3M is cutting its global workforce by 6,000 as it responds to investor displeasure over declining sales and costly litigation.
3M cutting 6,000 more jobs in restructuring
Global cuts, including in Minnesota, come in addition to 2,500 manufacturing layoffs announced in January as the company undertakes a significant reorganization.
April 25, 2023 at 9:15PM
The reorganization, announced Tuesday, will affect all parts of the Maplewood-based corporation and includes about 600 layoffs in Minnesota.
With 3M stock trading near its lowest levels in a decade amid a sustained decline in revenue, "3M is finally responding with aggressive cost actions," Wolfe Research analyst Nigel Coe wrote about the changes.
These cuts are in addition to the elimination of about 2,500 manufacturing jobs announced in January. Combined, it reduces the company's workforce of more than 90,000 by about 10%.
The company is now balancing the reorganization with other structural changes, including the impending spinoff of its health care division, a wind-down of its PFAS business and weakening demand for its consumer products.
"This [reorganization] is driven by our relentless focus on optimizing our path to the customer," CEO Mike Roman told analysts Tuesday morning.
The structural changes are expected to save the company between $700 million and $900 million annually and will impact "all functions, businesses and geographies," the company said in a news release. It will cost as much money over the next year and a half to implement the changes.
Real estate will also be shed — Roman specifically called out the company's conference center in Park Rapids, Minn., as well as international offices.
Some divisions will be combined and others streamlined to focus on high-growth areas like auto electrification, industrial automation and consumer electronics.
"We are taking out layers of management across all areas of the supply chain," Roman said. "Our progress in digital gives us new tools to use in logistics, removing redundant work and improving productivity."
The maker of Scotch tape, N95 respirators and air filters expects to eventually see productivity and supply chain improvements amid the shrinking of 3M's global footprint.
The conglomerate's financial forecast remains unchanged for 2023. 3M predicts sales to drop 2% to 6% this year and adjusted earnings to fall about 10% from 2022 levels.
"The actions we announced today will allow us to exit 2023 stronger than we started," Chief Financial Officer Monish Patolawala said Tuesday. 3M also intends to finish spinning off its health care division by the end of the year.
Patolawala said the cost savings from Tuesday's announced restructuring would be fully realized in 2025 and beyond.
In the first quarter, sales of $8 billion were down 9% compared to the year before. Adjusted earnings per share of $1.76 fell 22% from the first quarter of 2022, the company reported Tuesday.
Despite drawing down inventory, taking a hit from the loss of COVID-driven respirator sales and seeing declines in consumer products, the results beat analyst expectations by 16 cents per share.
"We stayed relentlessly focused on serving customers and aggressively managed costs," Roman said.
3M's stock price slipped less than 1% Tuesday amid declines across the broader market, closing at $104.42 per share. In the past year, 3M's stock price dropped more than 27% as investors balked at potential billion-dollar price tags for ongoing litigation over allegedly defective earplugs and PFAS, or forever chemicals.
Analyst Jonathan Sakraida at CFRA Research said the "favorable" restructuring plan will "help drive longer-term improvements in margins and cash flows. However, we continue to see sales growth as limited in 2023-2024."
With supplier issue now resolved, the Minnesota-run medtech company expects to “reach and then exceed” market growth in the fast-growing sector for “pulsed field” atrial fibrillation treatments.
