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Opinion
Brooke Sutherland

3M’s Headaches Won’t Vanish With New Maneuvers

Spinning off the conglomerate’s health-care business and seeking bankruptcy for its troubled earplug unit are a start, not a solution.

The investing case for 3M's stock is still weighed down by myriad problems.

The investing case for 3M's stock is still weighed down by myriad problems.

Photographer: Eric Lalmand/AFP/Getty Images

Corrected

Negative headlines have been piling up at 3M Co. for months over potentially mammoth legal liabilities, but it appeared as if the company had been mostly sitting on its hands, taking the hits and waiting out the long process of defending itself in the eyes of the courts and regulators. That changed on Tuesday: The industrial conglomerate announced plans to spin off its health-care unit and to put a business accused of selling faulty earplugs to the US military into bankruptcy in an attempt to ring-fence the burgeoning liabilities from the rest of its operations. From the perspective of investors, these moves are better than the inertia that’s prevailed until now, but they are far from a panacea. 

First, some background: 3M acquired a manufacturer of a type of dual-ended earplugs — Aearo Technologies — in 2008 and continued to sell that product until it was discontinued in 2015. The sales pitch for the earplugs was that one end would block out as much sound as possible while the other would protect users from particularly loud noises, like explosions, and still allow them to have situational awareness and conversations with nearby counterparts — a feature that had obvious appeal to the military. Veterans have sued 3M, however, contending the company knowingly sold defective earplugs, leaving the soldiers with hearing loss and tinnitus. A growing number of them are winning their initial trials. Most recently, a jury in May awarded $77.5 million in compensatory and punitive damages to a US army veteran in the largest payout to date for bellwether trials over the earplugs, bringing the total awarded damages for successful plaintiffs to about $300 million.