1 00:00:06,880 --> 00:00:08,719 Speaker 1: This has been by briefive minutes funding in New York 2 00:00:08,800 --> 00:00:10,880 Speaker 1: or Tandy Berger reporting from Berlin. 3 00:00:11,039 --> 00:00:11,399 Speaker 2: Today. 4 00:00:11,480 --> 00:00:15,600 Speaker 1: Joining the show is Roy Jacobs, CEO at Phillips. Good 5 00:00:15,640 --> 00:00:18,520 Speaker 1: to see Roy this morning. We've just finished a conversation 6 00:00:18,920 --> 00:00:20,959 Speaker 1: with one global leader. Let's bring it to you. No 7 00:00:21,079 --> 00:00:24,360 Speaker 1: recession in the US until twenty twenty five, but prepare 8 00:00:24,400 --> 00:00:26,680 Speaker 1: for more shocks. How do you see the road ahead 9 00:00:26,760 --> 00:00:28,080 Speaker 1: is already slow down in your business? 10 00:00:28,120 --> 00:00:31,400 Speaker 3: Good morning, Good morning, could to see you. 11 00:00:32,080 --> 00:00:34,199 Speaker 4: Yeah, looking at the world, when I started the year, 12 00:00:34,200 --> 00:00:35,960 Speaker 4: I said, this is for sure another year that is 13 00:00:35,960 --> 00:00:37,879 Speaker 4: going to be business as usual, and that. 14 00:00:37,960 --> 00:00:39,120 Speaker 3: Is actually taking effect. 15 00:00:39,680 --> 00:00:41,680 Speaker 4: We do see that there are different trends in the world, 16 00:00:42,320 --> 00:00:44,919 Speaker 4: do you us We do see strengthening a bit, so 17 00:00:45,000 --> 00:00:46,920 Speaker 4: I think in that building on world. Just as said, 18 00:00:47,280 --> 00:00:50,720 Speaker 4: we see some of that also back in our business segments, 19 00:00:50,760 --> 00:00:52,639 Speaker 4: both in the healthcare segment as well in. 20 00:00:52,600 --> 00:00:53,560 Speaker 3: The consumer segment. 21 00:00:53,920 --> 00:00:56,880 Speaker 4: But globally we still see also challenges in Europe which 22 00:00:56,920 --> 00:01:00,680 Speaker 4: is slower, China which actually is still slower. So overall 23 00:01:00,920 --> 00:01:03,920 Speaker 4: the world macroeconomopy still is not in its best shape, 24 00:01:04,200 --> 00:01:07,160 Speaker 4: but we do see it's slightly improving in certain areas. 25 00:01:07,720 --> 00:01:11,039 Speaker 1: We're grappling with strikes from the UAW. You have many 26 00:01:11,080 --> 00:01:13,800 Speaker 1: manufacturing plants in the United States of America. Your new 27 00:01:13,880 --> 00:01:17,160 Speaker 1: CEO set the tone for wages at Phillips. Are your 28 00:01:17,240 --> 00:01:22,440 Speaker 1: supporter an active supporter of wage revision and revising them higher? 29 00:01:22,480 --> 00:01:24,440 Speaker 1: How are you going to set the tone for wages 30 00:01:24,440 --> 00:01:25,560 Speaker 1: from the top at Phillips. 31 00:01:28,040 --> 00:01:31,160 Speaker 4: So we are in active dialogue continuously also with our 32 00:01:31,560 --> 00:01:35,080 Speaker 4: workers and also with our manufacturing facilities. So far, actually 33 00:01:35,120 --> 00:01:38,840 Speaker 4: everything is conducted in good faith and we are running 34 00:01:38,840 --> 00:01:43,399 Speaker 4: at full steam. We have also been raising wages across 35 00:01:43,400 --> 00:01:46,760 Speaker 4: the globe in line with market conditions and inflation. So 36 00:01:46,800 --> 00:01:49,920 Speaker 4: it's something that we have been supported in and on. 37 00:01:50,040 --> 00:01:53,360 Speaker 4: Because labor is short, is important that we keep the 38 00:01:53,400 --> 00:01:56,160 Speaker 4: operation going, so we have been taking action there. 