3M (MMM) Makes Long Overdue Decision To Exit Pfas Manufacturing As Litigation Continues To Mount
2:59 pm Tuesday, December 20th, 2022
When thinking about 3M (MMM), the company’s well-known Scotch Tape brand is something that immediately comes to mind for many people. Unfortunately, the company’s environmentally unfriendly reputation and its litigation history stemming from its use of so-called “forever chemicals” is another thought that’s closely linked to the industrial giant. This morning, the company took a significant step in its efforts to repair its tarnished standing, while also appeasing investors by lowering its risk of future lawsuits.
MMM has not only been a lightning rod for controversy over its usage of PFAS, but it’s also found itself in the crosshairs of a few major court cases.
In 2018, the company settled a lawsuit with the state of Minnesota, agreeing to pay $850 mln to remediate damages related to contaminated drinking water in the town of Cottage Grove and other surrounding towns.
This past July, the company resolved its dispute in Belgium by shelling out nearly $600 mln to account for damage caused by toxic discharges from its Zwijndrecht plant near the Belgian port city of Antwerp.
MMM’s troubles don’t end there because California Attorney General Rob Bonta filed a lawsuit against the company last month, claiming that PFAS chemicals are causing irreparable harm to the state’s natural resources. The lawsuit also names Dupont (DD) as a defendant, but the company denies the allegation, stating that it has never manufactured products with PFAS chemicals.
The main takeaway is that this decision seems long overdue given the trouble that PFAS chemicals have created for the environment, human health, and for MMM. There may be some modest disruptions in MMM’s manufacturing processes, but we don’t expect the transition to cause any material financial impact since the migration away from PFAS will occur over a multi-year period. From a fundamental perspective, the biggest positive is that MMM’s litigation risk will be lessened, ultimately removing a key overhang on the stock.
