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 	George W. Buckley, Chairman, President and CEO
 

George W. Buckley, Chairman, President and CEO

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     	George W. Buckley, Chairman, President and CEO George W. Buckley, Chairman, President and CEO Presentation Transcript

    • George Buckley Chairman of the Board, President, and CEO 3M Company Continuing On the Path to Higher Growth October 9, 2007 © 3M 2007. All Rights Reserved. 2007 3M Investor Conference
    • Higher Growth Is Fundamental To Our Long Term Success 1. Rebuilding R&D to improve new product flow and impact 2. Complement the core through acquisitions 3. Financing the growth through supply chain re-engineering 4. Developing a more entrepreneurial and responsive culture 2 © 3M 2007. All Rights Reserved. 2007 3M Investor Conference
    • What Has Changed Since 18 Months Ago? Early analysis quickly identified:- The causes of slow growth The way to accelerate it Eighteen months ago, we told you what we were planning to do and, since then, we’ve been simply executing We’re building the plants, doing the acquisitions, investing in R&D and fixing the things which were broken and selling those we don’t need or want What is clearer to us now? The vital importance of the supply chain initiative The vital importance of 3M’s traditional core The power of 3M’s enduring franchises .. And how to secure them The fact we cannot rely only on big bets (e.g., Aldara) for growth The fact we can finely balance growth, ROIC and margin 3 © 3M 2007. All Rights Reserved. 2007 3M Investor Conference
    • Growth Inspired by Our Customers, Balanced with Operational Excellence Growth Operational Excellence Protect and Adjacency Grow the Core Build Out 3. Solve Low 1. Factory Cost 2. Control Price 1. New Technology 2. New Products 3. M&A Reduction Leakage Turns Inventory 4. Breakthrough 4. Service & Quality 5. Localized, Simplified 6. Go to 5. Sourcing 6. Lean Six Sigma Opportunities Revolution Supply Chains Market (BTO’s) Organizational excellence within a growth culture essential 4 © 3M 2007. All Rights Reserved. 2007 3M Investor Conference
    • The Dynamics of Growth Many companies covet growth and believe it to be the best value creator Companies that participate in broad markets will always, in the absence of something special, tend to the mean growth rate. Growth above market is not a right A company cannot sustain higher growth rates than the market unless it does at least one of three things: Creates new markets at growth rates consistent with their long term growth expectations. Saturation always happens Penetrates new segments, e.g. international or the pyramid’s lower levels Moves to markets where the average growth rate is higher Sustained growth above the average is therefore a very challenging goal for corporations to achieve 5 © 3M 2007. All Rights Reserved. 2007 3M Investor Conference
    • Why Growth Naturally Runs Out; Market Saturation Assume we grow at ≈ three times (10%) the market rate; here’s what happens 3M Share 3M Share 3M Share Balance Balance Balance 87% 91% Year 0 Year 5 Year 10 Market Grows Market Grows Market Grows 83% @ 3% @ 3% @ 3% 17% 9% 13% 3M Share 3M Share Balance Balance 76% 66% Market Grows Market Grows @ 3% @ 3% Market twice Year 15 Year 20 the size growing @ 34% 10% 24% 6 © 3M 2007. All Rights Reserved. 2007 3M Investor Conference
    • Essentials of 3M’s Growth Plan Rebuilding & extending the core; lowest risk and fastest results Protect and defend the core; inventing a new future Fixing chronic capacity issues Broaden the product portfolio to become more important to customers Invest in the future R&D spending increases, protecting our flanks and reengaging the labs Acquisitions, Break Through Opportunities (BTOs) and “feet on the street” Improving supply chain speed and efficiency Shortening most of our supply chains Driving growth by going “local” with regional brands and manufacturing Releasing working capital and lowering entropy costs and effective tax rate Experiment with new markets Emerging Business Opportunities (EBOs) and other adjacencies Greater emphasis on International markets growth 7 © 3M 2007. All Rights Reserved. 2007 3M Investor Conference
    • A Visual Of Our Basic Strategy Strategic Thrust Grow the Current Complementary Build New International Core Business Acquisitions Businesses Growth • Defend and extend the core • Follows core strategy • Seeded by small M&A • BRICP • Build scale • Supports adjacencies • Mega Trends • No country left behind • Build relative share • Mostly tuck-ins • Track and Trace • Localization • Occasional transformation • Minerals extraction • Disruptive technologies • Oil & Gas • Build long term competency • Food safety 8 © 3M 2007. All Rights Reserved. 2007 3M Investor Conference
