3M Could Sell ‘Commodity-Like’ Units, New CEO Says

Sept. 13, 2024

“Should we be in businesses where technology doesn’t drive differentiation?” Bill Brown said at a Morgan Stanley conference.

Geert De Lombaerde

Continuing to hammer the innovation theme he spoke on in late July, new 3M Co. CEO Bill Brown said at a recent investment bank gathering that the diversified manufacturer could sell off some of its divisions in coming years.

Speaking at the Morgan Stanley 12th Annual Laguna Conference, Brown—who took 3M’s helm in May—also reiterated that he and his leadership team are pushing hard to improve the company’s operational performance and top-line growth. But speaking to the portfolio of products under his purview, Brown quickly turned to the idea that maybe a third of 3M’s sales come from “more in the commodity-like areas” and said he will think about whether 3M should remain in businesses where its technologies and innovation don’t give it an edge.

That’s not to say, Brown added, that a “commodity-like” business needs to stay in that category long term. Rekindling 3M’s innovation engine—a priority he highlighted this summer—could quickly improve the growth and profit trajectory of a product line.

“At the end of the day, where we are really good is where the technology skills of the company can drive the differentiation inside of the product and make a difference at the customer interface,” Brown told analyst Chris Snyder. “So over time, I imagine there will be some portfolio shifts that happen […] That’s the lens [through which] I’m going to be looking at this in the coming months and quarters.”

Following the spinoff this year of its former healthcare business as Solventum, 3M is organized through three divisions: safety/industrial as well as transportation/electronics and consumer. Safety/industrial accounted for about 46% of $6 billion in sales and 48% of $1.3 billion in adjusted operating profits through the first six months of this year. Transportation and electronics claimed 32% of sales and 33% of profits while consumer claimed 21% and 17%, respectively, of those metrics.

Speaking to Snyder, Brown acknowledged that divesting significant businesses or product lines would come with headaches because a lot of 3M’s intellectual property and manufacturing processes are spread across product groups. But he pointed out that 38 of 3M’s 110 factories handle roughly three-quarters of its volumes and that the company’s teams have built up expertise in IP and supplier agreements through the Solventum spin.

“It’s not an impediment to a portfolio change,” he said.

Shares of 3M (Ticker: 3M), which popped after Brown’s first public comments as CEO in July, rose 1.4% to about $132 the day of his remarks at the Morgan Stanley confab. They have now climbed more than 50% over the past six months, growing 3M’s market capitalization to more than $72 billion.

About the Author

Geert De Lombaerde | Senior Editor

A native of Belgium, Geert De Lombaerde has been in business journalism since the mid-1990s and writes about public companies, markets and economic trends for Endeavor Business Media publications, focusing on IndustryWeek, FleetOwner, Oil & Gas Journal, T&D World and Healthcare Innovation. He also curates the twice-monthly Market Moves Strategy newsletter that showcases Endeavor stories on strategy, leadership and investment and contributes to other Market Moves newsletters.

With a degree in journalism from the University of Missouri, he began his reporting career at the Business Courier in Cincinnati in 1997, initially covering retail and the courts before shifting to banking, insurance and investing. He later was managing editor and editor of the Nashville Business Journal before being named editor of the Nashville Post in early 2008. He led a team that helped grow the Post's online traffic more than fivefold before joining Endeavor in September 2021.