Philips Electronics NV has announced that it will streamline its worldwide operations by closing up to one-third of its manufacturing plants by 2002. The company feels it had built up a production capacity that is now too large compared to demand for its products. When the consumer electronics and semiconductor giant began reviewing its manufacturing infrastructure earlier this year, it had 269 factories. It now says it will have reduced that number to 226 by the end of the calendar year and aims to have 160 to 170 by the 2002 target date. Philips has not discussed the impact of the actions on the overall workforce of the company, which currently numbers about 256,000, and won’t indicate which geographical locations would be hit the hardest. Philips has facilities around the globe and it would be logical to assume that the bulk of the closures will come in Europe and the US, where costs are the highest. Philips has seen its prices erode about 9% on average this year and recently reported third- quarter net income that plunged 71% to the equivalent of $118m on revenue down 15% at $8.7bn. Since late 1996, when chief executive Cor Boonstra took over, the company has been paring itself down through the divestiture of more than 20 separate businesses, among them entertainment group PolyGram NV, German electronics firm Grundig AG and the telecommunications joint venture with Lucent Technologies Inc. It ms yet unclear to what extent the plant closures will effect the company’s financial results between now and 2002. The company has said that a substantial portion of the money saved from the streamlining activities will be used for acquisitions, especially in the areas of medical products, semiconductors and lighting. Expansion in the US will also be a focus of acquisitions going forward.
