Thread regarding 3M layoffs

https://www.washingtonpost.com/business/2023/06/26/3m-multibillion-dollar-settlement-is-bad-news-for-its-dividend/e31aa002-1447-11ee-9de3-ba1fa29e9bec_story.html

@ Still Not Making Sense

Get comfy and grab some popcorn because this will be the first of many settlements, extending for so long as people continue to find PFAS in the environment and in their bodies. How long is that you ask? Nearly every PFAS molecule that 3M manufactured and put in its products is still here and will be forever. And some of those molecules are quite unique to 3M. So this sh1tshow has the potential to last approximately forever. Or at least until bankruptcy.

You may be thinking: surely this poster is exaggerating. Flim Flam’s totally got this. Isn’t it all settled now? Isn’t 3M winning?

Let me introduce you to 3M’s very own 10-Q:

https://investors.3m.com/financials/sec-filings/content/0000066740-23-000028/0000066740-23-000028.pdf

Pour yourself a stiff drink—something that would make Wee Pete proud—and read pages 29-42, the Environmental Matters and Litigation section. The AFFF section (which is the subject of today’s settlement) extends approximately a single page. A single page. All the other pages? Not germane to this settlement. So, congrats to 3M on getting their first 11-figure settlement under its belt. Blew the previous 9-figure settlements out of the water.

$10.3B settlement over 13 years. Very manageable. Still think 3M will go bankrupt? No chance this 120 year old company goes chapter 11!!

@ Not Making Sense

This reminds me of when a kid plays the board game Monopoly. The game goes along just fine—for more than 120 years—until they land on Boardwalk with a hotel. The kid begins negotiating to stay in the game, scrambling to make the numbers work. A mortgage on Baltic, selling their houses on Vermont, a fire sale on the Reading Railroad to a sympathetic parent, convincing a sibling to buy their get out of jail free card at a steep discount, and small loan from the bank. Maybe they can tear their Marvin Gardens deed in two, creating separate entities and “unlocking” the hidden value. Sure enough, the child manages to remain in the game for a little longer, dreaming that they might be able to lap the board 10 times unscathed, collecting $200 each time. All in the hope of preserving cash and someday turning their fortunes around.

But in reality, the game is over for them. It’s a matter of time. Winning is no longer possible. Just staying in the game requires perfect rolls. Every time.

As eloquently put in the last couple of posts, the $10B is for a fraction of the PFAS claimants in a single MDL, just for AFFF. Only for municipal water providers. Just in the US. If $10B is indeed the number, then 3M believes that is a good deal relative to the alternative, for just that select group of claimants.

Assuming the settlement occurs, there will be blood in the water. A sea of little red hotels will proliferate across the Monopoly board. Everyone will want a piece of the 3M pie sooner rather than later as insolvency becomes increasing plausible. Moreover, the list of additional hotel-creating events is unlimited and out of 3M’s control. CERCLA-listing of PFOA and PFOS? Many, many more hotels. NPDWR? Still more hotels. A new contaminated site? More hotels.

Capstone Companies is a regulatory issue advisory firm that estimates 3M’s cost to settle PFAS litigation will be more than $40B.
Some analysts estimate the cost of settling CAEv2 litigation at $10B to $15B.

RemainCo will get $6-10B from HC spin. Would then have to issue $40-45B of debt assuming above estimates in addition to the existing $12B of debt. RemainCo earnings will be lower after spin and dividend will have to be slashed. Would take over 10 years to pay off the debt.

Who wants to buy the bonds and who will want to hold the stock given the massive debt load and low or no dividend? More job cuts. Less investment in the business. Former high margin products become low margin commodities as competitors gain share. Earnings continue to fall.

$10 or $20 a share is almost the same as bankruptcy for those who bought above $200.

@tay+1ncaHahI - "There is no chance 3M goes bankrupt."

No doubt 3M can manage the cost of CAEv2 litigation, but that pales in comparison to the PFAS train that is quickly gaining steam.

The rumored $10B PFAS settlement is only expected to cover municipal providers of drinking water to consumers.

