Minnesota manufacturers must weigh worker safety, changing sector demands

3M's respirators, especially N95 masks, are in so much demand, the Maplewood-based company's plants making them are at full capacity and another production line is supposed to go online this month.

The N95s are an essential item on health care's personal protective equipment lists because of COVID-19. The rising demand for personal safety, health and consumer goods during the pandemic drove strong first quarter results for 3M.

Yet the demand in its industrial segment, especially auto, was down, causing a torrent of activity to shore up cash reserves, cut costs and manage supply chains.

3M said during its first-quarter earnings call it would take $350 million to $400 million in savings from the second quarter from actions such as furloughing workers.

In less than two months, the COVID-19 pandemic threw world markets into a tailspin, one the markets are now slowly starting to climb out of, with uncertainty the only sure thing for the rest of the year.

Manufacturers make up about 50% of the Star Tribune 50 companies, generating more than $27 trillion in revenue.

And Minnesota has been hit hard by the coronavirus economy downturn, harder than other Midwestern states, said Ernie Goss, head of Creighton University's Institute for Economic Inquiry, which conducts monthly surveys of manufacturing.

Part of the reason is the state's strong import/export economy, which is at a record low right now, Goss said.

While the manufacturing economy is improving compared to late March and April, it is now just "less bad." This recession is consumer-led, and the uncertainty surrounding COVID-19 does not bode well for an upturn.

"Businesses don't like volatility," Goss said. "Consumers don't like volatility, and they pull back with their purchases."

In contrast, stay-at-home orders meant General Mills and Hormel saw skyrocketing demand for their products as more people cooked and ate at home.

Yet General Mills and Hormel also had to immediately figure out and spend money to make their factories as safe as possible and at the same time figure out how their corporate staffs could efficiently work at home.

Hormel Foods Corp. lost sales to restaurants shut down by shelter-in-place orders issued by governors across the country. The company pushed for and saw an increase in retail sales at supermarkets as people purchased more groceries to eat at home.

Hormel said its operating expenses will increase by more than $50 million because of costs related to the virus — including safety measures and higher wages — as meatpacking plants have been particularly hard hit.

With the higher costs and uncertainty of markets, most manufacturers have canceled their guidance for earnings this year.

Catherine Roberts • 612-673-4292