Since mass layoffs, perhaps multiple times a year, are a sure thing moving forward, what will be the other big announcements in the near future.
No one I know stays through a Minnesota winter for the worthless GESPP (15% discount on 10% of your salary = 1.5%, who cares). You stay through the Minnesota winter for the Minnesota summer. Won’t catch me spending a cent of that severance moving south 🤮
Moving north on the other hand? Maybe I’ll try for squatter’s rights at wonewok 😎
When monish's GE announced it was ending any new accrual of pensions, it was in mid 2017, effective Jan 1 2019. So yes, you usually have one plus year left to add to your pension before it is capped. Which means...it's a toss up if 3M announces end of pension accruals this summer (effective Jan 1 2025) or waits one more year. But it will happen with the HCBG spin.
Also, the remain co 3M will likely give a dividend plus what HCBG gives that will be far less than today's nice divy. I see HCBG saying "hey, we're a growth company with a very modest/measly divy so too bad. We're investing in growth."
As for retiree medical and such, no chance 3M will keep this past 2025. Not enough money and when the company is broken into 5 pieces they won't care anyway!
Amazing how many people put up with 6 months of Minnesota winters, a bit less pay than they could get elsewhere, all with the promise of a lucrative GESPP and retirement health coverage better than most big employers. Only to have this become a bait and switch. What a frigging mess!
@byz+1mv578T5 - "Age 55 plus 5 years service is all a person needs to take their lump sum pension and cut all 3M risk to zero."
I just want to clarify that an employee does not need to be age 55 to take their lump sum pension. I left last year at age 54 and rolled over my pension lump sum and 401k to an IRA. Employees under age 55 will however lose their RMSA (Retiree Medical Savings Account) and will not receive any company contributions to a Medicare-eligible HRA (Healthcare Reimbursement Account) starting at age 65.
I left for my own sanity knowing what I was giving up as far as retiree medical benefits, but also knowing what I would lose when the lump sum pension values dropped on 01-01-2023. Just the interest on the amount the lump sum would have dropped was more than enough to make up the difference in my case. The fact that 3M can change or eliminate these retiree medical benefits anytime at their sole discretion was also a factor ("A bird in the hand is worth 2 in the bush"). With lump sum values reduced, the math will be different for those leaving this year, but you can still take your pension as a lump sum before age 55 if you decide that's the best choice for your unique situation.
I encourage people to read all the relevant benefit plan info (summary plan descriptions, etc.) to make sure you understand what you're entitled to and what you're giving up if you're considering leaving on your own terms prior to being "retirement eligible" at age 55.
I also sold all of my 3M stock back when it was over $200. I regretted that decision for a few months as the stock continued to climb to almost $260, but now I'm so glad I sold.
Dinner...$50.00 Movie...$18.00 Popcorn...$8.00 Cutting all 3M risk to Zero...Priceless!
Making Cents,
You may want to focus less on the Income Statement & look at the Cash Flow Statement. You do realize that EPS $9/share you're focusing on has to cover all of the following: dividend, share repurchases, debt payments, legal fees, CapEx (Property, Plant & Equipment), etc? The numbers haven't exactly added up for a few years now (hence the divestitures: body armor, food safety, dr-g delivery, wonewok, etc). Furthering the problem, they can no longer kick the debt can down the road & repeatedly roll their debt due to higher interest rates.
The dividend will most definitely be cut under the cover of the health care spinoff.
Philosophically, the board of directors is all about shareholders and could care less about preserving employee retirement benefits. The numerous cuts to retiree benefits over the last 10-15 years are evidence of that. Meanwhile, the quarterly dividend has increased for 64 consecutive years. Every quarterly earnings report and annual report in recent years has bullet points highlighting how many billion dollars were returned to shareholders via dividends and share repurchases. I've never seen a bullet point highlighting how many million dollars were invested in the pension plan to provide financial security to our valued employees and retirees. If there is a mention of pension, it's under the category of "headwinds" to explain that pension contributions were part of the reason that earnings per share didn't meet expectations.
On a dollar basis, pension is pretty small potatoes. On a worldwide basis, 3M’s pension and postretirement plans were 96 percent funded at year-end 2022. 3M expects to contribute approximately $100 million to $200 million of cash to its global defined benefit pension and postretirement plans in 2023. That $0.1B to 0.2B pension contribution pales in comparison to the $3.4B in dividends and $1.5B in share repurchases that 3M returned to shareholders in 2022. So if they need to come up with some serious cash (i.e. legal costs / class-action settlement), pension doesn't put a dent in it. At that point, you need to reduce or eliminate stock buybacks and then if more cash is needed go after the dividend.
It's also important to understand that a company can't just come out and say the pension is frozen effective today. It takes months (maybe more than a year) to work through the whole process of terminating a pension plan under ERISA. Even then, the annual administrative costs don't stop (unless the plan is turned over to the PBGC or an insurance company). Stock buybacks on the other hand can be stopped tomorrow. The dividend could be changed as early as this week when the BOD meets and declares the 2nd quarter dividend that will be payable mid-June.
@mzn+1mv578T5, why are you assuming that I am a Mr? Regardless ....
3M EPS in 2022 was $10.1 (while paying out $5.96/share dividend last year). The forecasted EPS in 2023 is $8.50-$9. Given 3M already topped earnings in Q1 by $0.39/share, I fully expect company to earn at least $9/share this year. Dividend is only $6/share, which leaves 3M with $3/share to re-invest in the company. At 552M shares outstanding, that is $1.7B (far exceeding litigation costs). This is all publicly available information.