39 00:01:56,320 --> 00:01:57,640 Speaker 2: Do you still have labor shortages? 40 00:01:59,560 --> 00:02:02,920 Speaker 4: We do see certain eras where labor's labor is short. 41 00:02:02,960 --> 00:02:05,560 Speaker 4: For example, we are dialing on big time in AI 42 00:02:05,800 --> 00:02:08,760 Speaker 4: and in the area of software. Of course, that is 43 00:02:08,800 --> 00:02:11,840 Speaker 4: something that many more are doing. So that's an area 44 00:02:11,880 --> 00:02:15,040 Speaker 4: where we are hiring and taking people from the market. 45 00:02:15,080 --> 00:02:17,080 Speaker 4: We also are able to recruit, but it is a 46 00:02:17,080 --> 00:02:20,520 Speaker 4: short market, so there are specific people that we are 47 00:02:20,520 --> 00:02:24,400 Speaker 4: after that are in HIGHIMONT and that's where AI place part. 48 00:02:24,520 --> 00:02:26,920 Speaker 1: So tell me you're spending on AI briefly, what would 49 00:02:26,919 --> 00:02:28,880 Speaker 1: you say your budget on AI is a you're spending 50 00:02:28,880 --> 00:02:31,360 Speaker 1: a billion two billion and hiring an AI. What's the 51 00:02:31,440 --> 00:02:34,160 Speaker 1: rhyme figure for AI? Will get to the recall in 52 00:02:34,240 --> 00:02:34,840 Speaker 1: just a second. 53 00:02:36,280 --> 00:02:38,680 Speaker 4: Yeah, if you look too kind of our IMD spend, 54 00:02:38,800 --> 00:02:41,280 Speaker 4: it's around one point seven billion a year. 55 00:02:41,480 --> 00:02:44,359 Speaker 3: Of that more than half is actually software. 56 00:02:44,000 --> 00:02:47,320 Speaker 4: And AI is an increasing part of what we do 57 00:02:47,720 --> 00:02:51,960 Speaker 4: in software. So actually AI is really taking a significant 58 00:02:52,160 --> 00:02:54,720 Speaker 4: shape of that. And the application of AI is also 59 00:02:54,760 --> 00:02:57,640 Speaker 4: really impactful. We're already using AI today, for example, to 60 00:02:57,720 --> 00:03:00,320 Speaker 4: help to predict an event from happening by the patient 61 00:03:00,360 --> 00:03:03,400 Speaker 4: is in hospital, or to increase scanning times by three 62 00:03:03,480 --> 00:03:07,440 Speaker 4: times by putting AI on an imaging device. Also, we 63 00:03:07,480 --> 00:03:10,440 Speaker 4: are using it and looking at generative AI how we 64 00:03:10,480 --> 00:03:14,120 Speaker 4: can use it to reduce the administration time that a 65 00:03:14,240 --> 00:03:18,200 Speaker 4: nurse uses per hour every average fifty minutes to make 66 00:03:18,240 --> 00:03:19,560 Speaker 4: their work easier. 67 00:03:20,280 --> 00:03:22,560 Speaker 1: Let's get to the big issue. Your stock is down 68 00:03:22,600 --> 00:03:25,720 Speaker 1: by fifty percent. You've come in to turn this company around. 69 00:03:25,760 --> 00:03:29,680 Speaker 1: On the CPAP recall, I've got figures in front of 70 00:03:29,720 --> 00:03:32,560 Speaker 1: me saying five billion euros is the right number for litigation. 71 00:03:32,800 --> 00:03:34,760 Speaker 2: You've only provisioned a billion so far. 72 00:03:35,520 --> 00:03:38,240 Speaker 1: What is your estimate, your best estimate now to the 73 00:03:38,360 --> 00:03:41,360 Speaker 1: market on what this recall in litigation is going to 74 00:03:41,400 --> 00:03:41,760 Speaker 1: cost you. 75 00:03:44,440 --> 00:03:46,480 Speaker 4: So recall, of course is very important for us, first 76 00:03:46,520 --> 00:03:49,760 Speaker 4: and foremost from a patient's perspective, we made great progress 77 00:03:49,760 --> 00:03:55,240 Speaker 4: in remediating the patient's sleep. Remediation by now is nearly done. 78 00:03:55,280 --> 00:03:57,360 Speaker 4: We are ninety nine percent, so the patients are getting 79 00:03:57,360 --> 00:03:59,360 Speaker 4: the devices, are getting back on therapy. 