It would not address suits by over 2 dozen states over the pollution of rivers and streams, soil, etc. Just in the last month (since May 25, 2023) attorneys general from 8 states (Arkansas, Pennsylvania, New Mexico, Oregon, Washington, Arizona, Maryland, and Rhode Island) have filed litigation over PFAS. 3M's lawyers haven't even had time to read all of these documents, let alone propose any kind of settlement. MN already settled for $850M, but a state official has said that they aren't afraid to ask for more money if needed for cleanup and will utilize the court system again if necessary.

Then there are the personal injury/death and property damage claims that are piling up by the thousands.

Financial research firm CreditSights estimated that 3M could be on the hook for nationwide PFAS cleanup costs of up to $143 billion. That’s almost triple the company’s market capitalization. Maybe they're smoking something and $143B is an inflated number, but what if it's half ($72B) or even a fourth of that ($36B)? That's still a big number compared to 3M's ~6.7B annual earnings before income tax. And this estimate doesn't include the thousands of personal injury claims.

This is all just U.S. court litigation. What could the international liabilities be beyond Belgium?

Chuck Tatelbaum, a bankruptcy lawyer who has dealt with mass-tort cases said “They may not be able to settle their way out of this. Bankruptcy may be the only real alternative to deal with this kind of bet-the-company threat.”

US District Judge Richard Gergel is overseeing the Stuart, Florida case (which was recently delayed for 3 weeks to allow more time for the rumored $10B settlement talks) along with thousand of other PFAS cases. Even the judge has said that PFAS litigation poses an “existential threat” to 3M and other companies that manufactured PFAS.

I don't understand how a reasonable person could brush all of this aside and declare that "There is no chance 3M goes bankrupt." In my mind, it's greater than a 50% chance.

3M 2023 EPS will likely exceed $9/share. Remainco retains 19.9% of Spinco which should be about $6B. PFAS settlement rumored to be about $10B. This means that Remainco could float bonds to pay the remaining $4B. CAEv2 should settle for $1-5B depending on 11th circuit appellate court ruling (hopefully by August). While settlement numbers are big, they are manageable. If there is a realistic chance that 3M could go bankrupt, no way stock is $100/share; i.e. total market cap of $55B. Again, 3M makes billions in profits per year. Companies that has billions in profit do not go bankrupt!

@1ebj+1ncaHahI

This article is spot on. 3M looks to hit 10/10.

If you haven't sold off your GESPP it's not too late with the shares over 100

Even if our management was competent (I’ll not beat a dead horse here with additional commentary) and made the right moves over the last 5 years, PFAS alone is more than enough to force a bankruptcy. Too many claimants (government and private) and too much potential liability, fines, and clean-up costs. Bankruptcy reorganization will be the only way out down the road. Why do you think they are spinning healthcare? It’s not to “unlock value”, but rather to salvage some value as shareholders get SpinCo shares. RemainCo eventually goes to 0 share value but SpinCo shares will still be worth something. I am far from in the know, but am almost certain that the spin and eventual bankruptcy are a part of a larger strategy to deal with combat arms and PFAS litigation.

https://www.wisebread.com/10-signs-your-company-is-going-under

Do any of the 10 signs in the article ring a bell?

1. There's a Hiring Freeze
2. Closed Door Meetings Are Everywhere
3. The Good Employees Start Leaving
4. Layoffs and Reorganizations Are Constant
5. Playing It Safe Is Encouraged
6. Everyone Is Unhappy
7. There's No Money to Do Anything
8. The Company Stock Is in Free Fall
9. Benefits and Freebies Dry Up
10. You're Not Busy

How are Workday postings looking lately? Heard of any cryptic meetings in the past 6 months? How many times has your stomach sank in 2023 knowing that yet another talented person you knew announced they were leaving? Could there be anymore layoffs and reorgs? What about Class 5 R&D programs…are you hearing much? Are your town hall meetings energizing and positive-what’s the sentiment among the antendees? How are those factory upgrades / capex spends coming along? How are your GESPP/RSUs doing? The bennies are getting better though, right? How’s the 3M Center parking lot looking today?

https://www.reuters.com/world/us/3m-strikes-tentative-pollution-settlement-least-10-bln-bloomberg-news-2023-06-02/

$10,000,000,000 to potentially settle a FRACTION of the PFAS liability, just in the US. EPA hasn’t even made the CERCLA designation yet.

https://www.jdsupra.com/legalnews/epa-delays-pfas-cercla-designation-3627407/

3M will reminisce about the good old days of the CAEv2 MDL.

