The leaders of 3M Co. said Jan. 24 they will lay off 2,500 manufacturing workers around the world in response to broad sales weakness in consumer-focused categories that intensified in December and which they expect will continue through the middle of this year.
Mike Roman, chairman and CEO, and Monish Patolawala, the company’s chief financial and transformation officer, told analysts and investors that weak demand for smartphones, tables and televisions as well as consumer retail products such as its office and decorating items pulled down the company’s organic growth, which was just 0.4% in the fourth quarter. Looking to the coming months, they are forecasting first-quarter double-digit drops in the consumer electronics group and a full-year sales dip of up to 3%, a trend they say call for the job cuts.
“We are not satisfied with our progress or performance,” Roman said. “We are taking additional actions, building on the actions taken in the second half of 2022 to reduce cost structure and inventory. We have implemented strict control of hiring and discretionary spending.”
The 3M executives said fourth-quarter organic sales in their consumer business were particularly weak in the United States “as consumers pulled back on discretionary spending and retailers aggressively took actions to reduce their inventories.” Sales in China also fell in part to that country’s COVID control measures while overall industrial activity was mixed. For the quarter, the company posted net income of $541 million, less than half its bottom line from the same period of 2021. Sales fell to about $8.1 billion from $8.6 billion.
On a call with analysts, Roman and Patolawala didn’t provide details about where the 2,500 jobs cuts – 3M has about 95,000 full-time employees – will happen. But Roman did add that his team also is looking to further streamline its supply chain and generally trim spending as it prepares to spin off its $8 billion-plus healthcare business by year’s end.
On a more positive note, Patolawala said the 3M team expects supply chain performance to improve this year and is forecasting a relative benefit from raw material and logistics costs to also help margins as 2023 progresses.
"External data says the second half gets better," Patolawala said. "It gets better in China, it gets better globally. And that's another reason why we are hopeful that as volumes come back in the second half, we should see our own margins go up and our own revenue go up."
Shares of 3M (Ticker: MMM) were down more than 5% to about $116 in midday trading Jan. 24. Over the past six months, they have lost more than 10% of their value, trimming the company’s market capitalization to about $64 billion.