Dutch electronics and electrical manufacturer Philips has announced their plan to cut 4,000 jobs after they recalled faulty sleep respirators, which has pushed them to a considerable loss.

According to the company, the 1.3-billion-euro ($1.28 billion) recall for the defective machines led to a slashing of 5% of the workforce, having incurred the same amount. 

Phillips’ CEO Roy Jakobs said, “We do face multiple challenges and we are taking immediate steps to cut costs.”

“This includes the difficult but necessary decision to immediately reduce our workforce by around 4,000 roles globally...a decision we do not take lightly,” he added.

The attrition situation comes at a time for Jakobs to tackle as he was recently hired as the chief executive of the 131-year-old company, replacing Frans van Houten. The job losses experienced by Phillips’ staff would mainly be in the United States, the Netherlands, India and China. Currently, the company has 80,000 employees in 100 countries.

The company expects to incur another 300 million euros in restructuring charges in the coming quarters, although it expects that those measures will result in savings of the same amount. Yet, the losses incurred in tackling lawsuits for faulty respirators would be huge.

The reason for the defective pieces is said to be because of"operational and supply challenges, inflationary pressures, the COVID situation in China and the Russia-Ukraine war".

To tackle this, Philips had already set aside 900 million euros over the faulty respirators and had warned two weeks ago that it would take the 1.3-billion-euro charge this quarter for the problem.

Along with the charges, it seems that the defective pieces may cost jobs of over 4,000 employees worldwide too.