Thread regarding 3M layoffs

Varys what is your opinion of the segment marketing fad in a couple of the divisions. Do you buy it or is it smoke and mirrors and why doesnt anyone see through the bs

Thank you Varys for your insights and wonderful help! I started at 3M in 2019. I came from another Fortune 500 company in the Twin Cities. I heard good things about 3M during my working life and was excited to join 3M. I had to go through much pain and many meetings with EAP to realize 3M condones and even promotes leaders who are toxic and reptilian.

With regard to the pension question down a ways: Pension benefits, both monthly and lump sums, are paid out of a trust managed within 3M. The transaction that transfers pension liabilities to an insurance company is called a “pension buyout.” To my knowledge, and it would make the news in the pensions world, 3M has not done such a transaction yet (and may not in the near term or ever necessarily). After a buyout, pensioners would receive their monthly benefits from the insurance company as an annuity from the company with which 3M did the transaction.

Vary's, thank you for sharing your thoughts and enlightening us, this site has been a great help and aid to a lot of people , mainly because the last six years i have seen good people leave this company in droves and then the people from layoffs , a lot of mistakes from management and changes that were mind boggling and useless to say the least. Give Roman some relief and say with the litigation problems and pandemic, it has not been easy but when you are paid nearly fifteen million dollars a year , you don't make wrong decisions, or well, you should not , hope to see you keep posting Vary's and also the rest of good knowledgable folk

Okay, last one, weekend is nearly over.

• Why leave?

Over at least the last 20 years, 3M's culture has been slowing decaying. Around 2019, even before the pandemic, that process dramatically, exponentially accelerated. It became a place where people were not trusted, not valued, and simply put sociopathic leaders were allowed to flourish. Coming out of the pandemic I realized is was no longer a company worth working for.

• SpinCo vs RemainCo

I think you overestimate the size and relative importance of Acelity relative to the rest of MSD. It is important, but in no way dominating. The Acelity fraction is only roughly 1/3rd of MSD and only around 1/5th of all of HCBG. 3M Medical has been successful in these markets far, far longer than KCI or Acelity has ever existed. Cutting HCBG free with (I hope) better leadership will ultimately do those businesses a lot of good.

• Lawsuits and bankruptcy

I agree the earplug settlement is probably substantially complete and could have been far worse for 3M.

I cannot say the same for PFAS. 3M is already accounted for over $12B into this, multiple US states and localities are asking/suing for a lot more. Europe hasn't even really started with their demands yet. My estimate is that the $12B so far will expand by several times before PFAS is finally put in the rear-view mirror for 3M. That, combined with shrinking sales, will be the cause of RemainCo's bankruptcy.

Varys…
Appreciate your honesty and insight. I concur that SpinCo may have a better chance than RemainCo, particularly considering the absence of imminent bankruptcy risks. Nevertheless, the prospects for both SpinCo and RemainCo do not appear particularly promising. Both are grappling with stagnating or minimal growth and reduced investments in research and development, which has led to a stagnant innovation engine and a lack of new breakthrough products. Furthermore, the departure of key personnel from KCI, along with their recruitment by competitors (for instance, the former CEO's recent move to Smith & Nephew), is poised to make SpinCo's journey arduous in the upcoming years. While there is a realistic bankruptcy risk with RemainCo, the recent settlements concerning PFAS and earplugs may provide a temporary reprieve, potentially by 2-3 years.

Also, just curious at to what drove you to start looking for a job outside the company?

@3xlg+1paOnBcp

Bankruptcy Redux -

Yes, I think it will happen with RemainCo. I don't wish for it, but I think that is the path RemainCo is on with few alternatives. Please see my other posts on this site where I go into how I've come to this conclusion.

You mentioned someone purchasing 3M. My question back to you is who? Who would see 3M as a good purchase right now? There are definitely some pieces that I think could easily be sold, but I don't see a solid near-complete 3M purchase scenario.

The only people that I think would even want to buy 3M as a whole would be a foreign sovereign investment fund* but given some of 3M's US government contracts and tightly export controlled technologies I don't think the US government would allow it.