Having a good understanding of a majority if 3M’s divisions/businesses and the legal pressures facing the company, I would bet my first born that RemainCo will end up bankrupt within 3 years. The writing is on the wall everywhere. The most obvious being the spin itself, a tool to preserve residual shareholder value vs “unlocking” it. Buckle up.

Companies can and do emerge from Chapter 11 bankruptcy (General Motors did not too long ago). 3M would not file Chapter 7 liquidation, which would mean it’s folding up and ceasing operations. In that case, there’s no company to own shares in and shareholders would be late in line to claim assets of the defunct company. The problem, if you are a shareholder, is that with Chapterr 11 (reorganization), there’s a chance that the shares will be canceled and new ones issued later. That means the canceled shares go to 0. Even if that doesn’t happen, it will likely take a very long time for shares to bounce back post bankruptcy. Any employee with a brain who even remotely has a clue about what is going on with this company should be thinking of how and when to exit their positions.

I think PFAS will become too big for RemainCo to avoid bankruptcy. I'm not sure it will happen as quickly as Varys predicted below, but it's only going to get worse and I think it is inevitable.

t’s obvious that our management is incapable of navigating through the litigation, making good business decisions, placing the right bets, etc. I’m sure there’s an army of consultants, lawyers, and bankers trying to figure this all out in terms of a combination of spins and ultimately a bankruptcy of some part of whatever is left of RemainCo. I’m not sure anyone fully understands the he scope of PFAS, the number of potential claims, and the probable liability. I’m sure it’s massive and will force a Ch 11 bankruptcy at some point.

As an Executive with talent, I can recommend that - 3M should go ahead just do bankruptcy instead of wasting $$ on useless efforts to revitalize itself.

Flim flam special 2

My current estimate:

• I now estimate an 80% (4 in 5) chance of RemainCo declaring bankruptcy within 6 months of the HC spinoff date.

• If HC spinoff is cancelled or delayed to at least 2026, I remain around 60% chance of a parent 3M bankruptcy.

The big two changes that are driving my update:

• PFAS lawsuits are gaining a lot of momentum in the last few months and are focusing on 3M far more than the other players in the industry.

• The recent legal rulings that will prevent Aearo from using bankruptcy to shield 3M from liability. (I agree with the rulings BTW)

To the point on revenue and EPS - I agree both are decent and in an ideal world would cover all the potential liabilities, it just would take a few years of profits.

However, here is how I think it will go down: (my 80% chance scenario)

• HC Spins off next year - 3M shareholders get shares of SpinCo and RemainCo.

• The main liabilities (PFAS and earplugs) stay with RemainCo.

• RemainCo undergoes a quick pre-packaged Chapter 11 in 2024, flushing the main legal liabilities down the drain with it. RemainCo stock goes to zero.

• Current shareholders end up with only their SpinCo shares.

• Bankers get a chance to make money on 1) The spin itself 2) The bonds of RemainCo 3) The future IPO of the 'new' RemainCo after bankruptcy. In the end they make more money than if 3M just sent its profits to cover liabilities for a few years.

If there is one thing that is abundantly clear about 3M's current leadership is that they care far more about Wall Street bankers than their actual retail shareholders.

There is no chance 3M goes bankrupt. 3M revenue and EPS, while lower than last year, are still strong. Earnings are in the billions. Companies that have billions in profits and cashflow do not go bankrupt. Product liability jury awards like in the CAEv2 cases always get substantially reduced on appeal.

https://www.fool.com/investing/2023/06/19/why-is-everyone-talking-about-3m-stock/?source=eptcnnlnk0000002&utm_source=cnnmoney&utm_medium=feed&utm_campaign=article