Our troubled economy

3M to cut jobs to weather storm

  • Article by: DEE DEPASS , Star Tribune
  • Updated: December 9, 2008 - 9:59 AM

The company will shed 2,300 jobs, up 500 from what it said last week. Of the total cuts, 400 will come from the Twin Cities.

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Post-It brand notes and Scotch Matte Finish Magic Tape are among 3M’s best-known consumer products. The company said Monday that second-quarter earnings rose 4 percent on orders for health care and safety products. The company reduced its full-year profit forecast.

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3M shareholders and employees got more bad news Monday as the company lowered its earnings forecasts for 2008 and 2009 and amped up the gloom, announcing 500 more job cuts on top of the 1,800 it disclosed just last week.

The 2,300 job cuts in the fourth quarter account for about 3 percent of the Maplewood company's workforce worldwide. Of those, 400 will come from 3M's Twin Cities-area operations, the company said.

Analysts described the retrenchment as "aggressive" but not surprising. The layoffs follow 1,000 company-wide job cuts announced last quarter.

More pain lies ahead in the first quarter of 2009, as the company battles one of the worst and most far-reaching recessions ever, CEO George Buckley and CFO Pat Campbell told investment analysts during a conference call Monday.

"More restructuring is likely in 2009," Campbell said. He said every 3M business unit would face belt-tightening and predicted that profit margins could drop for each of them.

The company expects layoffs, reduced work schedules, some factory closings and other restructuring efforts as it wrestles with decreased demand for industrial and electronic products. Capital expenditures will drop to less than $1.2 billion in 2009 from about $1.4 billion this year.

Buckley and Campbell said 3M hopes to hold on to this year's product price increases, but noted that sales volumes are expected to decline 3 to 7 percent next year and that foreign exchange rates will likely reduce sales by 6 to 7 percent next year.

As a result, 3M now expects 2008 earnings of $5.10 to $5.15 per share, excluding special items, down from the previous guidance of $5.40 to $5.48.

3M's 2009 earnings are expected to reach just $4.50 to $4.95 a share despite declining raw material costs, steady pricing, productivity gains and restructuring efforts, which combined are expected to add more than 60 cents a share. Restructuring efforts alone will contribute 25 to 30 cents per share in 2009.

Shareholders were displeased at the news. 3M shares fell $2.47 a share Monday to close at $57.38.

Despite the dreary economic conditions roiling the globe, the maker of Post-It notes, Scotch Tape, automotive adhesives and reflective highway and street signs expects to continue its research and development spending. It also will continue strategic acquisitions.

Buckley told analysts that the turbulent economy will force some companies into bankruptcy or restructuring and that 3M must be prepared for opportunities that come along. Even so, he said 3M will stick with its core markets.

3M's strategy for navigating the recession involves restructuring, maximizing cash flow, minimal share repurchases and continuing its pursuit of growth in emerging markets.

China continues to expand and 3M does not foresee reductions there, where its annual business is growing about 20 percent, Buckley said. Other emerging markets are experiencing slower growth, but are still growing, he added.

3M has invested heavily in China, Korea, Japan, Brazil, Poland, Russia and Turkey, to name a few nations. 3M's emerging-market sales skyrocketed in recent years, rising from $2.7 billion in 2001 to about $7.5 billion this year.

Campbell said, "Even in this environment, there will be good growth opportunities."

Dee DePass • 612-673-7725

  • about this series

  • The Star Tribune's coverage of the housing crisis, the credit crunch and their effect on Minnesotans.
  • NEW JOB CUTS

    500

    TOTAL FOURTH- QUARTER JOB CUTS

    2,300

    TOTAL SECOND- HALF JOB CUTS

    3,300

    EXPECTED SALES VOLUME DECLINE

    3% to 7%

    EXPECTED 2008 EARNINGS PER SHARE

    $5.10-$5.15

    PREVIOUS EXPECTED 2008 EARNINGS PER SHARE

    $5.40-$5.48

    EXPECTED 2009 EARNINGS PER SHARE

    $4.50-$4.95

    INVESTOR REACTION, IN MONDAY'S SHARE PRICE -$2.47, OR 4.1%

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