3M Reaches $6.01 Billion Settlement, Faces Other Legal Challenges

One sentence summary – 3M has reached a $6.01 billion settlement with 250,000 plaintiffs over allegations that the company manufactured defective earplugs that caused hearing loss in military veterans and service members, but still faces other legal challenges, including a $10.3 billion settlement with water utilities over drinking water contamination, and estimates suggest its total liability risk related to PFAS contamination is nearly $30 billion; to fund these settlements, 3M has undertaken cost-cutting measures, including job cuts and plans to spin off its health-care business, although there is debate surrounding the sustainability of its dividend.

At a glance

  • 3M has reached a $6.01 billion settlement with approximately 250,000 plaintiffs over defective earplugs.
  • The settlement compensates military veterans and service members who suffered hearing loss.
  • 3M still faces a $10.3 billion settlement with water utilities over drinking water contamination.
  • 3M’s total liability risk related to PFAS contamination is estimated to be nearly $30 billion.
  • To fund settlements, 3M has implemented cost-cutting measures and plans to spin off its health-care business.

The details

Multinational conglomerate 3M has reached a significant settlement with approximately 250,000 plaintiffs, totaling $6.01 billion.

The settlement is a result of allegations that 3M manufactured defective earplugs that caused hearing loss in military veterans and service members.

This resolution is expected to receive overwhelming support and provides compensation to the affected veterans.

Other Legal Challenges

However, 3M still faces other legal challenges.

One such challenge is a $10.3 billion settlement with water utilities.

This settlement pertains to drinking water contaminated with “forever chemicals” and is facing pushback from over 20 states.

It is crucial to understand that this settlement only covers a subset of liabilities and excludes personal injury claims and lawsuits from other states.

In the broader context, Capstone estimates that 3M’s total liability risk related to PFAS contamination is nearly $30 billion.

3M has also faced lawsuits from countries such as the Netherlands and Belgium due to PFAS contamination.

Europe is currently considering a ban on PFAS chemicals, while the US Environmental Protection Agency is contemplating labeling PFAS as a hazardous chemical.

Cost-Cutting Measures and Spin-Off

To fund these settlements, 3M has undertaken cost-cutting measures, including the elimination of 8,500 jobs this year.

Additionally, 3M plans to spin off its health-care business by the end of 2023 or early 2024, which is expected to generate $7 billion to $9 billion in cash flows.

However, there is some debate surrounding the sustainability of 3M’s dividend, which presently pays investors 6.1%.

Wall Street firms such as JPMorgan, UBS, and RBC have indicated that 3M’s dividend may be at risk.

Despite these challenges, the business transaction for the spin-off of the health-care unit appears to be on track, with the recent announcement of a new CEO for the health-care business.

Moreover, the current CFO has been given the title of president, positioning him as a potential successor to the CEO.

CEO’s Challenges and Stock Performance

3M’s CEO, Mike Roman, has been at the helm of the company for five years and has faced various challenges, including the Covid pandemic, the earplugs and PFAS litigation, and underperformance in the stock market.

During Roman’s tenure, 3M’s stock has fallen by 48%, while the XLI Industrials ETF has rallied by 50% over the same period.

However, on Tuesday, 3M’s stock experienced a modest increase of more than 1%.

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cnbc.com
– 3M has settled with approximately 250,000 plaintiffs in a $6.01 billion deal over allegations of manufacturing defective earplugs that caused hearing loss in military veterans and service members.
The settlement is expected to receive overwhelming support and provides compensation to veterans.
– However, 3M still faces other legal challenges, including a $10.3 billion settlement with water utilities over drinking water contaminated with “forever chemicals,” which is facing pushback from over 20 states.
– The settlement with water utilities only covers a subset of liabilities and does not include personal injury claims or lawsuits from other states.
– Capstone estimates that 3M’s total liability risk related to PFAS contamination is nearly $30 billion.
– 3M has also faced lawsuits from countries like the Netherlands and Belgium over PFAS contamination.
Europe is considering a ban on PFAS chemicals, while the US Environmental Protection Agency is considering labeling PFAS as a hazardous chemical.
– To fund its settlements, 3M has cut costs by eliminating 8,500 jobs this year.
– 3M plans to spin off its health-care business by the end of 2023 or early 2024, which is expected to bring in $7 billion to $9 billion in cash flows.
– There is debate about the sustainability of 3M’s dividend, which currently pays investors 6.1%.
– Wall Street firms like JPMorgan, UBS, and RBC have mentioned that 3M’s dividend may be at risk.
The business transaction for the spin-off of the health-care unit seems to be on track, with the announcement of a new CEO for the health-care business.
The current CFO has also been given the title of president, positioning him as a potential successor to the CEO.
– 3M’s CEO, Mike Roman, has been leading the company for five years and has faced challenges such as the Covid pandemic, earplugs and PFAS litigation, and underperformance in the stock.
– 3M’s stock has fallen 48% since Roman became CEO in 2018, while the XLI Industrials ETF has rallied 50% during the same period.
– On Tuesday, 3M’s stock rose more than 1%.

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