• My example here is the Saudi government buying GE Plastics, now Sabic plastics.

Many people on this thread mentioned bancrupcy. I dont think it is possible that 3M goes bancrupt. I ratehr this it could be buy by some other company. Why bancrupcy is consdered by you as real option?

@3cai+1paOnBcp

• Stock after bankruptcy

My understanding is that most cases the common stock of a bankrupt firm will go to zero.

That is why I think 3M's stock is really only worth the value of SpinCo plus a year or two's worth of dividends

@3wuz+1paOnBcp

• Stock Option Changes

Can the BOD do it legally, my understanding is yes. The BOD can do pretty much whatever they want with stock.

Will they do anything to help those options, almost certainly not. The institutional investors would rightly object and they could realistically threaten the BOD's jobs.

What if RemainCo goes bankruptcy what would happen to 3M stock? Would it go to zero values? Just want to confirm.

Varys - what do you think will come of the management long term incentive plan stock options that are significantly under water? Can a company legally restate or reissue these via a spin off or any other vehicle?

@3lhg+1paOnBcp

I'm too young to claim the pension yet, but my understanding is this:

When a person claims their pension and chooses the annuity 3M will take what would have been the lump sum payout and buys the retiree an actual life annuity from an insurance company. When that happens the retiree's pension is no longer connected to 3M in any way, but to the insurance company. Put another way, 3M has already fully paid for the retiree's pension.

I don't know how retiree medical is handled, so that might still be on 3M long term and at risk in a bankruptcy.

@3xmi+1paOnBcp

• Tireman's Tenure

No, if he is lucky he makes it to RemainCo's bankruptcy. Might even be gone before then.

@3lpc+1paOnBcp

The job market for professionals right now is downright awful. In my case the search took over a year and I accepted a lateral move and a slight pay cut.

In looking I was focused on three basic things:

• Was the role big enough to interest me?
• Did the company have a strong plan to grow long term?
• Did the people I meet at the company seem to be mostly happy?

In terms of advice, I'll suggest people network where you can, but don't be afraid to send out a few hundred applications. I'm not joking on that number.

Statistically about half of companies never reply at all to an application, I only got about 1 recruiter screening phone call for every 10 applications I sent out, and entered the formal interview process for only about half of those. (So 1 interview per 20 applications...)

After the spin off and Remain Co eventually goes in bankruptcy/Chapter 11 what do you think happens to retirees who are currently on the annuity pension plan? So far the pension plan is well funded. Hoping the good funding will keep the pension plan from going over to PBGC. Would appreciate your thoughts.

Varys,
Do you think Tireman will stay long on his job, or will he be booted out just like the previous supply chain SVPs? Seems Tireman has no strategy or any clue to run a complex SC model like 3M.

Varys, yes, thank you for your insight. Just curious on what qualities you were looking for in your next company if that is how you escaped. If that is the case, how was the job search knowing it is dependent on the time you were looking and location? How long did it take you to land one? Any helpful advice or tips to those still looking?

@2tbj+1paOnBcp

• Stock w/HC Spin

To my knowledge the spin financial details, such as debt loading and asset ownership, of the split have not been announced yet. That will play very heavily into the math. My very rough estimate right now is SpinCo is worth around $25B in market cap.

I'll repeat what I think will happen with the spin:

• The spin happens.

• SpinCo will not be in one piece very long. SPSD and HIS are either going to be sold or further spun off. Their business models just do not make sense with the other two. SPSD's business model is mostly industrial-style spec-in. HIS is a software firm that already operates entirely independently anyway.

• Or-l Care and Medical might stay together long term or might also be bought up. Could honestly go either way.

• RemainCo is the doomed part. I think Monish will try to sell off what divisions he can within 12-18 months and the rest goes into bankruptcy to be reborn as a new, much smaller, 3M in 3 to 5 years.

