3M Sets Restructuring

Electronic News, April 30, 2001 by Bernard Levine

5,000 jobs to be affected

3M, St. Paul, Minn., is cutting 5,000 jobs in a consolidation of operations. The selective restructuring will reduce its global workforce by about 7 percent over the next 12 months, with half the employment reductions outside the United States.

Business units, functional groups and geographic areas across the company are driving the restructuring, the firm said in a statement last week. Much of the streamlining will be targeted at parts of the company facing the greatest economic challenges and where the greatest opportunities exist to eliminate unnecessary structure and improve productivity, efficiency and the supply chain, the company added, without specifically identifying them.

The company expects to incur a one-time charge of approximately $600 million over the next few quarters as a result of this action. The restructuring is expected to provide annual pretax savings of approximately $300 million upon completion of the plan. Not included in the charge are previously incurred costs related to the elimination of some jobs stemming from the ongoing integration of recently acquired businesses.

Last week 3M (nyse: MMM) also reported first-quarter 2001 earnings of $1.16 per share, up 3 cents per share from the first quarter last year, excluding nonrecurring items in both periods. Net income totaled $467 million, compared with $456 million in the comparable period excluding nonrecurring items. Sales totaled $4.2 billion, up 2.3 percent in U.S. dollars and 6.7 percent in local currencies.

"Our people delivered solid results under extremely difficult U.S. economic conditions, continued strengthening of the U.S. dollar and sharply higher energy costs," said W. James McNerney Jr., chairman and chief executive officer. Currency effects reduced earnings for the quarter by 7 cents per share, and higher U.S. energy costs reduced earnings by 4 cents per share.

"We are intensely focused on driving down costs to deliver positive earnings growth in an uncertain global economic environment," McNerney said. "Unusually unpredictable market and currency trends produce a range of $4.75 to $5 per share for 2001 earnings in total, with negative market and currency trends more than offset in any scenario by our aggressive cost plan."

3M earned $4.68 per share in 2000, excluding nonrecurring items. The company expects earnings for the second quarter to be similar to, or up slightly from, the second quarter last year.

"Our management team is accelerating efforts to grow our strong market positions and deliver solid financial results," McNerney said. "We've identified opportunities to streamline our supply chain and achieve other structural improvements -- especially important now in light of the current, difficult economic situation and the reality that these conditions may last longer than expected.

"While no one likes to eliminate jobs, this action is consistent with our resolve to achieve solid growth, make the whole organization faster and advance 3M to an even higher level," McNerney added.