The Dutch health technology giant Philips (PHG.AS) announced on Tuesday that Frans van Houten, the Chief Executive will depart the company in October. This comes after a significant product recall reduced Philips’ market value by more than half during the previous year.
Philips outed that Roy Jakobs, who is in charge of the group’s Connected Care operations, will take over for Van Houten on October 15. The third term of CEO Van Houten was scheduled to expire in April.
The 48-year-old Jakobs is currently in charge of the firm’s withdrawal of millions of ventilators and devices used to treat sleep apnea. As a result of that procedure, investors have knocked over $30 billion off the value of Philips.
The leadership change is appropriate at this time, according to a statement from Philips.
Although Philips stock increased 2% in afternoon trade, it has lost about 60% of its value since June 2021, when the company warned that foam used for soundproofing could leak carcinogenic chemicals.
Philips stated when it first began the recall in September of last year that it anticipated finishing the replacement and repairs of all impacted units within a year.
Philips stated in June that the job was only about halfway complete despite expanding the operation’s global reach to 5.5 million devices.
The recall was categorised by the U.S. Food & Drug Administration (FDA) in January as Class 1, the most dangerous category, which poses a risk of damage or death.
In June, Philips claimed it had given the FDA proof from independent studies on the recalled goods that foam degradation was primarily related to the use of potent, illegal ozone-based cleaning agents.
Even though the testing thus far has proven that the parts did not exit the machine, the company has pledged to do additional research to establish the possible toxicity of deteriorated foam parts.
Philips calculated that the recall would cost 900 million euros. The potential costs of litigation are not covered by that amount. Over one hundred class action lawsuits have been filed against the corporation.
It is too many if there are three recalls in a decade. According to analyst Jos Versteeg of InsingerGilissen, Van Houten’s situation had grown hopeless. In 2014, there were issues with medical scanners, and in 2017 there was a recall on defibrillators.
Since we’re still awaiting the official results of the (safety) studies, I don’t think the problem is completely under control.
Supervisory board chairperson Feike Sijbesma argued that Jakobs was the ideal candidate to address the issues facing the firm, notwithstanding the possibility that the reputational damage to Philips may have influenced its decision to hire an outsider for the top position.
Jakobs was in charge of the manufacturing ramp-up after the recall and is an expert on patient safety and product integrity, so he is also the correct choice from that angle.
Van Houten, 62, supervised the sale of Philips’ lighting, household, and consumer electronics businesses during his nearly twelve years in charge.
It has been officially announced that Frans van Houten, who has served as CEO of Royal Philips since April 2011, is no longer in that role. He served as the Executive Committee’s and Board of Management’s chairman as well.
He once had a strong passion for business transformation, innovation, and entrepreneurship as ways to increase competitiveness & customer value. As a result, Jakobs now assuming such a significant role raises expectations.
Philips now competes with Siemens Healthineers (SHLG.DE) and General Electric (GE.N) in the market for medical imaging, monitoring, and diagnostic equipment.
