3M to cut 2K jobs globally, lowers 2019 profit outlook | Hacker News Reader

3M to cut 2K jobs globally, lowers 2019 profit outlook

reuters.com

81 pointsoldjokes82 comments

Anecdotally, 3M seem to suffer more than I'd expect from fake products flooding the market place.

I've lost count of the number of reviews of products I've read which advertise "3M tape / adhesive" or alike, where it turns out to be something cheap with a 3M logo on it.

Likely a drop in the ocean of 3M's business, but every little helps, I guess.

Given the prodigious use of sticky notes involved in Agile transformation, and the apparent commitment to 3M’s bottom line, perhaps this is a leading indicator that agile consulting is in decline? /s

I sure hope so!

I think you're right - that and the security industry convincing the vast majority NOT to write passwords down on sticky notes..

3M is a staple in American Industry. I wonder if this is foreshadowing anything broader for the USA.

Seems companies are starting to tighten the belt a bit but the market certainly isn't watching for that yet... (or is just ignoring it)

A lot of companies are really tightening their belts to deal with the cheap debt they accrued over the last few years that they now need to pay off.

> market certainly isn't watching for that yet

On the contrary. US Treasuries are plummeting in yield. 10-year is 2.53%.

People are keeping their money in stocks because the bond market is also pretty messed up. Where exactly do you put your money?

Treasury Yields suck, Stocks are risky. And Real Estate caused the last crash.

Hence the rush to "investing" in gimmicks

Yup. So much printed money in the hands of "investors", who are all chasing yields. No one wants to invest to create actual products.

QE has been a failure

> QE has been a failure

It did what it was intended to do, which was to shore up housing prices and prevent mass defaults.

The problem now is that we have a huge prickly slow motion debt crisis.

We need interest rates to get back to something normal, but if you raise interest rates when people are in huge debt, they go bankrupt because they can't pay the interest. That was the original problem -- we kicked the can down the road but we never solved it.

What you need is for people to have more money to pay their debts at the same time as you raise interest rates. One way to do that is for real wages to rise, but there are a lot of reasons that's difficult right now, not least due to competition from other countries for jobs.

Another way is to have another round of QE but instead of using it to buy treasuries like before, we use it to fund a UBI while we raise interest rates. Then people have the incentive to pay down debts (higher interest rates) at the same time as they have the money to pay them with (UBI), and you don't compromise competitiveness because the money comes from QE rather than increased domestic labor costs.

It also allows for a certain amount of asset price inflation, which is necessary to rebalance general prices against the prices of things like housing and education (and stocks) without causing nominal housing or stock prices to decline and thereby cause a bunch of defaults and malaise.

>>It did what it was intended to do, which was to shore up housing prices and prevent mass defaults.

So to prevent cheap housing in order to save the banks and prevent a depression ?

Isn't cheap housing an amazing thing, an historical opportunity to reduce poverty etc ?

And if so, doesn't it worth some sacrifice ?

> So to prevent cheap housing in order to save the banks and prevent a depression ?

Not even just the banks -- all the dumb entities that had been holding toxic mortgaged-backed securities. This was everything from insurance companies (who then wouldn't have been able to pay claims) to pension funds.

> Isn't cheap housing an amazing thing, an historical opportunity to reduce poverty etc ?

It is -- that's the problem. Right now you have millions of people who have overpaid for a home. They paid $400K for something that should have cost $200K, and then over the past decade have paid more than $200K in just down payment and monthly payments, but still owe more than $200K of principal.

If you just reset housing prices and do nothing else, all of those people are wiped out -- they still owe more than their house is worth even though they've already paid enough that they should own it outright by now. Moreover, they would end up underwater and have no reason not to default, with all the downstream consequences of that.

The nominal cost they're paying for housing is already sunk -- it was set at the time they bought the house. The only way to reduce it for all of those people is for the real cost of housing to decline without changing the nominal cost.

In other words, there needs to be inflation, so that nominal housing prices stay where they are and people don't end up underwater, but wages and everything else rise to catch up to them. And then people can pay back their existing mortgage more easily.

That's what QE was intended to do, but it only did half the job. It kept nominal housing prices up but it didn't result in wage growth because the money went into the housing and bond markets rather than into the pockets of regular people, and that in turn drove investors from the bond market into the stock market. So now we've got a housing bubble and a stock bubble. Whee.

And again, the way to deflate either of them without a big depression-inducing pop is to let their nominal prices stay where they are while adopting policies to raise nominal wages and the nominal prices of everything else back to parity.

