Philips Sacks CEO After Massive Product Recall

Philips Chief Executive Frans van Houten will leave the company in October, the Dutch health technology firm said on Tuesday, Aug. 16. 2022, after a key product recall cut its market value by more than half over the past year, Bart H. Meijer reported for Reuters.

Photo Insert: Philips said Van Houten, during whose tenure a key product recall cut its market value by more than half, will be replaced on Oct. 15 by Roy Jakobs, head of the company's Connected Care businesses.

Philips said Van Houten will be replaced on Oct. 15 by Roy Jakobs, head of the company's Connected Care businesses. Van Houten's third term as CEO had been due to end in April.

"The time is right for the change in leadership," Philips said in a statement. Jakobs, 48, is currently overseeing the company's recall of millions of ventilators and machines for the treatment of sleep apnea. That process has lopped almost $30 billion off Philips' value as investors fear large claims.

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 it started 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 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, unauthorized 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.

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