3M, which makes wound care and dental products, said it will cut a further 6,000 jobs as hospital staffing shortages continue to limit procedure volumes.
“First-quarter elective healthcare procedure volumes were approximately 90% of pre-COVID levels as nurse labor shortages and strained hospital budgets continue to impact the pace of recovery,” Monish Patolawala, chief financial and transformation officer at 3M, said on a call with investors. “Operating margins were impacted by manufacturing and supply chain headwinds, carryover raw material logistics and energy cost inflation and investments in the business.”
3M, which said in January it would eliminate 2,500 manufacturing positions, expects the additional 6,000 job cuts to lead to an annual pre-tax savings of as much as $900 million.
The staff reductions follow a drop in first-quarter adjusted operating income at the company’s healthcare unit ahead of a planned spinoff.
CEO defends healthcare unit
On the earnings call, CEO Mike Roman defended the healthcare unit after an analyst asked how comfortable he felt ahead of the spinoff given that “margin is down pretty heavily year-on-year again, down sequentially” and there is “not a lot of organic growth.”
Roman said he is “confident that as procedures improve, we will see growth, and growth gives us the best leverage to the margin.”
Responsibility for driving the improvements will fall on Jeff Lavers, whom 3M has named as permanent group president of its healthcare business. Lavers has held the title on an interim basis for the past nine months while continuing to serve as group president of the consumer unit.
3M expects healthcare procedure volumes in the second quarter to be similar to the level recorded over the first three months of the year, Patolawala said on the call.