80 00:03:59,640 --> 00:04:00,000 Speaker 3: That's all. 81 00:04:00,080 --> 00:04:02,520 Speaker 4: So where we provided the one billion, four so that 82 00:04:02,600 --> 00:04:05,280 Speaker 4: actually has been moving along with pace. 83 00:04:05,640 --> 00:04:08,360 Speaker 3: The second part is we have been closing on an. 84 00:04:08,280 --> 00:04:11,640 Speaker 4: Economic loss provision where we provided five from seventy five 85 00:04:11,680 --> 00:04:14,240 Speaker 4: million earlier this year Q one and we just settled 86 00:04:14,240 --> 00:04:16,120 Speaker 4: it at four and a seventy nine million, so we 87 00:04:16,200 --> 00:04:18,960 Speaker 4: also have been closing that out. Then there is further 88 00:04:19,000 --> 00:04:22,480 Speaker 4: litigation coming so to you have said that most mightly. 89 00:04:22,240 --> 00:04:25,400 Speaker 1: That's the question Roy, how close to multiple billions is 90 00:04:25,440 --> 00:04:25,960 Speaker 1: it going to be. 91 00:04:26,080 --> 00:04:30,120 Speaker 3: Briefly, we don't speculate on that number. It's too early. 92 00:04:30,160 --> 00:04:33,720 Speaker 4: We are in the process of going through the investigation 93 00:04:33,839 --> 00:04:35,840 Speaker 4: on that, so we have not put the number out 94 00:04:36,000 --> 00:04:38,240 Speaker 4: if we have, of course insights around that, which we 95 00:04:38,320 --> 00:04:41,680 Speaker 4: said probably is not earlier than twenty twenty four, we 96 00:04:41,720 --> 00:04:42,800 Speaker 4: will bring that to the market. 97 00:04:43,240 --> 00:04:45,960 Speaker 1: What's the progress on the recall? Just remind us where 98 00:04:45,960 --> 00:04:48,039 Speaker 1: you are in terms of the recall, how many of 99 00:04:48,080 --> 00:04:49,600 Speaker 1: you brought back in, how many more to go? 100 00:04:51,480 --> 00:04:54,760 Speaker 3: So in essence, the sleep we call is nearly finished. 101 00:04:54,760 --> 00:04:57,760 Speaker 4: We have replaced ninety nine percent of the devices in 102 00:04:57,800 --> 00:04:59,760 Speaker 4: the market, which means and that's great news for the 103 00:04:59,760 --> 00:05:02,560 Speaker 4: pace that they're back on therapy. So actually that part 104 00:05:02,680 --> 00:05:05,680 Speaker 4: is really being dealt with, which also allows me to 105 00:05:05,720 --> 00:05:08,800 Speaker 4: focus on the order important part of getting fitters back 106 00:05:08,920 --> 00:05:12,240 Speaker 4: winning again and progressing on our performance journey where we 107 00:05:12,240 --> 00:05:14,600 Speaker 4: have seen that we have now three quarters of growth 108 00:05:14,800 --> 00:05:18,520 Speaker 4: and that is on very distinct actions on improving our execution, 109 00:05:18,960 --> 00:05:22,240 Speaker 4: voting patient safety and quality in supply chain, but also 110 00:05:22,240 --> 00:05:25,039 Speaker 4: in simplifying the organization. So we are on a track 111 00:05:25,080 --> 00:05:28,359 Speaker 4: where we're improving both growth and profitability on a quarter 112 00:05:28,320 --> 00:05:29,400 Speaker 4: of the year tenure. 