Regarding stock, it is too late for people to exit when they are at a reasonable price but now they are way below our cost basis. Should we continue to hold till the HC spinoff so we can get some HC stocks and pray for RemainCo stock to recover some when all lawsuits settle and MR retires in 2024? Thanks

@2jzs+1paOnBcp

Good catch, worthy of separate discussion.

Regarding the bankruptcy question, let me introduce you to the freshly minted: “3M Chemical Operations, LLC”.

https://www.bizapedia.com/mn/3m-chemical-operations-llc.html

https://webapps.sfm.illinois.gov/ustsearch/Facility.aspx?ID=3008107

https://ordspub.epa.gov/ords/cimc/f?p=CIMC:RCRA:::::P14_RCRA_HANDLER_ID:ALD004023164

On one hand, it could be that 3M is packaging this fine suite of US-based PFAS manufacturing facilities for potential sale to another company who is eager to get into this lucrative line of business (all the while managing contaminated sites in 3 different states in perpetuity). On the other, it could be an attempt to concentrate massive still-unresolved liabilities into a single entity in a last ditch effort to ring-fence it from the rest of RemainCo. (Because attempting to concentrate liabilities into a sub and bankrupt it has worked so well for 3M in the past?).

By the way, if you provide support to Cordova, Decatur, or Cottage Grove chemical plants, you may have been “leased” to 3M Chemical Operations, LLC. I’m sure your recent rental to an entirely new subsidiary has been communicated and explained to you. For more details, please refer to 3M’s change of ownership, operator, and landowner filing located here (posted on 6/16/23): http://app.adem.alabama.gov/efile/.

• Not Varys

I forgot one more point on bankruptcy. The market has started taking something of a position on this too. 3M stock is at 10+ year lows and the bond prices are plummeting as well.

@1hoc+1paOnBcp

• Investors

Actually, not in 2015, but around 2018-2019 I started hearing several executives/COC members get suddenly very worried about what they termed 'activist investors'. The gist of it was they were afraid that someone would come in and basically fire all the executives. In hindsight that might actually have been a good thing for 3M.

Varys,

Did you hear any chatter around 2015 about Inge and Mike borrowing billions to buyback stock to prevent for 3M what happened to dow and Dupont regarding activist investors buying into 3M to force a breakup

@1rwb+1paOnBcp

• Bankruptcy

Yes, in my opinion the bankruptcy talk is warranted. Search the site for some of my other posts on this.

In a nutshell, I think Wall Street would rather see a quick Chapter 11 bankruptcy to shed at least part of 3M's debt* than have 3M spend every dollar of the next 5 to 7 years of earnings paying it off.

Assuming the HC spin happens next year sometime, I put RemainCo's Chapter 11 bankruptcy odds at 95% within 3 years of spin date and probably a lot sooner than that. SpinCo does not file for bankruptcy, they will do fine on their own.

I will say that this is not entirely, or even mostly, the fault of the lawsuits. If Inge and the BOD hadn't gone massively into debt to do share buybacks I think 3M would be in a solid position to weather the lawsuits and survive.

*Debt defined as our bonds, earplug settlements, and rapidly growing PFAS liability.

Couldn’t agree more about Tireman- why would someone with zero manufacturing experience get hired to run a manufacturing organization?? The only reason I can think of was to be the “bad guy” and start all the layoffs. You could tell he was clueless when he first started when every meeting revolves around “being safe” and ZERO plans or direction on what direction manufacturing needed to go in. Terrible decision and terrible management by the Tireman and even with the layoffs that he instigated they stay have zero clue on how to turn things around-

The person sold all his/her stock and quit. How much more of a bet is the person supposed to make? That's already putting the money where the mouth is ....

How are you so sure 3M is heading for bankruptcy? This site has a lot of doom and gloom and I'm not saying it's not all warranted, but that's a very strong statement to make and not something that should be said lightly. I know a lot of people probably read that and want to know more. What would you wager the odds are? Would you bet you're savings on it?

MV a total joke. How did he even get out of technical? Zero understanding of business.

@1swg+1paOnBcp

A lot to unwrap here.

• Tireman

Short version is that Tireman was a bad hire for his job. I've written before that he just doesn't have the right experiences to lead 3M's manufacturing organization and it shows in his performance.

