With business conditions soft in much of the world, 3M Co. said Thursday that it would lay off 1,500 employees worldwide after seeing sales and profits decline during the latest quarter.
3M officials said they planned to eliminate “structural overhead,” including “management layers,” in order to simplify divisions and save costs. Of the 500 U.S. jobs being cut, “it has not yet been determined how many will be in Minnesota or the Twin Cities,” 3M spokeswoman Donna Fleming Runyon said.
The cut is less than 2 percent of 3M’s workforce — and much smaller in number that recent cuts announced by other multinational giants such as DuPont, Caterpillar and Kraft Heinz. Still, officials said the move was painful but necessary “to further strengthen competitiveness.”
3M employs nearly 90,000 workers worldwide, including an estimated 10,000 in Minnesota at its headquarters in Maplewood and factories in Alexandria, Cottage Grove, Hutchinson, Eden Prairie, Fairmont and New Ulm.
The last time 3M cut 1,500 jobs worldwide at the same time was during the Great Recession in 2009. In early 2012, an estimated 1,000 workers accepted 3M’s early retirement offer.
3M officials told analysts during a conference call Thursday that parts of 3M Europe, the Middle East and Canada remain soft and that Brazil is expected to struggle for another two years. China surprised officials with modest improvements during the quarter.
Edward Jones analyst Matt Arnold said most industrial firms reporting earnings this month are suffering due to the global economic downturn.
Caterpillar, which announced 31,000 layoffs since 2012 plus another 10,000 last month, reported Thursday that third-quarter earnings plunged 56 percent.
“Compared to that, 3M looks like a well-behaved little quarter,” Arnold said. “3M is not the start of this layoff trend. They are following an extremely long list of industrials who are restructuring. 3M is one of the last companies to announce layoffs and restructurings.”
On a day when the Dow Jones industrial average crawled out from correction territory, 3M investors sent shares up $6.18, or 4.1 percent, to close at $156 per share.
The 3M layoffs will result in a restructuring charge of $100 million, or 13 cents a share, in the fourth quarter, and $130 million in pretax savings in 2016.
3M’s total third-quarter sales declined 5.2 percent from a year ago to $7.7 billion. Foreign currency translations reduced sales 7.4 percent, officials said. The worst unit hit was electronics and energy, which saw sales fall 8.1 percent to $1.4 billion, mainly due to currency exchange rates.
Third-quarter earnings fell 0.5 percent to just shy of $1.3 billion, or $2.05 per share, amid what 3M CEO Inge Thulin described as a “continued slow growth environment.”
As a result, 3M downgraded its full-year 2015 guidance Thursday. Excluding restructuring charges, full-year 2015 earnings are expected to be $7.73 to $7.78 per share, which is down from the prior guidance of $7.73 to $7.93 per share. Including the new restructuring charges, earnings will be $7.60 to $7.65 a share.
Quarterly results beat Wall Street expectations on profits but missed on sales. Analysts had forecast earnings of $2 per share and revenue of $7.85 billion for the quarter.
Overall, “we think 3M is doing a good job in a tough global environment,” said Jim Corridore, equity analyst with S&P Capital IQ. Corridore lowered his 3M earnings estimate for 2015 but said 3M’s stock is still performing above peer industrial firms.
Thulin said there are additional opportunities for cost reductions in the supply chain area but insisted that there were no immediate plans for additional layoffs.
Right now, he said he was very sensitive to the fact that there would be 1,500 3M workers who suddenly “need to go away and do something different.”