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62
NOTE 4. Restructuring Actions and Exit Activities
Restructuring actions and exit activities generally include significant actions involving employee-related severance
charges, contract termination costs, and impairment of assets associated with such actions. Accounting policies
related to these activities are discussed in Note 1.
The following provides information, respectively, concerning the Company’s 2009/2008 restructuring actions and its
exit activities during 2008.
2009 and 2008 Restructuring Actions:
During the fourth quarter of 2008 and the first nine months of 2009, management approved and committed to
undertake certain restructuring actions. Due to the rapid decline in global business activity in the fourth quarter of
2008 and into the first three quarters of 2009, 3M aggressively reduced its cost structure and rationalized several
facilities, including manufacturing, technical and office facilities. These actions included all geographies, with
particular attention in the developed areas of the world that have and are experiencing large declines in business
activity, and included the following:
x During the fourth quarter of 2008, 3M announced the elimination of more than 2,400 positions. Of these
employment reductions, about 31 percent were in the United States, 29 percent in Europe, 24 percent in
Latin America and Canada, and 16 percent in the Asia Pacific area. These restructuring actions resulted in a
fourth-quarter 2008 pre-tax charge of $229 million, with $186 million for employee-related items/benefits and
other, and $43 million related to fixed asset impairments. The preceding charges were recorded in cost of
sales ($84 million), selling, general and administrative expenses ($135 million), and research, development
and related expenses ($10 million). Cash payments in 2008 related to this restructuring were not material.
x During the first quarter of 2009, 3M announced the elimination of approximately 1,200 positions. Of these
employment reductions, about 43 percent were in the United States, 36 percent in Latin America, 16 percent
in Europe and 5 percent in the Asia Pacific area. These restructuring actions resulted in a first-quarter 2009
pre-tax charge of $67 million, with $61 million for employee-related items/benefits and $6 million related to
fixed asset impairments. The preceding charges were recorded in cost of sales ($17 million), selling, general
and administrative expenses ($47 million), and research, development and related expenses ($3 million).
x During the second quarter of 2009, 3M announced the permanent reduction of approximately 900 positions,
the majority of which were concentrated in the United States, Western Europe and Japan. In the United
States, another 700 people accepted a voluntary early retirement incentive program offer, which resulted in a
$21 million non-cash charge. Of these aggregate employment reductions, about 66 percent were in the
United States, 17 percent in the Asia Pacific area, 14 percent in Europe and 3 percent in Latin America and
Canada. These restructuring actions in total resulted in a second-quarter 2009 pre-tax charge of $116
million, with $103 million for employee-related items/benefits and $13 million related to fixed asset
impairments. The preceding charges were recorded in cost of sales ($68 million), selling, general and
administrative expenses ($44 million), and research, development and related expenses ($4 million).
x During the third quarter of 2009, 3M announced the elimination of approximately 200 positions, with the
majority of those occurring in Western Europe and, to a lesser extent, the United States. These restructuring
actions, including a non-cash charge related to a pension settlement in Japan, resulted in a third-quarter
2009 net pre-tax charge of $26 million for employee-related items/benefits and other, which is net of $7
million of adjustments to prior 2008 and 2009 restructuring actions. The preceding charges were recorded in
cost of sales ($25 million) and research, development and related expenses ($1 million).
The restructuring expenses related to these actions are summarized by income statement line as follows:
(Millions)
2009
2008
Cost of sales ..............................................................................................................
$
110
$
84
Selling, general and administrative expenses ...........................................................
91
135
Research, development and related expenses .........................................................
8
10
Total restructuring expense ...................................................................................
$
209
$
229