St. Paul, MN-based manufacturing conglomerate 3M reported its 2019 fourth quarter and full-year financial results on Tuesday and announced a new operating model and operating structure that includes cutting approximately 1,500 jobs.
The company said that following the implementation of a new ERP system and the April 2019 move from five to four business groups — Safety & Industrial, Transportation & Electronics, Health Care and Consumer — its new model is based around each segment having full responsibility for all facets of strategy, portfolio optimization and resource prioritization across their entire global operations.
iStockThe new model was implemented Jan. 1.
3M noted that under the prior model, area and country teams — which comprised 3M’s International Operations organization — were responsible for setting priorities in their regions. Now, all 3M employees report to the business groups and functions they are part of, and 3M no longer has an International Operations organization.
All of 3M’s international employees now report into the business groups and functions they are part of, and 3M no longer has an International Operations organization.
The company said benefits of the new operating model include more accountability to its business groups; stronger customer insight; empowering employees to make decisions faster; organizational streamlining, and leveraging strengths across markets.
To support the realignment, 3M:
- Is consolidating manufacturing, supply chain and customer operations in to a new Enterprise Operations organization focused on optimizing the customer experience;
- Has formed a new global Corporate Affairs organization focused on advancing and protecting the company’s brand and reputation;
- Realigned all existing corporate functions to drive more effective operations
As a result of those actions, 3M has initiated restructuring that will reduce approximately 1,500 positions across all business groups, functions and geographies. 3M took a pre-tax restructuring charge of $134 million in the Q4 2019 and expects annual pre-tax savings of $110 to $120 million, with 2020 savings of $40 to $50 million.
Those job cuts — comprising about 1.5 percent of the company's global workforce — come less than a year after 3M shed 2,000 jobs during 2019.
“3M continues to transform how it operates and build a more customer-driven and streamlined organization for the future,” said Mike Roman, 3M chairman and chief executive officer in a press release. “The latest phase of our transformation journey is designed to improve growth and operational efficiency, and will enable us to create even more value for our customers and shareholders. This is a defining moment in how we run our company, and positions 3M for success in the years ahead.”
“We continued to face softness in certain end markets, namely China, automotive, and electronics, which impacted overall growth,” Roman later said in a conference call with analysts.
With the restructuring announcement, 3M also said that international operations executive vice president Julie Bushman has announced she will retire effective April 1.
For the full year, 3M’s total 2019 sales of $32.14 billion declined 1.9 percent from 2018, with organic sales down 1.5 percent. The company’s 2019 operating profit of $6.17 billion fell 14.3 percent, while total profit of $4.57 billion fell 14.6 percent.
3M posted total company Q4 sales of $8.11 billion, up 2.1 percent year-over-year (YoY), with organic local-currency sales down 2.6 percent and acquisitions increasing sales 5.1 percent. Health Care sales surged 25.4 percent, while Consumer sales were flat, Safety & Industrial declined 4.8 percent and fell 6.2 percent in Transportation and Electronics. In organic local-currency, Consumer sales increased 0.2 percent, Health Care declined 0.2 percent, Safety & Industrial fell 2.8 percent and Transportation & Electronics fell 5.9 percent.
Geographically, Q4 sales grew 7.4 percent in the US and 1.2 percent in Latin America/Canada, and declined 1.7 percent in Asia Pacific and 2.0 percent in EMEA.
3M’s Q4 operating profit of $1.33 billion fell 25.7 percent, while total profit of $969 million compared with $1.35 billion from a year earlier.
Safety & Industrial
In its Safety and Industrial segment, 3M said Q4 sales increased in personal safety and roofing granules, and declined in electrical markets, industrial adhesives and tapes, automotive aftermarket, abrasives, and closure and masking. Sales grew in Latin America/Canada, while declining in Asia Pacific, the US and EMEA. The segment’s Q4 operating profit of $586 million decreased 12 percent YoY, with operating margins of 20.9 percent.