113 00:05:30,040 --> 00:05:33,040 Speaker 1: As I look at at the storyboard and I've interviewed 114 00:05:33,080 --> 00:05:36,800 Speaker 1: your pre disaster for ten years, I'm introducing myself to you. 115 00:05:36,880 --> 00:05:39,880 Speaker 1: I want to know who you are as a CEO 116 00:05:40,000 --> 00:05:43,560 Speaker 1: you've got a dog investigation, open ended financial risk, and 117 00:05:43,600 --> 00:05:45,080 Speaker 1: a reputation crisis. 118 00:05:45,520 --> 00:05:47,080 Speaker 2: As those issues. 119 00:05:46,839 --> 00:05:51,159 Speaker 1: Mind, would you support clawbacks on your predecessors if it 120 00:05:51,200 --> 00:05:56,080 Speaker 1: is fined that they deliberately perhaps with health information. Are 121 00:05:56,120 --> 00:05:59,599 Speaker 1: you a supporter of clawbacks and penalties to predecessors. 122 00:06:02,440 --> 00:06:05,719 Speaker 4: I'm focusing actually on bringing Phillis back to where it belongs, 123 00:06:05,800 --> 00:06:07,880 Speaker 4: and that's where I presented the plan earlier this year. 124 00:06:08,040 --> 00:06:12,240 Speaker 4: That's where actually I've been relentlessly focused on improving our execution, 125 00:06:12,720 --> 00:06:16,000 Speaker 4: getting momentum back. We're seeing that also coming back, we 126 00:06:16,040 --> 00:06:18,599 Speaker 4: are able to provide more innovation solutions to the healthcare 127 00:06:18,600 --> 00:06:20,880 Speaker 4: customers that we serve, and also the consumers that we serve. 128 00:06:21,279 --> 00:06:23,479 Speaker 3: Had the three progressive quarters of growth. 129 00:06:24,839 --> 00:06:28,039 Speaker 1: And we have more to crawbanks would help restore the 130 00:06:28,120 --> 00:06:31,920 Speaker 1: credibility and perhaps gave you the opportunity to say, this 131 00:06:32,040 --> 00:06:34,520 Speaker 1: is who I am. I'm going to make sure that 132 00:06:34,560 --> 00:06:37,719 Speaker 1: there's some kind of accountability here. 133 00:06:37,960 --> 00:06:39,520 Speaker 2: Just briefly on that and we will move on. 134 00:06:41,520 --> 00:06:44,880 Speaker 4: So I've been taking accountability for the future of Phillips 135 00:06:45,120 --> 00:06:47,240 Speaker 4: the moment I started, and that's what I focused my 136 00:06:47,320 --> 00:06:51,080 Speaker 4: time on. That is resolving do we call for patients 137 00:06:51,200 --> 00:06:54,120 Speaker 4: is also working through the challenges that are tied to 138 00:06:54,200 --> 00:06:58,120 Speaker 4: the litigation, but also very much focused on getting the 139 00:06:58,160 --> 00:07:01,080 Speaker 4: other eighteen billion of Phillips to get really to true 140 00:07:01,320 --> 00:07:04,360 Speaker 4: value potential. And you saw, for example, and big investor 141 00:07:04,440 --> 00:07:07,560 Speaker 4: coming in putting three billion into Phillips because they are 142 00:07:07,600 --> 00:07:10,880 Speaker 4: excited by that value creation potential that Phillips has and 143 00:07:10,920 --> 00:07:13,040 Speaker 4: that's something that they see underpinned by the actions that 144 00:07:13,080 --> 00:07:14,840 Speaker 4: we're executing on will they take. 145 00:07:14,760 --> 00:07:15,440 Speaker 2: A bigger stake? 146 00:07:15,480 --> 00:07:18,800 Speaker 1: And how active have your discussions been with mister alcin. 147 00:07:20,560 --> 00:07:22,920 Speaker 4: So we have been actively engaged, because this is not 148 00:07:22,960 --> 00:07:25,440 Speaker 4: only about money, it's about building trust in each other, 149 00:07:25,560 --> 00:07:28,080 Speaker 4: building trust in the trajectory. They have been taking a 150 00:07:28,120 --> 00:07:31,320 Speaker 4: fifteen percent stake, they can take up to twenty percent. 