    • Core Growth Remains The First Mission Grow the Current Core Invent a Extend The Core New Future • Constant reinvention • Localization • Imagine, dream and invent • Differentiation • Build first where we’re strong • Beat competitors to the future • Build key partnerships • Build scale & relative share • Plan for cannibalization • Fill product “white spaces” • Licensing • Be important to customers • Avoid NIH syndrome Build Broad Long • Use dual branding Term Competencies • International localization • Local acquisitions • Private labeling • Develop broad based long-term capabilities • Acquire supporting technology with quality brands • Build volume and scale 9 © 3M 2007. All Rights Reserved. 2007 3M Investor Conference
    • We Made Solid Progress in 2007 Reinvigorating R&D 11% increase over 2006* Building on EBOs New product vitality index up from 20% to 24% Accelerated International Growth Building local/regional brands Pursued profitable adjacencies Invest in a better Supply Chain 28% increase in Capex over 2006 Improving local source of supply • Korea – New respiratory facility • Poland – New optical facility • Canada – New CHIM tape facility • China – New Industrial tapes facility Seed Further Growth in the Core via acquisitions 15 acquisitions YTD *ex-pharma, Brontes in 2006 10 © 3M 2007. All Rights Reserved. 2007 3M Investor Conference
    • Capital Spending 2001-2007 +25% CAGR Supply Chain -20% Optical and Film CAGR Growth/Strategic Sustain 2001 2002 2003 2004 2005 2006 2007E Building the capital assets to drive growth 11 © 3M 2007. All Rights Reserved. 2007 3M Investor Conference
    • Elements of Growth © 3M 2007. All Rights Reserved. 2007 3M Investor Conference
    • 3M’s Core Strength: Connecting Technology to Markets A B P S b i m m A C E N P S c e m t o u A D F M P T N d d c i w p t A D F F I M M O P V r m i e s s e o p p A D F I L M M P R W p e n o i m m f r d A E F I M P S W e e o s c l n d 3M Technology Capability Technology-enabled NPI solutions Voice of The Market 13 © 3M 2007. All Rights Reserved. 2007 3M Investor Conference
    • 3M’s Multiple Technology Platforms Ab Bi Pm Sm Investment priority Abrasives Biotech Polymer Specialty Melt Materials Processing Ac Ce Em Nt Po Su Acoustics Ceramics Electronic Nano- Porous Surface Materials & technology Materials Modificat ion Membranes Ad Dd Fc Mi Pp Tt Nw Adhesives Drug Flexible Microbial Nonwoven Precision Track and Converting Detection & Delivery Materials Processing Trace & Packaging Control Pr Vp Am Di Fe Fs Is Me Mo Op Process Display Filtration, Integrated Metal Matrix Molding Vapor Advanced Flexible Opto- Design & Separation, Systems Composites Materials Electronics electronics Processing Control Purification Design Pd Rp We An Do Fi Im Lm Mf Mr Particle & Radiation Accelerated Analytical Dental & Films Imaging Light Mechanical Micro- Weathering Dispersion Orthodontic Processing Mgmt Fasteners replication Processing Materials Pe Se Wo As Ec Fl In Md Sensors Predictive Wound Applicat ion Energy Fluoro- Inspection & Medical Engineering Software Components materials Measure- Mgmt Data Mgmt & Modeling ment Successful new product growth builds on uncommon connections 14 © 3M 2007. All Rights Reserved. 2007 3M Investor Conference
    • The Oldest Can Be Forever New - Abrasive Reinvention FROM TO Trizact™ Hook-it™ Super Abrasives Cubitron™ Sandblaster™ Traditional mineral materials and market focus; Synthetic materials and specialized metal finishing and wood-working applications; aerospace, healthcare, composites 2003 OI Margin = 12% 2012 OI Margin = 25% 2003 ROIC = 16% 2012 ROIC = 45% 2003 Growth Rate ≈ 1% 2007 Growth Rate = 7.8% Movement to higher growth, higher profit market zones 15 © 3M 2007. All Rights Reserved. 2007 3M Investor Conference
    • 3M’s Platforms Broadly Supported by Nanotechnology Ce Ad Am Fi Nw Mr Ceramics Adhesives Films Advanced Nonwoven Micro- Materials Materials replication Nanotechnology Nanomaterial Zirconia cubes hardcoats 10nm Silica spheres 75 nm Nanoprocessing Nanocomposites Nanocatalysis Nanofabrication Window Film Dental restoratives Filtration Drug Delivery Reinventing material science through nanotechnology 16 © 3M 2007. All Rights Reserved. 2007 3M Investor Conference
