Philips to Cut Number of Factories by Third Aug 25, 2003

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Philips, Europe's top consumer electronics group, plans to close or get rid of a third of its existing 150 factories as part of an ongoing cost-cutting program, a Dutch newspaper reported.

"We want to continue making ourselves only those products which we can differentiate from the competition," chief executive Gerard Kleisterlee told NRC Handelsblad in an interview.

Philips, once a sprawling electronics conglomerate has already cut the number of its factories from 270 5 years ago. It has reduced its labour force by 50,000 jobs to 170,000 since Mr. Kleisterlee took over in 2001.

Last month Europe's largest maker of lighting and number three chip producer said it expected to reap an extra 400 million euros (U.S. $435.2 million) in annual savings by 2005 at its consumer electronics division by sharpening the unit's focus. That was on top of of the 1 billion euros in cost savings it plans to have achieved by end of 2003.

Philips posted a record net loss in 2001 and remained loss-making last year as it faces a worldwide economic slowdown, a drop in demand for semiconductors and intense competition from new and existing Asian rivals.

Facing fierce competition and low margins, it has outsourced most of its consumer electronics production to contract manufacturers like Jabil Circuit Inc, concentrating its own resources on research, design, and marketing.

Mr. Kleisterlee said he wanted to concentrate on the rapidly growing Chinese market, hoping to double sales there within five years. Philips currently derives a tenth of its sales from there. (Reuters)

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