Philips axes 15,000 more jobs

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The Independent Online
PHILIPS, the troubled Dutch electronics giant, is cutting up to 15,000 jobs in its second big restructuring this decade. The group, which has been forced to set aside 1.2bn guilders ( pounds 459m) to cover the restructuring costs, blamed its problems on the unexpected depth of the recession.

Jan Timmer, Philips' president, who took over three years ago to implement an initial restructuring involving the loss of more than 45,000 jobs, said renewed cuts were necessary 'because we underestimated the depth of the recession in consumer electronics'.

The bulk of the retrenchment is widely expected to be in the loss- making consumer electronics and components divisions, but Mr Timmer refused to give any details, insisting these were 'delicate processes'. 'We have a number of different projects in a number of different countries. It requires careful consultation with all parties, as we did in 1991 and 1990.'

Nevertheless, the 17,100 employees of Grundig, Philips' German consumer electronics affiliate, look a likely target. Philips has a 31.6 per cent stake in Grundig, but under an unusual agreement it is fully responsible for all its profits and losses. Last year, the size of Grundig's loss - 484m guilders, including a 200m guilder restructuring charge - was such that Philips has consolidated the company for the first time. As a result, in 1992, Grundig accounted for 193m guilders of the total 553m guilders (pre-restructuring costs) lost by the consumer electronics division.

Some rationalisation of production between Philips and Grundig has already taken place, but Philips said that further integration was needed and it was clear that Philips would have to assume greater control.

Last year, Philips shed 2,200 employees. It now employs about 252,200 worldwide, of which around 11,000 are in the UK.

Including Grundig, Philips' income from operations in 1992, before the restructuring charge, fell more than a fifth to 2.48bn guilders. After the restructuring charge and taxes, the group made a net loss of 900m guilders following a comparable restated profit last year of 1.1bn guilders. Comparison with earlier years is difficult because of a radical revamp of Philips' accounting policies. The plunge in profitability, which means there will be no dividend for the third year running, came despite a 3 per cent increase in sales to 58.5bn guilders.

Mr Timmer said price-cutting and currency fluctuations had taken their toll on the company. Overall, average selling prices in local currencies fell 3 per cent, but in consumer electronics the drop was 6 per cent.

Philips does not expect any economic recovery this year. While prospects are better in the US, in Philips' main European markets there is no sign of improvement and sales in real terms this year will be flat. Mr Timmer would give no profit forecast for 1993, but said he saw the bulk of the benefits of this restructuring coming through in 1994.