    • Rekindling the Spirit of Innovation Broad patent portfolio Technology 140 Technology Platform Experts identified and recognized leadership Subject Matter Expert roster published and available across 3M “Tech Time” with George Executive Monthly meetings with CTO support R&D executive leadership within every Big B Top scientist (T6/T7) advisory board Strengthening the innovation culture 2003 R&D opinion survey highlighted job fears, time pressures, and 3M Culture emphasis on formal processes (e.g., Six Sigma) 2007 survey shows a committed technical community, encouraged to collaborate, freedom to focus on new ideas Continued recognition for innovation Innovation Funding grants (e.g., Genesis, Alpha) Circle of Technical Excellence and Carlton Society recognition Technical Community is getting re-engaged 17 © 3M 2007. All Rights Reserved. 2007 3M Investor Conference
    • Stepping Up The Pace In New Products – Our Vitality Index ($MM) $9,000 2005 Launches $8,000 $7,000 2009 Launches $6,000 2008 Launches 2007 Launches $5,000 2006 Launches 2005 Launches $4,000 2004 Launches 2003 Launches $3,000 2002 Launches 2001 Launches $2,000 $1,000 $0 2005 2006 2007 2008 2009 Estimate Forecast Forecast 18 © 3M 2007. All Rights Reserved. 2007 3M Investor Conference
    • Stepping Up The Pace In New Products – Our Vitality Index ($MM) $9,000 2006 Launches $8,000 $7,000 2009 Launches $6,000 2008 Launches 2007 Launches $5,000 2006 Launches 2005 Launches $4,000 2004 Launches 2003 Launches $3,000 2002 Launches 2001 Launches $2,000 $1,000 $0 2005 2006 2007 2008 2009 Estimate Forecast Forecast 19 © 3M 2007. All Rights Reserved. 2007 3M Investor Conference
    • Stepping Up The Pace In New Products – Our Vitality Index ($MM) $9,000 2007 Launches $8,000 $7,000 2009 Launches $6,000 2008 Launches 2007 Launches $5,000 2006 Launches 2005 Launches $4,000 2004 Launches 2003 Launches $3,000 2002 Launches 2001 Launches $2,000 $1,000 $0 2005 2006 2007 2008 2009 Estimate Forecast Forecast 2007 new products expected to deliver ~33% more than historical average 20 © 3M 2007. All Rights Reserved. 2007 3M Investor Conference
    • Stepping Up The Pace In New Products – Our Vitality Index ($MM) $9,000 2008 Launches $8,000 $7,000 2009 Launches $6,000 2008 Launches 2007 Launches $5,000 2006 Launches 2005 Launches $4,000 2004 Launches 2003 Launches $3,000 2002 Launches 2001 Launches $2,000 $1,000 $0 2005 2006 2007 2008 2009 Estimate Forecast Forecast 2007 new products expected to deliver ~33% more than historical average 21 © 3M 2007. All Rights Reserved. 2007 3M Investor Conference
    • Stepping Up The Pace In New Products – Our Vitality Index ($MM) 75% of new product $9,000 2009 sales expected from products 2009 Launches $8,000 already launched $7,000 2009 Launches $6,000 2008 Launches 2007 Launches $5,000 2006 Launches 2005 Launches $4,000 2004 Launches 2003 Launches $3,000 2002 Launches 2001 Launches $2,000 $1,000 $0 2005 2006 2007 2008 2009 Estimate Forecast Forecast 2007 new products expected to deliver ~33% more than historical average 22 © 3M 2007. All Rights Reserved. 2007 3M Investor Conference
    • Towards More Impactful New Product Launches Tools & training developed for successful launch execution; ~90% adoption rate Trained 8,000 people globally on commercialization; established Marketing University Established a commercialization community for best practices with 15,000 members Intense focus on top 2006 and 2007 new product introductions (NPI) ~45% Top Product Launches 1H2006 1H2007 Becoming more effective in new product introductions 23 © 3M 2007. All Rights Reserved. 2007 3M Investor Conference
    • The 3M Growth Strategy Is Taking Hold 8% 2% 6% 3M LC Revenue Growth 1% Acquisition 6% 5% Oil and Housing Organic Headwinds Plus a Slowing GDP in US and Asia 03-05 06-07 YTD Increasing growth, without favorable economic conditions 24 © 3M 2007. All Rights Reserved. 2007 3M Investor Conference
    • New Product Success Ensures Long-Term Market Sustainability Just Some of 3M’s New Platforms © 3M 2007. All Rights Reserved. 2007 3M Investor Conference
    • A Great New Emerging Platform: Optically Clear Adhesives (OCA) Light Extraction PSA for OLED Protective film Functional Injected PSA Hole Visible Light Photons OLED Glass ITO (n=1.51) Anode Al/Cathode Organic Layer Injected Electron 26 © 3M 2007. All Rights Reserved. 2007 3M Investor Conference
    • High Performance Window Film Prestige and Crystalline Window Films Film + Nanomaterials Nanomaterial hardcoat HPWF 875 PSA Liner • Film offers IR reflectivity and the nanomaterial hardcoat absorbs IR resulting in rejection of up to 97% of the sun’s IR energy • Tiered global launch with a new business model to meet service expectations – met 100% of sales forecast in 1st year • Established a technology platform to launch subsequent products (Prestige Safety – 2007). Superior heat rejection with low reflectivity and high visible light transmission 27 © 3M 2007. All Rights Reserved. 2007 3M Investor Conference
