3M plans to restructure its business after a challenging Q1, and will cut 6,000 more jobs worldwide, the company announced Tuesday.
"The structural reorganization will reduce the size of the corporate center of the company, simplify supply chain, streamline 3M's geographic footprint, reduce layers of management, and further align business go-to-market models to customers," the company said in a press release, adding the 6,000 job cuts are in addition to the 2,500 announced in January this year.
3M expects to save between $700 million and $900 million in costs through the restructure. The actions will "affect all functions, businesses, and geographies," according to the press release.
Executives shared further detail on their plans in a presentation and earnings call on Tuesday.
“Not all of these costs are just people-related costs,” EVP, CFO, and Chief Transformation Officer Monish Patolawala said on the earnings call. “We're taking a lot of other costs out from the center of the company, we're reducing rooftops, etc, which allow us to exit some of these cost structures faster and that's where you get a better payback.”
CEO and Chairman Mike Roman said 3M will reduce rooftops worldwide, including exiting its conference center in northern Minnesota, move its technology to the cloud, and remove hundreds of legacy systems.
The CEO mentioned the restructure would have distinct impacts for each division, saying:
- "In safety and industrial, in transportation and electronics, we will eliminate certain area based business group leadership and move to a division like model.
- In transportation and electronics we will also combine 2 divisions further reducing structure.
- In consumer we will simplify how we go to market with each area team aligning around their product portfolios and [leading] brands."
And in 30 countries around the globe, Roman said the business would move to "a model partnering with distributors with deep local knowledge and infrastructure, enabling us to reduce our people, real estate, and other related costs."
In addition to the layoffs, the company also announced changes to its leadership. 3M appointed Michael Vale as its group president and chief business and country officer, a new role created for its corporate operations committee, effective April 25. Vale will oversee three of 3M’s four business groups, as well as customer operations, country governance and emerging markets.
The company also added responsibilities to Patolawala and EVP, CTO and Environmental Responsibility John Banovetz. Patolawala will now oversee 3M’s enterprise strategy development and its global service centers. Banovetz will oversee new growth ventures, including 3M’s venture capital and early-stage R&D organization.
The company continues to experience end-market weakness in consumer electronics, shifting consumer spending patterns, retailer destocking, and mixed industrial markets, Patolawala said. 3M also is continuing to navigate COVID-19-related impacts in China and the geopolitical challenges in Europe.
Still, executives credited the actions 3M initiated in Q4 with delivering a better-than-expected Q1, Patolawala said. Sales hit $7.7 billion, but experience a 1.3% sales decline compared to last Q1
The company adjusted its manufacturing output and controlled costs to improve inventory levels. It also announced a round of layoffs in January, cutting 2,500 manufacturing jobs.