Please share your analysis if you have an alternative view.
To answer OPs original question, the pension contributions gets cut before dividends would even be slowed up. That is an easy, very high-confidence prediction. Our BOD is all about short-term shareholder payouts than any long-term survival of the company.
I think that if the pension contributions for Portfolio 2 stop, then my estimate of 3M parent bankruptcy chance will increase from 60%, to "I will give odds in Vegas that it will happen ".
Portfolio 1 is less of an impact as most everyone included is either retirement eligible already or will be in the next few years. The youngest person even theoretically in Portfolio 1 is currently 42 years old, and the vast majority are 50+ years old. Age 55 plus 5 years service is all at person needs to take their lump sum pension and cut all 3M risk to zero. I could even see 3M using a portfolio 1 contribution freeze as a way to convince a bunch of people to retire for cheaper than severance packages.
Post ID: @mzn+1mv578T5
Mr. Making sense, you conveniently left out 3M's legal fines and liabilities. Please redo the dividend math taking into account 3Ms ever increasing legal issues. Do you know how much we are paying the legal team for fees and also in terms of penalities every quarter. In 2023 we will write a check of $500 million or so to the Govt. Of Belgium.
The math that you have done is true for companies that are others otherwise doing well, we are NOT.
Your message makes sense when somebody is smoking something funny.
Please be realistic.
I’m so grateful I was raised on a farm and learned self-sufficiency at an early age. While pensions and unions were pseudo valuable 50-80 years ago, today they are merely corporate tools used to create golden handcuffs and indentured servitude. I will never pay money to a union to negotiate on my behalf because I can speak for myself. I have no interest in a pension because I’d prefer to take my money today and invest it the way I want, no strings attached.
In 2019, GE announced that it was freezing its pension program for all employees covered under the plan. Guess where 3Ms CFO was working in 2019?
As for 401k enhanced match (while freezing pensions to what you've already earned), beware that many financially strapped companies have reduced or even stopped matching. That's just one more incentive to leave without a package. Someone should ask tireman at his next raucous townhall about this happening. He doesn't care because he and monish don't get pensions.
I know some people who were part of the Dow and Dupont merger some years ago and got spun off into one of the "new" companies. At the time of the merger, Dupont had partially grandfathered long time employees into a hybrid pension and 401k program. Pension contributions were much smaller but supposedly you made up for it with more 401k. Dupont then completely stopped adding new contributions and made it all 401k match. Meanwhile, Dow had grandfathered in long time employees with the same pension program but new hires starting about 15 years ago were all 401k match.
After the merged company was broken up into three new companies, two of the three did not offer any pensions at all while "new Dow" kept the pension program for a few years. Then they stopped new contributions and only enhanced 401k.
One guy I know was a Dow employee transferred to Corteva (a spin off) in his early 50s. He kept his Dow pension that he had already earned but nothing going forward. Like 3M, the pension contributions in your 50s can be very nice (the multipliers are better than in your 30s and 40s). He decided that he had to work two more years than planned because, unless he could outperform the financial professionals managing Dows pension, he would come up way short.
Another guy stayed with Dow in his mid 40s but the pension changeover to 401k match only will cost him 200k in the long run. They gave you software to compare old vs new expected earnings in your pension and 401k. Bottom line is the companies saved money at the employees expense.
As for 3M, they know what Dow and Dupont did and how it saved money and will do the same here.
All of this sucks, but I have to wonder if an activist had taken on 3M years ago and forced out people like Inge and Mike, maybe they would have found better leaders who would have grown the pieces left of this company better. Life would still have been a bumpy ride for employees but at least the businesses would be doing well.
To: OP... Offering the following info to clear up the statement "Stopping pension from Portfolio 1."
Employees (myself included) had to make a choice during the Fall of 2000 as to whether we wanted our retirement money to remain in the classic pension plan that was Portfolio 1, or move it into the new Portfolio 2 which was more like a 401K (I'm sure that's way too simplified). At that point (end of 2000), Portfolio 1 was frozen and not available to new employees (Portfolio 2 was their only option). The funds for Portfolio 1 remain in place and are insured by the Pension Benefit Guarantee Corporation.
https://www.pbgc.gov
I think one thing 3M might consider, however, is reducing the paltry 4% match it offers on the current plan.
3M has about 552M shares outstanding. At $6 dividend/share = $3.3B payout to shareholders every year. Assuming HC spin results in 25% reduction of parentco, that reduces 3M shares outstanding to 414M, and correspondingly, annual dividend obligation to $2.48B. That still means that 3M (parentco/remainco) still need to perform well, but the dividend is quite manageable.
As for stopping the pension, wouldn't you think 3M would have frozen the pension before all the layoffs if company wanted to save billions more? Buckley had previously said that 3M's pension obligation, while big, was fairly predictable and manageable (compared to healthcare costs that continue to spiral up). That was 18 years ago, so 3M pension obligation is significantly smaller now. Highly doubt 3M will cut existing pension of Portfolio 1 & 2 employees.
3M is a 120 year old company that has a bad CEO and is, thus, going through a bad stretch. Even then, 3M revenue was $32.8B in 2018 vs $34.3B last year ($35.4B in 2021 but that was because of $1+B in extra respirator sales due to pandemic). In spite of a not-so-great CEO, the company has grown. Plus 3M raised dividend in 2023, and has raised dividend for 60 years. If business truly could not support the dividend payout, it would have been cut (or not raised) in February 2023 by the BoD.
All that to say, the sky is not falling. Better days are ahead for 3M, starting with Q2.