    • New Consumer Products Inspired by Non-Woven Technology Non-woven • New performance attributes • Natural materials • Sustainable and renewable 28 © 3M 2007. All Rights Reserved. 2007 3M Investor Conference
    • Microreplication Drives Abrasives - 3M™ Trizact™ Belts 3M™ Trizact™ Cloth Belts 3M™ Trizact™ Diamond Cloth Belts Benefits - Increases throughput - Reduces down-time - Improves quality - Long lasting - Lower overall cost 29 © 3M 2007. All Rights Reserved. 2007 3M Investor Conference
    • Advanced Materials Provides Basis for 3M Aluminum Composite Conductor Composite (ACCR) Key Features: Key Features: Capable of carrying 2-3x the Capable of carrying 2-3x the current of conventional, steel current of conventional, steel core conductors core conductors Strong like steel Compatible with existing Compatible with existing Light weight like aluminum structures structures Highly conductive Less sag Less sag Low thermal expansion Almost no corrosion due to: Almost no corrosion due to: Metal matrix Metal matrix Chemically compatible Chemically compatible (inorganic) (inorganic) materials materials Environmental stability Environmental stability Aluminum-oxide fibers Aluminum-oxide fibers 30 © 3M 2007. All Rights Reserved. 2007 3M Investor Conference
    • Advances in Ceramics Produce High Strength Glass Bubbles • Stronger, Lighter, More Versatile • Processing Advances and Capacity • Building Blocks for Composites, Cements, Insulation, Oil and Gas Fluids Enhanced Oil & Gas Production 31 © 3M 2007. All Rights Reserved. 2007 3M Investor Conference
    • So What Makes 3M So Resilient? 3M’s Enduring Franchises © 3M 2007. All Rights Reserved. 2007 3M Investor Conference
    • First, What Not To Do… Growth First Requires Plugging The Leaky Bucket Push into upper middle level market Competitors push into the lower market … we refuse to defend The objective is to bulwark and defend the markets that we created, not just to grow 33 © 3M 2007. All Rights Reserved. 2007 3M Investor Conference
    • Then What To Do… The Enduring Franchises of 3M What similarities do Scotch tape, Post it Notes, Scotch-Brite, Trizact and many other 3M “franchise” products have? 3M usually invented the basic technology They serve all market segments from the bottom to the top Customers make more money on them than we do As the market commoditized, 3M served all segments as and when they gradually emerged, steadily building market competence and influence They were built up over many years In developed markets they almost always began at the top and spread to the bottom of the market tier 34 © 3M 2007. All Rights Reserved. 2007 3M Investor Conference
    • A Good Example — The “Scotch Tape” Market Pyramid Scotch Tape Success: Services all market segments Great aesthetic design Superb management of price and value laddering World class service delivery Outstanding account management World’s leading brand Consumer friendly technologies Customers make higher profits than 3M Several critical elements sustain enduring market success 35 © 3M 2007. All Rights Reserved. 2007 3M Investor Conference
    • Traffic Safety – Sustaining the Enduring Film Franchise Traffic Safety sustained the film franchise: Moved the Engineering Diamond Grade ™ Grade™ film down the pyramid High Intensity Grade ™ Launched new, innovative products for the top of the pyramid Engineering Grade ™ Traffic Safety Division remains globally pre-eminent in traffic signage 36 © 3M 2007. All Rights Reserved. 2007 3M Investor Conference
    • Different Strategies for Different Situations Developed Type of market Post-it® Notes Expand the base Extend the core Paint Application Solutions Developing Create a presence Build a presence Scotch-Brite™ Medical Tian Tu (Second Natural Fiber Way) China Brand Emerging Developed Wipes Franchise strength One size does not fit all 37 © 3M 2007. All Rights Reserved. 2007 3M Investor Conference
    • How We Think About Successful Franchises Where 3M typically wins: Business Success Factors Use of multiple Level of Market Market Global size structure Growth Margin technologies regulation adaptability Not Small <5% <10% Low Single Discrete Discrete regulated <$1B country Trans- Moderate Well-defined 5-10% 10-15% Medium Low Moderate 5-10% Trans- national $1-10B overlaps $1-10B national >15% High High Large Highly >10% Global >15% High High >$10B interrelated Our best businesses fit with the majority of these factors 38 © 3M 2007. All Rights Reserved. 2007 3M Investor Conference
    • 3M’s Enduring Franchises Span the Company 3M franchises Automotive Tapes Office Display Safety Dental aftermarket Enduring franchises are the majority of sales Advanced Micro- Adhesives Nonwovens Films Ceramics materials replication 3M Technologies Technologies provide the foundation 39 © 3M 2007. All Rights Reserved. 2007 3M Investor Conference
