans van Houten of Dutch health technology company Philips presents the company’s financial results for the fourth quarter and full year 2018, in Amsterdam, the Netherlands, January 29, 2019. REUTERS/Eva Plevier

The FDA said it would analyze the reports and examine possible reasons for the increase in numbers.

Complaints do not prove causation, but are an indicator of the seriousness of the problem.

In June, Philips said it provided the FDA with evidence from independent testing of the recalled devices that showed foam degradation was primarily related to the use of harsh, unauthorized ozone-based cleaners. . Read more

He promised to carry out additional tests to determine the potential toxicity of the degraded foam parts, even though tests had so far shown that the parts did not come out of the machine.

Philips estimated the costs of the recall at 900 million euros ($915 million). This amount does not cover any legal costs. The company is facing more than a hundred class action lawsuits.

“If you have three recalls in 10 years, that’s too many. His (Van Houten’s) position had become untenable,” said analyst Jos Versteeg of InsingerGilissen. He was referring to a defibrillator recall in 2017 and issues with medical scanners in 2014.

“This situation is not really under control, I think, because we are still waiting for the final conclusion of the (safety) studies.”

Although the blow to Philips’ reputation may have led it to pick a foreigner for the top job, supervisory board chairman Feike Sijbesma said Jakobs was the right person to solve the company’s problems. ‘company.

“He led the ramp-up of production after the recall and is very knowledgeable about patient safety and product quality, so from that perspective as well, he’s the right fit,” he said.

During his nearly 12 years at the helm, Van Houten, 62, oversaw the divestment of Philips’ lighting and consumer electronics divisions.

Philips now focuses on medical imaging, monitoring and diagnostic equipment and competes with General Electric (GE.N) and Siemens Healthineers (SHLG.DE).

($1 = 0.9833 euros)

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Reporting by Bart Meijer; Additional reporting by Ahmed Aboulenein in Washington; Editing by Matt Scuffham, Emelia Sithole-Matarise and Richard Pullin

Our standards: The Thomson Reuters Trust Principles.

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