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3M considers some moves to lower-tax nations
Officials say locating some operations closer to growing international markets could save $1 billion over six years.
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3M Co. will look to "selectively restructure" its operations so that factories, distribution centers and potentially entire business units are moved to countries that promise higher growth and lower tax rates, company officials told financial analysts Tuesday.
The Maplewood-based manufacturer hopes to realize about $1 billion in supply-chain savings during the next six years, the officials said at an annual investors' conference.
Building plants closer to customers and moving some operations to lower-tax locations could help cut costs associated with transportation, inventories and labor, CFO Pat Campbell said.
"We think there is about a $1 billion cash opportunity for us as we get some of our supply chains cleaned up," Campbell said. If 3M can "untangle the very complex supply chain in many of our U.S. operations" and locate operations closer to its mostly international growth markets by 2012, 3M could speed up its growth rate by 1 percent, he said.
Currently, about 61 percent of 3M's $24 billion in annual sales are made overseas. By 2012, 3M expects the percentage to grow to about 65.
"Yet our assets are about 57 percent [domestic] and 43 percent internationally," Campbell said. "So international has grown. We have not kept pace with our supply chain infrastructure and asset builds with those."
CEO George Buckley noted that 3M is opening five factories this year in Korea, Poland, Canada, Mexico and China.
By shifting manufacturing or distribution, 3M could slash its overall tax rate from 33 percent to 30.5 percent and shorten distribution routes between manufacturing plants and customers.
"It's important to experiment with international markets," Buckley said. "Those markets are growing much faster than the United States."
Officials emphasized that any moves would be carefully considered and no overall revamping of 3M is planned. However, they noted, that 3M's manufacturing is "heavily weighted" in the United States, Japan, Western Europe and other "high-tax" markets.
"As for [our] business unit operations [of which there are six], all are in the U.S. today. Yet half have over 60 percent of their sales from outside the U.S. So one of the things we have to look at is, should some of our business units actually be located outside the U.S?'" Campbell said.
3M also pointed out new products, including dental crown and bridge computer systems that let dentists take images of the mouth with the wave of a wand. A "micro-needle" skin patch that can painlessly deliver drugs is under development.
3M is also offering new lower-cost optical-LCD films for TVs as well as window film-kits for the home that filter out the sun's harmful UV rays.
Dee DePass • 612-673-7725
Dee DePass • ddepass@startribune.com
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