    • But Franchises Must Be Constantly Refreshed 1.0 0.9 Industrial Relative market power 0.8 0.7 λ = 0.2 N(t) = Noe-λt 0.6 λ = decay constant Consumer 0.5 No = starting point 0.4 0.3 Electronics 0.2 λ =1 0.1 λ=5 0.0 Time Moving down the pyramid enables enduring franchises 40 © 3M 2007. All Rights Reserved. 2007 3M Investor Conference
    • Extending Our Optical Franchise Four market elements; hand helds, monitors, laptops and LCD TV Battery powered devices favor high performance films; high performance films in plug-in devices produce better energy efficiency Usage changes…. More movie watching on monitors drives recontenting We anticipate the LCD TV market will follow similar dynamics we’ve seen and experienced in other markets, but played at faster speed than most The LCD TV market will exist for many years …. substitution not likely in high volume for many years And yes, it will see pricing pressure over time, but afterwards, stability and recontenting opportunities emerge Turbulence at the bottom of the market as new players enter and succeed or fail 41 © 3M 2007. All Rights Reserved. 2007 3M Investor Conference
    • Extending Our Optical Franchise Brightness Gain DBEF + BEF 1.8 Current 3M product focus DBEF 1.6 BEF 1.5 Looking to use Comp BEF film technology 1.5 leadership and Microreplicated Gain Diffuser scale to enter 1.4 - all segments 1.2 Bead Coated Gain Diffuser Participation in all segments is essential to maintain leadership 42 © 3M 2007. All Rights Reserved. 2007 3M Investor Conference
    • Acquisitions Higher organic growth results from more frequent acquisitions Acquisitions are not only about bulk, but are helpful in: Acquisitions 1. Strengthening the base by filling in white spaces 2. May facilitate growth through Growth entry into a new market 3. May provide a key new Base technology or brand 4. Fast capacity acquisition 43 © 3M 2007. All Rights Reserved. 2007 3M Investor Conference
    • The Expanding Impact of M&A ~20 18 4 2005 2006 2007 estimate 10% Increase in acquisitions in 2007 following 350% increase in 2006 44 © 3M 2007. All Rights Reserved. 2007 3M Investor Conference
    • Thoughtful Acquisitions Accelerate Core Growth Growth rate 19% 20% Int’l 14% 15% Int’l US 7% US 2004-2007 3M Sales CAGR 2006 Acquisitions* 2007 Acquisitions* Acquisitions Enable Growth Beyond Market Averages *Note: 1st year projected sales growth 45 © 3M 2007. All Rights Reserved. 2007 3M Investor Conference
    • M&A to Bolster Technology Portfolio: Brontes Technologies 46 © 3M 2007. All Rights Reserved. 2007 3M Investor Conference
    • Building New Businesses Emerging Business Opportunities (EBOs) • Emphasis on high growth opportunities where technical capability exists ~$3B ~20% • Consolidate related activities into a single ~$1B entity to gain economies of scale and focus • Acquisitions and additional resources 2007 2012 provide momentum Sales (MM) Filtration Food Safety Mining & Mineral Track & Trace Renewable Oil & Gas Extraction Energy Market Center in Division in I&TB BU in HCB Division in SS&PS BU in I&TB BU in I&TB SS&PS Great start: >20% growth in 2007 47 © 3M 2007. All Rights Reserved. 2007 3M Investor Conference
    • Renewable Energy EBO Solar - Films capable of concentrating sunlight 500x - Coatings to reduce dirt build-up Ab Bi Pm Sm - Encapsulation used to limit moisture and film degradation Ac Ce Em Nt Po Su BioFuels Ad Dd Fc Mi Nw Pp Tt - Ethanol extraction membrane Am Pr Di Fe Fs Is Me Mo Op Vp - 50% less energy in distillation - 2X throughput An Rp We Do Fi Im Lm Mf Mr Pd - Potential for cellulosic and butanol As Se Wo Ec Fl In Md Pe Wind - Existing coating products to improve hardness and reduce fractures in composite blades - Protective films for turbine blades Leveraging 3M capabilities to build businesses 48 © 3M 2007. All Rights Reserved. 2007 3M Investor Conference
    • Solar: Distinct Segments But Common Needs Flat Panel Concentrating Solar Thermal Thin Film and Photovoltaic Photovoltaic (CSP) Next Generation (<25 kW) (> 50MW) (various kW) (CPV) (25 kW – 30MW) Environmental Durability: UV Stability, Scratch Resistance, Self Clean, Moisture, Sealing, Cracking, Yellowing Increased Efficiency: Improved materials, capturing more sunlight, heat management, Lower Cost: Improved cost per watt, fabrication/mfg processes, reduced weight 49 © 3M 2007. All Rights Reserved. 2007 3M Investor Conference
    • Solar: Strong Capabilities & Technology Base Optically Clear UV Micro-replicated Wavelength Selective Barrier Films IR Reflective Films Stable Fluoropolymer Films Lens Film Mirror Films Metallized Anti-soil & Electrical Foil & Structural Tapes, 60 Years of Experience Mirror Films Hard Coatings Connectors Sealants & Adhesives (Weathering Resource Center) 50 © 3M 2007. All Rights Reserved. 2007 3M Investor Conference
