The three principles guiding 3M’s response to COVID-19

At last week’s Annual Shareholder Meeting and on our April 28th earnings call, I laid out an overview of everything 3M is doing to help lead the fight against COVID-19 – from our investments in surge capacity that enabled us to immediately accelerate respirator production, to our strong and time-tested business model that’s helped us respond with agility and at scale. Below is a slightly edited version of my remarks, which includes updates on our production and distribution of respirators.

COVID-19 is impacting all of us – both professionally and personally – and in this unprecedented time, I could not be more proud of how our team has stepped up to help lead the fight against this pandemic. Our response has been guided by our purpose as an enterprise, and shaped by three principles. First: An uncompromising commitment to the safety of our employees. Second: Fighting the pandemic with urgency from all angles, including everything we’re doing to help protect healthcare workers and first responders. And Third: Maintaining business continuity, executing actions to deliver for our customers and shareholders, and to lead out of the economic slowdown.

In January, we mobilized 3M’s crisis action team to coordinate our response to COVID-19. This team meets daily to ensure we are addressing our highest priorities which starts with protecting the safety and well-being of our people. Our learnings from China – which was impacted by the virus first – helped guide our actions worldwide, and made a significant difference in our ability to rapidly prepare and respond. We moved quickly to implement remote work where possible across the enterprise, and approximately half of our employees are working from home, including myself. In our plants and other facilities – where remote work isn’t feasible – we have instituted robust safety protocols. These include stringent cleaning and medical screening, along with staggering shifts and reorganizing how we work to increase social distancing. For 3Mers personally affected by the virus, we have implemented pandemic support policies to help protect their pay and benefits, and allow them to take care of themselves and their families.

As we protect our own employees, we continue to work urgently to protect the public, including healthcare workers and first responders. 3M is a longtime leader in personal safety, with a range of science-based solutions for respiratory, face, hearing and fall protection – which goes to the heart of our vision of improving every life. This includes our N95 respirators, which 3M pioneered nearly 50 years ago, and which we have continuously refined and improved ever since. Our largest production of N95 respirators is in the U.S. – at two plants in South Dakota and Nebraska – and we also manufacture them in Asia Pacific, Europe and Latin America.

After SARS in the early 2000s, we made the decision to prepare for future crises by investing in significant surge capacity at each of our respirator plants around the world. This additional capacity has largely remained idle for the last two decades, except for emergencies such as H1N1, the Japanese tsunami, and wildfires in California and Australia. As you know, compared to prior emergencies, COVID-19 has caused an unprecedented explosion in demand. When the virus broke out, we were able to immediately activate our surge capacity and maximize production to support the public health response.

Beginning in January, 3M doubled our global output of N95 respirators to 1.1 billion per year, or about 100 million per month – including 35 million per month in the U.S. We’ve made additional investments – and are also working with the Department of Defense – to double annual production once again to 2 billion by the end of this year, with additional capacity already beginning to come online. In the U.S., we will be producing N95 respirators at a rate of roughly 50 million per month in June – a 40 percent increase from current levels – and more than 90 million by October.

We’re also partnering with other companies on innovative solutions to protect those on the front lines. In collaboration with multiple sterilization companies, we have introduced new methods for hospitals to safely clean and reuse their N95 respirators. We are also working with Ford to expand production of 3M’s powered air purifying respirators, and earlier this month we began shipping 10,000 of these highly specialized pieces of equipment to healthcare workers.

Protecting people in this crisis is not just a 3M challenge -- it’s an industry-wide challenge. Even with 3M’s accelerated production, the stark reality is that global demand for respirators far outpaces the ability of the entire industry to deliver. That is why as we urgently expand capacity, we are also prioritizing and triaging our supplies to the most critical needs.

We moved quickly - within days of regulatory approval - to redirect more than 90 percent of our respirators into healthcare, with the rest deployed to other critical industries such as energy and food. Within individual regions and countries, we are working with government agencies – such as FEMA – and distribution partners to identify and serve hotspots. In addition, as the pandemic unfolds in different stages globally, we are working with governments to address trade restrictions and regulatory standards so we can redirect supplies around the world.