• Manufacturing leadership

Nobody wants that job because the last two CEOs made it that the manufacturing leader cannot 'win'. If the plants are fully staffed and running well, finance will complain about too much inventory. If the plants run lean, sales will blame poor sales results on backorders, fairly or unfairly.

Don't get me started in the stupid inventory metrics and projects. Inventory-reduction thinking has caused some galactically stupid decisions in 3M.

• Consultants

I see that there are two types of consultants.

First, the experts you call in for skills that you don't need very often. An example here is architect to help with a construction project. 3M doesn't need a full staff of architects, but can hire them when needed. This is smart business decision making.

Second are the management consultants like Kearney and McKinsey. They are simply leeches that provide zero value to most of the organizations they work with. Another root cause of 3M difficulties is that we hired senior leaders who came from these firms who quite literally have never made or sold any 'thing' for a profit in their lives. (I'm looking at you Banovetz, but not just you.)

@1lcg+1paOnBcp

• Promotion

Without knowing the career trajectory and functional area involved, my advice is a bit limited.

In my experience getting promoted comes down to three things:

• First, prove you can do the next higher job by starting to do as much of it as you can.
• Second, don't be an a--hole. (greatly simplifying, personality matters)
• Third, be a bit patient and lucky. (sorry, timing is a factor here one cannot totally control)

If you are looking to get into management, you need to prove that you can lead and develop others. That is the key qualification, not your individual performance, but your ability to make a group/team/organization better as a whole.

What are your thoughts on the supply chain org and Tireman? Why has that position been a revolving door over the past decade? What are your thoughts on Tireman’s Kearney consultants?

Varys

How does one get promoted in this organization remainco or spinco when they have done everything asked of them, won multiple presidents clubs, holds an advanced degree, has tenure, participates in internal programs and is constantly finishing runner up without any explanation as to why.

Most of the reasons I believe have to do with diversity and politics. Curious to get your thoughts as I am growing more and more frustrated.

@1aec+1paOnBcp

I am anti-Six Sigma. The people let go were undoubtedly good, but Six Sigma's lazy and shallow way of thinking is a significant root cause for 3M's decline.

Any group should be looking for continuous improvement opportunities. What we need to end is this foolish thought that we can magically DMAIC and C&E our way to 50% lower factory costs. If your plant needs a CI project manager, I suggest your plant goes out and hires a CI project manager.

@1xoy+1paOnBcp

It is the R&D VP (tech director title in the good old days) working with the division HR rep who are the key decision makers. More junior leaders might get some input, but usually not much.

@1whv+1paOnBcp PeterPan&Wendy Principle

• Vale follow up

I honestly don't know why Vale was picked. I simply wasn't senior enough to be in those discussions.

Mike Vale had exactly 1 tool in his tool kit - prioritization. Anytime anything anywhere was wrong his only response was 'you are doing too much, prioritize'. He simply had no other tools in his tool kit to use.

Yes, 3M dodged a bullet with Vale. He would have reduced 3M to under 10 divisions and maybe $10B in sales on a good day.

Varys, how do you view the layoff of the entire LSS MBB and BB group, with the excuse that company wants to "simplify" and consolidate into single CI program?

I think this is bullsh1t as for the next year hoppering, we are getting requests from area BSC to fill in hopper list. Exactly the same stuff that used to be done by MBB & BB, but now has to be done by ourselves!

@1qob+1paOnBcp

• 'Dumping Salary'

No, I've never seen it. Just mathematically is wouldn't help that much.

The difference in salary/benefits for an older employee versus a newer employee when compared to a full department budget really isn't very significant. On top of that, if I could accurately measure productivity per dollar I'd bet the more senior employees were usually, but not always, more efficient due to their experience.

I'm not denying that age discrimination can occur, I'm just saying I've never seen it happen other than BB/MBB assignments back in the McNerney days.

When it comes to to labs -- who really chooses the layoff victims? Does the technical director have any say? The VP? Or is it all demographics and HR?