    • International Operations Our Largest Growth Platform Inge Thulin Executive Vice President, International Operations © 3M 2007. All Rights Reserved. 2007 3M Investor Conference
    • International Operations $13.6B 2006 Sales* $3.7B 2006 OI* 62% of 2006 3M Total 65% by 2012 $6.2 $5.4 $2.0 65 Subsidiaries Latin America/ Europe, Middle 34 Laboratories Asia Pacific Canada East & Africa 85 Manufacturing Sites 40,000 Employees 99% Local Nationals Our Largest Growth Platform *Excludes Pharma and special items. 52 © 3M 2007. All Rights Reserved. 2007 3M Investor Conference
    • International Recent Performance Revenue* Operating Income* $3.7 $13.6 $3.5 $12.2 $11.7 $3.2 $10.2 $2.4 ’03-06 CAGR 10% ’03-06 CAGR 15% '03 '04 '05 '06 '03 '04 '05 '06 Priorities Priorities Gain share in West Europe and Japan Decentralized organization Expand BRICP Productivity Big 3M/portfolio management Price/margin management Grow at more than 2.5X IPI Operational exellence/Lean Six Sigma Localization Resource reallocation *Excludes Pharma and special items. 53 © 3M 2007. All Rights Reserved. 2007 3M Investor Conference
    • 3M’s Subsidiary Network Poland Switzerland Norway Hungary Canada Czech Trinidad East Austria Romania Republic Sweden & Tobago Finland Ukraine Puerto Rico Russia Germany Dominican Republic Kazakhstan Denmark Korea Jamaica Netherlands Belgium Japan United Mexico Kingdom China Guatemala Portugal Hong Kong El Salvador Spain Taiwan Costa Rica Vietnam Panama France Pakistan Colombia Philippines UAE Morocco Indonesia Venezuela Thailand Israel Ecuador Italy Malaysia Singapore Egypt Peru Greece Sri New Zealand Australia Lanka Brazil Kenya India Chile Turkey Uruguay Key Argentina Sales & Marketing South Africa Manufacturing/Converting Technical Capabilities 54 © 3M 2007. All Rights Reserved. 2007 3M Investor Conference
    • International Growth Dynamics Developed Central/East West Europe APAC Europe Canada Developing APAC Latin America Middle East/ Forecasted Africa Sales CAGR 55 Current Sales © 3M 2007. All Rights Reserved. 2007 3M Investor Conference
    • Cornerstones of International Growth Strategy Outpace Local Economy by at Least 2.5X International Grow the Current Complementary Build New International Core Business Acquisitions Businesses Growth Growth Four Cornerstones of the International Growth Plan Portfolio Management Brand and Reputation R&D & Supply Human Capital and Geographic Building Chain Localization Planning Expansion 56 © 3M 2007. All Rights Reserved. 2007 3M Investor Conference
    • Managing International Growth Cornerstones • Play the Big 3M • Increase Levels of Customer Intimacy – Key Accounts Portfolio Management • Develop and Launch Products to Meet Local Needs & Geographic Expansion • Borderless Customer Success • Margin Management • Building strategic and local brands Brand and • Government relations Reputation Building • Manage the brand pyramid • Customer focused Supply Chain • Capital Center-of-Gravity Shift R&D and Supply • Financial Optimization through Strategic Investments Chain Localization • Improve Productivity Levels • Recruit, Retain, Enable the Best Human Capital • All Employees Aligned Around Corporate Objectives • Compensation for Performance Planning • Leadership For Growth 57 © 3M 2007. All Rights Reserved. 2007 3M Investor Conference
    • Four Cornerstones of the International Growth Plan Portfolio Management Human Capital R&D & Supply Chain R&D & Supply Chain Brand andReputation Brand & Reputation Human Capital & Geographic & Geographic Planning Building Localization Building Localization Planning Expansion Expansion 58 © 3M 2007. All Rights Reserved. 2007 3M Investor Conference
    • Developed Countries Most Important Today Developing Countries Accelerating 41% 31% 28% 26% 59% 69% 72% 74% 2004 2005 2007 2012 Developed Developing 59 © 3M 2007. All Rights Reserved. 2007 3M Investor Conference
    • Opportunities in Developing Markets Growth in Infrastructure Spending Population growth and desire for basic services will fuel investment in roads, power generation and distribution and other infrastructure. Migration of Industrial Business With infrastructure in place and political stability, manufacturing migrates to developing countries in search of lower costs. Emerging Middle Class Growing employment base provides increased income and standard of living. Increased Health Care Spending Growing middle class increases expectations and expenditures on health care services. 3M Portfolio Meets Needs of Developing Markets at Every Step of Their Evolution 60 © 3M 2007. All Rights Reserved. 2007 3M Investor Conference
