Philips plans to slash costs by closing up to 80 factories

INTENT ON scaling back bloated production facilities, Dutch electronics giant Royal Philips Electronics NV said yesterday it will close about a third of its factories worldwide.

Philips spokesman Ben Geerts said the company had already announced in March that it would examine its industrial infrastructure.

At that time, "we had 269 factories and we will have reduced this to 266 by the end of 1998," Mr Geerts said.

"We said at the beginning of the year that we wanted to address our manufacturing infrastructure and reduce the number of our sites."

The company, Europe's largest consumer electronics group, "built too big a production capacity for requirements," Philips President Cor Boonstra was quoted as saying in yesterday's editions of the Financial Times.

It was not immediately clear whether employees at the targeted factories would be laid off or reassigned.

The Dutch group wants to cut the number of production sites to between 160 and 170 from the current 244 by 2002, the newspaper reported.

Mr Geerts said the company didn't have a specific plan on how to scale back the number, but that it would be done mainly through streamlining operations and combining some production lines.

Monday's news boosted Philips' shares on the Amsterdam stock exchange, which jumped 9.1 per cent to close at Fl108.40 (pounds 36).

Analysts said the company was simply continuing a restructuring process it started two years ago.

Jan Coen Balt of Effectenbank Stroeve in Amsterdam said that Philips was focusing more on distribution and marketing than manufacturing, hoping that by cutting costs it will be able to react faster to market demand.

The cuts come amid a rough season for Philips.

The company said last month that third-quarter income from normal operations fell 38 per cent to Fl449m (pounds 149m). Philips also plans to end its telecommunications joint venture with US-based Lucent Technologies.

The news followed a profit warning in September that income from normal operations in 1998 should be unchanged from 1997.

Mr Boonstra said Philips is still open to purchases in areas such as medical products, semiconductors and lighting.

"Now we can take our pick where we acquire and grow," he said, adding that the company wants to expand, mainly in the United States.

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