151 00:07:31,680 --> 00:07:34,520 Speaker 4: They're putting a clear vote of confidence in and that 152 00:07:34,600 --> 00:07:37,400 Speaker 4: actually is a great subscription to what we. 153 00:07:37,320 --> 00:07:38,440 Speaker 3: Are working towards. 154 00:07:38,520 --> 00:07:40,760 Speaker 4: They also have great experience and a track worker in 155 00:07:40,840 --> 00:07:43,560 Speaker 4: other industries that they are in all value creation. So 156 00:07:43,640 --> 00:07:46,280 Speaker 4: together we are on this pod to really bring Phillips 157 00:07:46,280 --> 00:07:47,480 Speaker 4: back where it belongs. 158 00:07:48,600 --> 00:07:50,320 Speaker 1: We just heard from Larry Think he says he's under 159 00:07:50,360 --> 00:07:54,000 Speaker 1: invested in China. We hear lots of politicians talenting US 160 00:07:54,000 --> 00:07:56,920 Speaker 1: from the United States to Europe, which is d risk 161 00:07:57,040 --> 00:08:00,840 Speaker 1: from China. When you hear d risk from China, what 162 00:08:00,880 --> 00:08:01,679 Speaker 1: does that mean. 163 00:08:01,520 --> 00:08:03,200 Speaker 2: For you as a CEO? 164 00:08:03,480 --> 00:08:07,440 Speaker 1: Are you preparing to decouple retrench French shore from China 165 00:08:07,520 --> 00:08:08,920 Speaker 1: in terms of your manufacturing. 166 00:08:10,920 --> 00:08:12,920 Speaker 3: So China is an important market for Phillips. 167 00:08:13,080 --> 00:08:16,200 Speaker 4: Around fifteen percent of our revenues are in China. But 168 00:08:16,320 --> 00:08:18,400 Speaker 4: what's important for us is actually that we adapt to 169 00:08:18,440 --> 00:08:21,760 Speaker 4: the new situation in the world from a global supply 170 00:08:21,840 --> 00:08:24,120 Speaker 4: chain perspective, and the global supply chain in the new 171 00:08:24,120 --> 00:08:27,080 Speaker 4: world requires that you regionalize more. That's not only China, 172 00:08:27,200 --> 00:08:30,440 Speaker 4: that is also for Europe, that is for the Americas, 173 00:08:30,520 --> 00:08:31,840 Speaker 4: that is for India. 174 00:08:31,960 --> 00:08:34,120 Speaker 3: So we are actually making sure that we. 175 00:08:34,160 --> 00:08:37,360 Speaker 4: Have the right setup to serve our customers in the 176 00:08:37,440 --> 00:08:38,360 Speaker 4: specific regions. 177 00:08:38,480 --> 00:08:39,440 Speaker 3: So here very well. 178 00:08:39,480 --> 00:08:41,800 Speaker 1: You retrenched from China, Roy, We're up against the clock 179 00:08:41,840 --> 00:08:43,520 Speaker 1: and I need to know when we're not tru. 180 00:08:43,679 --> 00:08:46,760 Speaker 3: Will we will We will not retrench from China. 181 00:08:46,920 --> 00:08:50,400 Speaker 4: China remains important part of the future of Phillips and 182 00:08:50,440 --> 00:08:53,840 Speaker 4: also how we provide services in China but also to the. 183 00:08:53,840 --> 00:08:54,480 Speaker 3: Rest of the world. 184 00:08:54,800 --> 00:08:56,360 Speaker 2: Roy, it's been great to catch up with you. 185 00:08:56,440 --> 00:08:58,960 Speaker 1: It's always tough when you've got a big job to do, 186 00:08:59,040 --> 00:09:01,320 Speaker 1: which is to restore Vale. We wish you well and 187 00:09:01,400 --> 00:09:03,640 Speaker 1: hopefully you and I will be talking in ten years time, 188 00:09:03,840 --> 00:09:05,840 Speaker 1: as I did with your predecessor. Thank you for your 189 00:09:05,880 --> 00:09:09,040 Speaker 1: time this morning, sir. That is the Phillips CEO, Roy Jacobs. 190 00:09:09,160 --> 00:09:12,640 Speaker 2: There, let's get to Danny. She is in Berlin.