    • Geographic Expansion: PLUS The Future Is Here And Now!!! Ukraine Kazakhstan Turkey Vietnam UAE (Dubai) Indonesia 61 © 3M 2007. All Rights Reserved. 2007 3M Investor Conference
    • Long-Term Focus on Developing Countries Drives Growth Russia India Deep Roots Brazil in BRIC(P) China Poland 1950 1960 1970 1980 1990 2010 2000 Turkey Vietnam Ukraine Indonesia Investing in UAE Kazakhstan our future 62 © 3M 2007. All Rights Reserved. 2007 3M Investor Conference
    • Four Cornerstones of the International Growth Plan Portfolio Management Human Capital R&D & Supply Chain R&D & Supply Chain Brand andReputation Brand & Reputation Human Capital & Geographic & Geographic Planning Building Localization Building Localization Planning Expansion Expansion 63 © 3M 2007. All Rights Reserved. 2007 3M Investor Conference
    • Strong Brands and Market Positions Brand Equity and Investment Shared Among Businesses 64 © 3M 2007. All Rights Reserved. 2007 3M Investor Conference
    • Strong Brands and Market Positions Mahindra Abzil Industria e Comercio Neoplast Nylonge DMS Chile Building a Regional Presence Through Acquisitions 65 © 3M 2007. All Rights Reserved. 2007 3M Investor Conference
    • Four Cornerstones of the International Growth Plan Portfolio Management Human Capital R&D & Supply Chain R&D & Supply Chain Brand andReputation Brand & Reputation Human Capital & Geographic & Geographic Planning Building Localization Building Localization Planning Expansion Expansion 66 © 3M 2007. All Rights Reserved. 2007 3M Investor Conference
    • R&D Localization Brazil Europe and Latin America New Customer Technical Center in 2005 Technologies: Bio, Nano Specialty M aterials: Hook/Loop, M olding, Non-PVC Films, Acrylic Foam Tape Russia New Customer Technical Center – May 2006 Germany, France, UK Poland Focus: Abrasives, Automotive Centers of Excellence (CoE): Optical Manufacture & Test Consumer & Office Center of Excellence Automotive, Dental, Telecom, Medical & Consumer Healthcare Center of Excellence Specialty Materials, Polymers, Consumer, Oil & Gas, Drug Delivery Asia Japan India SEMS (software) Customer Technical Centers (New Delhi, AOEM Design Studios) Electronics, Automotive Engineering Centers: Automotive, Corrosion Protection, Textiles Technologies: Track & Trace, Water filtration, fire protection Microreplication, Liquid Filtration Analytical development China Singapore Korea New R&D Center – June 2006 Southeast Asia region: product localization, Asia Display Tech Center Global Labs: HV Electrical, SMS corporate research lab, medical product Asia Tape & Adhesives Asia Lab: Telecom development & regulatory Labs: Nonwovens, RFID, Electronics, Technologies/products: Nonwoven, Electronics, Fine Pitch Flex Circuitry, Energy, Nano 67 Reactors, Medical, Corrosion Protection RFID, Cuno Display backlight center © 3M 2007. All Rights Reserved. 2007 3M Investor Conference
    • International Supply Chain Footprint - Current Germany UK Poland Japan France Canada Korea Italy China Spain India Mexico Singapore Brazil 68 © 3M 2007. All Rights Reserved. 2007 3M Investor Conference
    • International Supply Chain Footprint - Potential Russia Russian Estonia Far-East Poland West Europe Japan Turkey Canada Korea China India Middle East Vietnam Mexico Singapore Central America Indonesia Brazil Current Supply Chain Expanded Supply Chain Footprint 69 © 3M 2007. All Rights Reserved. 2007 3M Investor Conference
    • Four Cornerstones of the International Growth Plan Portfolio Management Human Capital R&D & Supply Chain R&D & Supply Chain Brand andReputation Brand & Reputation Human Capital & Geographic & Geographic Planning Building Localization Building Localization Planning Expansion Expansion 70 © 3M 2007. All Rights Reserved. 2007 3M Investor Conference
    • Human Capital Planning Recruit, retain and enable the best employees Significantly accelerate knowledge transfer to developing and emerging countries Move resources from back-office to customer-facing and from foundational businesses to growth opportunities. 5% front-line, 8%+ back-office productivity improvement 71 © 3M 2007. All Rights Reserved. 2007 3M Investor Conference
    • 3M International Summary International growth continues to expand Developed countries will grow through penetration and market share gain Developing countries accelerating BRICP and PLUS strategy Supply chain, brand and product localization Strategic acquisitions provide locally-relevant brands and product portfolio All about execution starting with the customer!!! Growth Possible in All “Corners” of the World 72 © 3M 2007. All Rights Reserved. 2007 3M Investor Conference
    • Operational Excellence © 3M 2007. All Rights Reserved.
