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Tech ObserverNewsIndustryPhilips to send CEO home after company valuations shrinks to half over equipment recall

Philips to send CEO home after company valuations shrinks to half over equipment recall

Philips said Van Houten would be replaced on Oct. 15 by Roy Jakobs, head of the company's Connected Care businesses.

Philips said Van Houten would be replaced on Oct. 15 by Roy Jakobs, head of the company's Connected Care businesses.

In a reprimand of sorts, Dutch multinational conglomerate that is also into medical equipment manufacturing has announced to part ways from company chief executive officer Frans van Houten. According to the Duch major, Houten will leave the company in October. This comes following a key product recall by the brand that dragged down the company market value by more than half over the past year.

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

Meanwhile, Jakobs, 48, is currently overseeing the company’s recall of millions of ventilators and machines for the treatment of sleep apnea. That process has dented almost $30 billion from Philips’ valuation so far.

“The time is right for the change in leadership,” Philips said in a statement. Philips shares were up 2% in afternoon trading, but are still down almost 60% since its warning in June 2021 that foam used for sound dampening might release toxic gases that could carry cancer risks.

When Philips started the recall in September last year, Philips said expected to complete the replacement and repair of all affected machines within a year. But after broadening the scope of the operation to around 5.5 million devices worldwide, Philips in June said the work was only around halfway done.

The US Food and Drug Administration (FDA) in January classified the recall as Class 1, or the most serious type, posing a threat of injury or death. Philips in June said it had supplied the FDA with evidence from independent tests on the recalled devices which showed foam degradation was mainly linked to the use of aggressive, unauthorised ozone-based cleaning products.

It has promised to run additional tests to determine the potential toxicity of degraded foam parts, even though the tests so far had shown that the parts did not leave the machine.

Philips estimated the costs of the recall at 900 million euros. That sum does not cover the possible costs of litigation. The company is facing more than a hundred class action suits.

Meanwhile, during his almost 12 years at the helm, 62-year old Van Houten oversaw the disposal of Philips’ lighting and consumer electronics divisions. Philips now focuses on medical imaging, monitoring and diagnostic equipment and competes against General Electric and Siemens Healthineers.

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