This looks like more a company specific issue rather than issue with broader market.

TBF there have been a lot of layoffs recently

https://www.cnbc.com/2019/04/04/job-layoffs-surge-35percent-...

Typically, when companies are having trouble generating top line growth they cut costs. And, unfortunately, since people are often the highest component of costs, they are among the first to be cut.

Also, it makes sense that the amount of people being laid off is at an all time high, there are more people working now then ever before.

https://www.statista.com/statistics/192356/number-of-full-ti...

In other words: "There are three kinds of lies: lies, damned lies, and statistics."

And to further complicate things, neither jobs performance nor broader economic performance (i.e. GDP growth) correlate really well with the stock market. So beware trying to market-time on macro indicators alone -- sometimes bad times for workers can be good times for corporate profits and hence shareholders.

Auto sales significantly slowing. We had a yield inversion event, and now 3M is lowering output.

Things certainly don't look good.

This is a layoff affecting approximately 2% of their workforce. I don't see why it's even in the news.

The drop in profitability is a big deal, which likely caused the 11% instantaneous drop in their stock price.

Big reliable companies like MMM don't usually move 10%+ in a single day. Anything that makes them move this much is definitely a newsworthy event.

The housing market is starting to feel like 2007 again. I've been trying to sell for 6 months. Prices are stagnant (or slowly falling), nobody's buying.

Maybe your area? I just bought a house and 3 other houses just sold in my Neighborhood. Another 2 on my street alone are coming up for sale after their kids finish school in May. One already has a buyer and sold by owner. No Zillow or any marketing.

I’m in Atlanta. What’s weird is I’ve seen about 10-15 houses Zillow bought and then upped by by $10-15k. Zillow’s been sitting longer than others but are selling with the premium they put.

It's area related, at least according to the data so far. Places with older houses, high (and increasing taxes), and undesirable weather with low or stagnant job growth are going to have a hard time selling.

Seattle is full of "older houses, high (and increasing taxes), and undesirable weather" but I guess the job prospects make up for it.

Again, not sure what I did to deserve downvotes considering Seattle is full of old and historic buildings, neighborhoods, and districts and has pretty crappy whether. The taxes aren't the worst in the country, but they are certainly not low either. Seems like the downvote feature on this site is used as a "diagree" button similar to reddit, which I don't believe is the intent. Not even sure how I managed to hurt feelings in this case, considering I was just saying Seattle sucks based on those criteria but no one is having a hard time selling as was stated

Seattle homes looks brand new compared to New England, and our taxes(MA) appear to be higher and our weather you could say is similarly bad but different if not worse. We also have a lot of jobs which pretty much drive everything.

I am curious about the tax side of things. What taxes in the Seattle area are high or increasing. I am asking because I am considering moving to the west coast.

Unfortunately nowhere worth living has many good jobs and anywhere with good jobs is an overpriced shithole (often literally, I'm looking at you SF and your poo problem).

Seattle’s tax situation is far better than the rust belt states that are looking down the barrel of old infrastructure, freezing winters (causing more expense due to salt and associated wear and tear and rusting), decreasing populations, and of course, debt in the hundreds of billions to their retirees.

Rust Belt population decline has slowed, as has growth in the Sun Belt. It appears an equilibrium of sorts is being approached.

https://www.bloomberg.com/opinion/articles/2019-04-26/the-ru...

I didn't downvote. I am genuinely curious as it is one of the places I am considering moving and I know I don't know anywhere close to as much as I do about Boston.

I think everything is relative. If you compare housing in Boston to Seattle. Seattle looks brand new because the vast majority of houses in the Boston area were built before 1970 and there are a lot of original features you don't want in Boston houses. If you compare Austin to Seattle then Austin seems brand new because it is.

If the taxes in Washington aren't great than I am more inclined to just go to CA.

Anecdotally, I've seen a bunch of price drops in Atlanta (grant park, o4w, cabbagetown, etc areas)

Are you sure it's that and not because you've been trying to sell your house during the off-season? Most of my real-estate friends barely make any, if any, sales during fall-winter and make most sales in late spring or when kids are out of school for the summer.

Is it not late spring right now?

Late spring is late May-early June

OP said 6 months. that's a long off-season.