    • Financing Growth Through Supply Chain Improvements The opportunity 3M’s history led to very complex supply chains Average time to traverse global supply chain is ~100 days Multiple plant hops, often backward and forward across continents, is the norm at 3M → Structure drives up inventory and working capital usage and lowers fill rates → Led to expensive, if flexible, machine tools → Frequent machine set ups and high excess and obsolete inventory Air freight, manual intervention and expediting are normal Large numbers of SKUs complicate the picture, compounded by chronic capacity shortages Goal: Make it close to where we sell it 74 © 3M 2007. All Rights Reserved. 2007 3M Investor Conference
    • We Are Already Making Strong Progress Russia Mfg Korea OH&ES 2007 2007 2007 China Suzhou LCD II Poland Optical UK Russia Poland 2007 China Korea Italy Japan 2007 Taiwan India China CHJ III Mfg 2008 Poland Tapes 2007 2007 2008 China GuangZhou India Industrial Tapes China Medical Mfg 75 © 3M 2007. All Rights Reserved. 2007 3M Investor Conference
    • Capacity Adds are Reducing Distance to Customer Example: Maintenance Free Respirators and Laminating Adhesives From US Supplying To Korea for APAC the World AverageAverage Distance to Customer ~3,000 ~1,000 miles) distance to customer ~30% (or Miles 76 © 3M 2007. All Rights Reserved. 2007 3M Investor Conference
    • Our Emerging Manufacturing Footprint “Super Hub” concept Large factories ($400Million to >$1B SVOP) and distribution centers Aligned to regional and area projected sales growth Shared resources and infrastructure among businesses/divisions Located in countries with maximum corporate and regional benefits Benefits Shared infrastructure and resources produces:- • Lower risk to individual businesses; economies of scale • Faster capital equipment installation and better resource utilization • Regional centers supply chain expertise Regional ‘ownership’ with increased customer responsiveness Principal locations = China, South East Asia and the Middle East 77 © 3M 2007. All Rights Reserved. 2007 3M Investor Conference
    • Globalizing the “Super Hub” concept Super Hubs would produce at levels similar to Hutchinson facility 78 © 3M 2007. All Rights Reserved. 2007 3M Investor Conference
    • A Huge Prize Remains for Supply Chain Improvements 2012 Opportunity Accelerated Growth +1 point minimum, adds ~$100M OI Service, higher fill rates + Cost reduction +80 to 100 bps gross margin, adds ~$300M to $400M OI/year Labor, logistics, shrinkage + Lower Inventory Minimum +1 turn, adds ~$700M to FCF WIP, FG, local sourcing = $1 Billion-Plus Opportunity Accelerate Growth … Drive Productivity … Reinvest 79 © 3M 2007. All Rights Reserved. 2007 3M Investor Conference
    • Summary © 3M 2007. All Rights Reserved. 2007 3M Investor Conference
    • Understanding The State Of Our Portfolio Business Type Characteristics Sales Weight OI% On course Growing > 5% 82% 83% Medical Supplies, Commercial Graphics, Automotive Aftermarket and Abrasives, et. al Workable Need modification 15% 16% solutions Industrial Minerals, Electronic Interconnect, Filtration, Optical Films Reposition Challenged Business or 3% 1% Technology Personal Care, Touch Systems 81 © 3M 2007. All Rights Reserved. 2007 3M Investor Conference
    • Growth Targets LC 6 Qtr. Avg. Organic LC* Target Organic Incl. Acquisitions Industrial and 5-8% 4.3% 7.6% Transportation Health Care (ex. Pharma) 8%+ 9.9% 12.3% Display and Graphics 5-8% 5.2% 5.4% Consumer and Office 5-8% 6.6% 7.4% Safety, Security and 8%+ 8.0% 14.4% Protection Services Electro and Communications 4-6% 1.6% 3.1% 3M (ex. Pharma) 5-8% 5.6% 7.9% *Local Currency Sales Growth = Volume + Price 82 © 3M 2007. All Rights Reserved. 2007 3M Investor Conference
    • What Have We Left Out? For every supply chain need there is a corresponding systems need that will be gradually addressed after leaning out the supply chain Selective plant closures and mothballing in high-cost, high-tax areas with no foreseeable fill plan No big bangs are expected There will be a few small divestitures where we think we are below critical mass 83 © 3M 2007. All Rights Reserved. 2007 3M Investor Conference
    • 3M’s Long Term Business Summary 1. Growth plans in place to deliver >2x IPI 2. Commitment to double-digit earnings growth 3. Maintain >20% ROIC and premium margins 4. Moving into faster-growing market spaces 5. EBOs making good progress 6. Supply chain improvements in place to finance growth 7. Tax opportunities abound Great opportunities remain for 3M 84 © 3M 2007. All Rights Reserved. 2007 3M Investor Conference
    • Our Principal Mission Driving Growth © 3M 2007. All Rights Reserved. 2007 3M Investor Conference