For example, in early April 3M and the U.S. government announced a plan to import 166 million respirators, primarily from our plant in China. 50 million of these respirators have already shipped via the FEMA air- and sea-bridge, with a total of 95 million expected by the end of May. This would not have been possible without the partnership of the White House – I would like to thank the President and his team for their leadership, the FDA for extending its emergency use authorization, and FEMA for their work in expediting the import of product to the U.S. This plan is enabling us to maximize support for the U.S., and other areas in urgent need including Europe, Central and Latin America, and Canada.

We also continue to aggressively fight fraud, price gouging, and other illegal and unethical activity. 3M has not – and would never – raise prices as a result of this crisis, and we are executing a multi-pronged strategy to pursue and deter unscrupulous behavior that is causing real harm to the public. We created a fraud hotline, published our list prices for N95 respirators, and are collaborating closely with partners to ensure that supply chains are secure. While virtually all of those engaging in predatory practices have no relationship with 3M, we have, in a few instances, terminated distributors in our industrial channel for acting unethically or in violation of their agreements. We have also filed multiple lawsuits, and continue to make referrals to law enforcement, take down counterfeit websites, and remove deceptive social media posts.

Beyond personal protective equipment, 3M science is leading the fight against COVID-19 in other significant areas as well. We are providing biopharma filtration and purification solutions to support the development of vaccines and therapeutics, including multiple drugs in current trials. Our advanced membrane technology is being utilized in blood oxygenation procedures and medical devices – vital treatments for some of the sickest patients. We’ve helped hospitals in New York City and elsewhere quickly connect their temporary facilities, and are providing leading software and coding solutions at no cost during this critical period of time, enabling frontline workers to better manage the surge in patient volume. 3M has also donated $20 million to support healthcare workers, vulnerable populations and scientific research.

3M is leading from a position of strength, and in these challenging times the benefits of our business model have never been clearer. We are a science and manufacturing powerhouse, with strong capabilities and brands across the world, with our greatest capabilities here in the United States. In the U.S., we have nearly 80 manufacturing plants and distribution centers anchoring communities in 29 states across the country. 3M has never left our home country, and has continuously expanded our U.S. capabilities. Over half of our research and development and capital investments are in the U.S., and every year we export $5 billion in goods to other nations from our robust U.S manufacturing base.

At the same time, over the decades we have also built out robust capabilities around the world to be close to customers and better serve the unique needs of regional and local markets. These global capabilities include plants and distribution centers in 54 countries, along with three global R&D centers in Asia and Europe. In this crisis, our model has enabled us to respond with agility and at scale, including the rapid deployment of personal safety equipment that we just talked about. It’s also enabling us to maintain business continuity, continue to serve our customers, and ensure the integrity of our supply chain.

The majority of our plants and distribution centers around the world remain operational, and we’ve maintained a consistent and reliable supply of raw materials. And to support 3Mers impacted by shutdowns – due to weak demand or government mandates – we have implemented a short-term, paid furlough program.

I am especially encouraged at the benefits we are seeing from the new global operating model we rolled out at the start of this year. As part of our new model, we consolidated manufacturing, supply chain and customer operations into a seamless, end-to-end Enterprise Operations organization. This team is enabling us to maintain strong customer service, streamline decision-making and adjust faster than ever to the external environment. As an example, we have reduced our production planning cycle times by 70 percent across our portfolio of businesses. In addition, our new Corporate Affairs organization has increased our collaboration with governments around the world, while enhancing our employee and community engagement.

We are also executing financial actions to deliver 2020 and set us up for success in 2021. We’re maintaining critical investments in organic growth through R&D – including in personal safety – and we remain committed to our dividend as a high priority for capital allocation. At the same time, we have implemented sharp spending reductions, suspended our share repurchase program, and adjusted our cap-ex plans to align with the external environment.

In summary: the fundamentals of 3M are strong, and our four priorities – portfolio, transformation, innovation, and people and culture – have positioned us to lead through this fast-moving situation. This will enable us to emerge even stronger, and continue to deliver for all of our stakeholders during the pandemic and as the economy recovers.

I once again thank all 3Mers for your tremendous work, and going forward we’ll continue to do all we can to protect our people, protect our enterprise and help the world get through this crisis.