Mike Roman will retire as 3M's CEO after spending much of his six rocky years fighting sluggish sales, a damaging landslide of litigation and a rapidly shrinking stock price.
He will be replaced May 1 by William Brown, a former aerospace and defense company CEO. Brown will take over at a critical moment for the 122-year-old industrial colossus as it seeks to revitalize its remaining businesses after the planned spinoff its health care operations in April.
Roman will remain board chairman. He was set to depart the Maplewood-based company this year due to the company's mandatory retirement age of 65. 3M said Tuesday its board waived the mandatory retirement age for both Roman and the 61-year-old Brown.
Brown was previously CEO and chairman of Florida-based L3Harris Technologies, which has offices in Burnsville. "Bill's strong track record as a CEO for a global technology company makes him the right leader for 3M," Roman said in a release.
Investors applauded the move: 3M's shares closed Tuesday at $98.72, up nearly 5%.
"It's about time," Morningstar analyst Joshua Aguilar wrote in research note Tuesday about 3M's CEO switch. "Mike Roman's tenure was marked by numerous early [profit] guidance cuts; litigation woes that gestated before his tenure but which he was slow to act upon; previously lackluster restructuring efforts; and just generally a litany of excuses for underwhelming operating results."
Brown was CEO and chairman of Harris Corp., a defense contractor, when it merged with L3 Technologies in 2019. He left in 2022. Before joining Harris in 2011, Brown worked for 14 years as an executive with United Technologies, an industrial and defense firm that merged with Raytheon in 2020.
"The good news is that Mr. Brown is well regarded in the investment community for his operational acumen," RBC Capital Markets analyst Deane Dray wrote Tuesday. "He essentially built Harris, which was a great stock for many years prior to the merger with L3. So overall, this seems like a good hire for 3M."
Brown is only the third 3M CEO from outside the company and the first since George Buckley, who ran 3M from 2005 to 2012.
In his report, Dray wrote that it seems like a good time to again bring in an outsider to lead 3M, and Morningstar analyst Aguilar agreed. "We think 3M will need an outsider's perspective," Aguilar wrote Tuesday.
Nigel Coe, an analyst at Wolfe Research was more ambivalent. Hiring an outside CEO "indicates a desire for change" at 3M, and that should be welcomed, he wrote. But "3M is a strong culture and has mixed experience with outside CEOs, most notably Jim McNerney," who ran 3M from 2000 to 2005.
McNerney was a top executive at General Electric, and between cost-cutting and constant change as he tried to enforce the Six Sigma efficiency method, it hurt morale. The focus on short-term gains also slowed innovation, long 3M's lifeblood.
Roman was a 30-year 3M veteran and the company's chief operating officer when he was named CEO in March 2018. At the time, 3M's stock was trading around $215, down a bit from its all-time high of around $250 in November 2017.
But 3M's stock price has steadily fallen since May 2021, and it scraped 10-year lows in 2023. By last summer, some investors were worried that the company's prized stock dividend would be cut. They have been worried, too, that 3M was losing its storied innovation magic.
Meanwhile, 3M's employees have endured waves of layoffs as the company cut costs. Last year, 3M announced 8,500 layoffs worldwide. 3M employed 85,000 people globally at 2023′s close, down from a 10-year high of 96,163 in 2019. (The numbers include workers added and subtracted in acquisitions and divestments.)
3M, maker of everything from sandpaper to stain removers and sponges, has long been one of the Twin Cities' landmark companies and a major local employer.
Roman's tenure was marked partly by global turmoil in manufacturing due to the COVID-19 pandemic. 3M rallied to boost production of its N95 respirators — the gold standard for masks — during the epidemic. But like so many manufacturers, 3M was hit hard by supply-chain constraints, which added costs.
The company in recent years has also faced an avalanche of lawsuits over its earplugs and its so-called "forever chemicals" known as PFAS. The litigation cloud has contributed to 3M's weak stock performance.
Last year, 3M settled the earplug case, one of the largest mass torts in U.S. history, for $6 billon. Tens of thousands of veterans and active service members sued 3M over allegedly defective earplugs that were once standard issue for the U.S. military.
3M also last year reached a $12.5 billion settlement with public water providers over water systems allegedly contaminated with PFAS, chemicals developed by 3M decades ago that have since been identified as major pollutants and possible health risks.
The two legal settlements partly assuaged investors' litigation fears. But a big pile of PFAS lawsuits remain open.
"The top of the to-do list for Bill Brown will be to deal with 3M's remaining unaddressed PFAS liabilities," wrote RBC's Dray.
Brown will also face a lukewarm outlook for many of 3M's myriad businesses.
3M's stock fell 11% on Jan. 23, the day the company announced a 2024 profit forecast that fell short of investor expectations. 3M's sales this year are expected to rise slowly or remain flat amid weak demand.
3M's fastest-growing business, health care, is being spun off into a separate publicly traded company called Solventum, which at least for now will also be based in Maplewood. Solventum had $8.2 billion in revenue last year, about 25% of 3M's total sales.
"The impending spin out of Solventum and the settlements of two major litigation pools have been widely viewed as potential catalysts for new leadership," wrote Coe, the Wolfe analyst.
However, Brown is facing a relatively heavy lift in "dramatically improving" 3M's sales growth, he noted.
Brown received bachelor's and master's degrees in mechanical engineering at Villanova University in Pennsylvania, and an MBA from the University of Pennsylvania's Wharton School of Business.
Staff writer Eder Campuzano contributed to this report.
