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By Andrew Haeg, Minnesota Public Radio
April 23, 2001
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3M will cut 5,000 jobs to cope with declining profits and a slowing economy. The company says fewer than 1,000 of the layoffs will come at the company's operations in Minnesota. The Maplewood-based manufacturer is joining a long list of other big firms, including Honeywell and ADC Telecommunications, to have let workers go in recent months.
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Management won't say exactly which divisions it will reduce. But in a conference call with analysts and reporters, Company CEO James McNerney says all divisions will see some cuts. Those that are watching sales fall, or grow only slowly, will see the most cuts, while stronger divisions will see the least.
With these cuts, and a broader restructuring, McNerney expects to save the company $300 million annually.
"In this uncertain environment, we are focused on the things that we can control, such as investing for future growth, tightly managing working capital, and, of course, sizing our costs to match revenues," McNerney said.
The announcement of job cuts came as 3M reported that first-quarter earnings fell seven percent - to $453 million. The company blamed the decline on the economic slowdown, a strong U.S. dollar overseas, and high energy costs. Company CEO James McNerney can't say when these broader problems will go away.
"The fact is conditions are very uncertain at the moment. There are no clear signs that the picture is improving anytime soon," he said.
McNerney took over 3M in January from former CEO Livio DeSimone, after his former employer - General Electric - chose another to succeed Jack Welch in the top spot.
Some analysts say McNerney is following in the footsteps of his former boss, who was dubbed "Neutron Jack" for his tendency to slash jobs.
In fact, McNerney began his tenure with a pledge to cut costs and make the company more nimble.
Edward Jones Analyst Bill Fiala.
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3M says it can't rule out further job cuts, and Fiala says he expects the company to continue reducing workforce even after this round of layoffs.
But some observers are dubious that cutting jobs is a smart thing to do, even in these tough economic times.
"If 3M's intent here is to make sure that they're cost effective, then perhaps it's a good program," says Fred Zimmerman, a professor of manufacturing at the University of St. Thomas. "But sometimes, I think that there's too much interest in making numbers for Wall Street at the expense of building really good companies over the long term."
For the short-term, 3M is pessimistic about the near future. As part of its earnings report, the company revised downward its earnings estimate for the full 2001 fiscal year. And it will take a $600 million one-time charge for the restructuring.
3M's McNerney says by reducing costs, the company will be able to rebound one day; healthier for being leaner. "Eventually the global economic picture will improve and the sun will, indeed, shine again, and, 3M will emerge stronger than ever before."
Edward Jones' analyst Bill Fiala agrees. "There's no doubt that 3M is still a stellar company financially. I think these moves, although unfortunate that people are losing their jobs, are going to position 3M great for when the economy does rebound, because they are going to be smart about where to take the jobs out, and make sure they don't cut out the muscle in some of their better growing businesses."
3M says it will make the cuts in its Minnesota divisions by the end of the year. A company spokesman says it will take somewhat longer to make reductions at operations in other states and overseas.
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