Yes, November 2018 - April 2019 is the prior 6 months. Not a lot of house selling going on usually. The majority of house sales are not within those months (at least in the US). A lot of it is regional (weather related) as well, but it's really mostly dictated by the school year. Most parents try to avoid moving their kids to a new school mid-year if they can help it and wait until school gets out to move.

https://www.zillow.com/sellers-guide/best-time-to-sell/

I feel like you're trying to say that house sales just stop, or come close to it, during this time. When the reality is it's more like a few % points drop in volume. If it took OP an extra week or three sell? Sure. But 6 months? Something else is wrong.

Off season is december. Now is more or less the good times.

I put this sucker on the market in the fall (bad time, I know). I got a great job offer I couldn't refuse and had to move.

Unfortunately, I have yet to "realize" my new, higher salary because I'm paying double for housing until the old place sells. It's a nice house, not too old, large, pool, etc., in a good neighborhood but it's not getting many showings.

Is it in the suburbs? All my home-buying-age friends are moving into/near the city, the definition of "good neighborhood" has shifted a bit from years past.

Have you lowered the price? A house properly priced will move in any market.

I listed it for exactly what it was listed for when I had bought it... about 7 months prior (and at that time it drew multiple offers within 2 weeks on market).

It really was an unexpected situation.

Markets can change rapidly.

Depends on the price point and locale, right? Where I'm at (a very average 500,000 person city), anything sub-$250k in a OK neighborhood is snatched up in a day. Meanwhile, anything $300k+ (unless it is in the super-cool hip neighborhood close to 3rd wave coffee and hobo poop) is just languishing.

Maybe in your area. The value of our home has been continually growing in the 3 years since I purchased it, and houses around us have been selling as soon as they hit the market

I keep expecting a housing crash here in a flyover, but it's been going strong. Know a guy who invests in houses, he is selling houses he bought for 15k for 170k, but it's a function of nice neighborhoods closing the "ghetto" pockets around the city. A ton of new construction. But I am also in the city which has the most Fortune 500 companies / pop and a cost of living nowhere near the coasts.

> Prices are stagnant (or slowly falling)

Sounds like a normal, healthy market. Prices are not supposed to just go up. They are certainly not supposed to go up by double digit percentages points year after year.

I've seen nothing that resembles the housing crisis.

My neighbor, on the other hand, had buyers beating down the door and sold his house in a week for more than the asking price. It did seem that real estate stagnated over the winter, but it's back in force now, at least where I live.

I checked out your profile. Are you referring to Satellite Beach as the old location? I've been researching moving to exactly that area myself, and found a lot of folks specifically complaining about lack of activity in Brevard County. Compounded by cancer risks apparently from the AF base, I read.

At least in my area of the midwest, housing still seems strong. Good luck selling your house!

Supply and demand. Is "nobody buying", or is your asking price too high?

Typically, when companies are having trouble generating top line growth they cut costs. And, unfortunately, since people are often the highest component of costs, they are among the first to be cut.

Also, it makes sense that the amount of people being laid off is at an all time high, there are more people working now then ever before.

https://www.statista.com/statistics/192356/number-of-full-ti...

In other words: "There are three kinds of lies: lies, damned lies, and statistics."

Does this mean they will move more of their production out of the USA?

They still have production in the US? they started moving out in the early 80s. My dad was involved in the re-assembly of the pipework for a specialized glass production facility (specialized lenses etc) physically disassembled & moved from the US to Xian china in '86. Even in the early 90's, most of their mech engineering was contracted out. Surprised they have 2000 employees to lay off tbh.

Yes of course they do. They just don't employ that many people to do it. With the kind of materials they handle there's not much for humans to do except run machines and more and more of that becomes automated at time goes on. Highly automated production like that is one of the few kinds of manufacturing it still makes sense to do in the first world because getting factory set up here is still cheaper than doing it half way around the world and if you're highly automated the downside (high labor costs) is not an issue. Of course they product stuff in China, India, etc. as well. They're a global company with a diverse portfolio so they have the ability to locate different things in different places in whichever way makes the most sense.

Whether they have their engineering in the US is a different story (though I'm sure some of it is).

Is 3m still a solid company? I’ve been wanting to invest for ten years but the pe has always been too high.

I would def look into the track record of the new CEO, who started in JUL'18. Stock has under performed since his appointment.

The prior CEO took on cheap debt though. This helped purchase massive stock buybacks (great for executives) which helped raise stock prices to satiate animal spirits. For some reason US business leaders (mostly under pressure from wall st.) aren’t the best at long term thinking anymore.

Great for executives and shareholders, many of which probably work at 3M. What else was management suppose to do with the cash they are generating? And, why was the debt cheap in the first place?

