Written by Brenda Nakalema

3M Plans To Cut Jobs Amidst Deeper Legal Trouble

3M (ticker: MMM), the company that makes post-it notes and scotch tape, plans to cut jobs in a cost-cutting measure …

3M (ticker: MMM), the company that makes post-it notes and scotch tape, plans to cut jobs in a cost-cutting measure as its legal trouble deepens.

Michael Vale, the chief of 3M’s head of safety and industrial division, announced the company’s decision to cut jobs in a memo to employees. This disappointing news comes shortly after a Friday decision passed by a U.S court banning the company from putting a subsidiary dealing with product litigation from faulty earplugs into bankruptcy protection. That move had been designed to restrict the total liability owed by 3M.

The company faces even more costs for cleaning up chemicals produced long ago that have been found in groundwater. The Environmental Protection Agency moved to declare the chemicals- PFOA and PFAS- as hazardous substances.

These devastating liabilities have cost the company more and have been reflected in the company stock in recent months. The stock has dropped 30% this year, nearly twice as much as the 17% drop in the S&P 500. Shares have declined roughly 50% from their 2018 record high.

In a bid to manage rising costs, the company has opted to lay off staff, although the exact number of workers to be cut has not yet been determined. The liabilities and other economic headwinds have had the 3M stock shunned by investors.

Only one out of 21 analysts covering the stock rates shares Buy. This represents less than 5% of the street. The average Buy-rating ratio for the stocks in the S&P 500 is roughly 58%.

Nicholas Heymann, a William Blair, believes investors share sustainability concerns regarding the 3M’s dividend, which costs the company roughly $3.4 billion each year. 3M’s projected cash flow covers that same amount, but its legal liabilities remain a thorn.


This might also interest you: