Perils Of The Hedge Highwire

Locking in exchange rates isn't always a great idea

As a company that gets more than half of its sales and profits in foreign currencies, Minnesota Mining & Manufacturing Co. is exquisitely sensitive to fluctuations in exchange rates. When the dollar rises, profits fall. Yet 3M doesn't use hedges to protect against currency fluctuations. In August, the maker of Post-its and Scotch Tape announced that the dollar's rise had cost the company $330 million in profits and $1.8 billion in revenue over the past three years. The no-hedging policy has analysts and investors in an uproar. "They have lost all credibility with Wall Street," says Jack L. Kelly of Goldman, Sachs & Co.

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