That decision benefits few at the cost of many (and eventually the few, just later). It is easy to imagine better uses of cash than full dedication to a buyback. Personally, I would make sure that R&D has plenty of funding, buy bonds, modernize old equipment, if necessary get consultants for leasing and insurance expenses,....basically hedge against risks and invest in competitiveness. Buybacks are fine to an extent. I think you know why the debt was cheap.

1. Corporations exist to benefit their shareholders over some term (short, long, whatever) as the shareholders ask for, through their elected board of directors. I tend to be sympathetic to what you're saying about taking the long view (esp. for a company like 3M) but the many vs. few doesn't make sense in a corporate context. It's the now vs. the later.

2. "Buy bonds"?? A corporate CFO would be pilloried for buying bonds. The shareholders are emphatically not interested in the CFO playing amateur bond-picker in order to generate a bunch of double-taxable income.

IMHO, they are a formerly great company that has decayed to... something less.

//dad worked there for 25yrs

Look into Avery Dennison. Some great innovation coming out of that company and have been on a nice climb the past few years.

I believe the cash-on-cash return over the last 10 years is something like 13% annually.

I think they've been steadily hollowing themselves out just like the every other American / global company that makes stuff. They don't spend on R&D like they used to, instead they've tried to acquire new products and technology.

It feels like the culture of innovation they built is lagging, and like for many American companies losing their way, I wish they could make a case for a real reinvestment in research with a 10 year payback instead of a next quarter result. This is anecdotal and I've only worked with one division of 3M in the past, but i've seen changes in how they support companies downstream. It may just be how everything is changing everywhere.

They still make good products, and they're consistently very good but always premium priced.

Why do research when you can spend the same amount of money just buying small companies that have researched and innovated?

I'm honestly asking. It doesn't seem like there's any substantial pros to doing the research in-house for a big company like 3m. A top down directive to make use of $new_acquisition's tech every now and then seems easier than fostering a culture of innovation at all times.

I am no expert, but one reason could be that there are certain avenues of research could only be viable for a company with large resources and funding not to mention patience (An example is pharma companies that spends billions and a decade developing a new drug).

It’s funny that you say that about pharmas - I’m not terribly informed but I’ve sure read a lot recently about big pharma following that model quite a lot actually.

Some types of research do fit startups.

But what about the more expensive, longer term research ? Isn't there value in that ?

A lot of that expensive, longer term research happens at public institutions via public funds. Which then gets commercialized by the university or by a spinoff company from the researchers.

Giving the benefit of expensive, longer term research but in a convenient form where the actual R&D was publicly funded, rather than internal.

> They don't spend on R&D like they used to, instead they've tried to acquire new products and technology.

From my understanding it was the opposite. They spend on R&D quite significantly but if a product isn’t profitable enough they sell it off. [0][1]

[0] http://m.startribune.com/3m-will-sell-corning-its-optical-fi...

[1] https://news.3m.com/press-release/company-english/3m-sell-it...

They polluted the heck out of a lot of land in MN and NJ, but it looked liked they got away with it until recently. One example http://www.startribune.com/lake-elmo-to-use-3m-settlement-mo...

Did anyone read the article at all? It cites dismal performance of the Chinese market. If anything, it's an indicator that China's growth is slowing, not the U.S.

Better than 2K cutting 3m jobs.

That would indeed be concerning... given that they (2K Games) only have ~4,500 employees.

However, the reverse is not true: 3M doesn't employ 3 million people (nor 2,998,000 ;))

3M cutting 2K jobs is the reverse of 2K cutting 3M jobs...

What is the reflective property

I struggle to see how this can be seen as a bellwether of the economy. 3M sells things that should be reasonably recession-proof: people don't stop buying scotch tape in hard times.

I believe most of 3M's products are industrial abrasives, films, laminates, and adhesives. I suspect they make more money selling layers of film that are part of electronic displays than they do selling scotch tape.

The vast majority of 3m products are used by businesses. If your business is doing less stuff then they need less 3m products.

Pretty sure scotch tape (or any other consumer product) is a tiny fraction of their business. Their main gig is selling industrial solvents, additives, adhesives & abrasives to mining & manufacturing concerns.

Building up production facilities for others & the engineering involved in all that is a lucrative line as well.

Patent licensing too.

Competitors exist. And I don't remember the last time I've bought scotch tape.

How can this happen? I thought Trump's tax cuts were guaranteeing prosperity for all?

Reply on news.ycombinator.com