Before we begin the day, I wanted to highlight our upcoming events for 2018, so you can get them on the calendar. They're from Mike Roman, HC Shin, Jon Lindekugel, Eric Hammes, and Steve Shafer. Here's our schedule for the morning. If we do end up running ahead of time, we'll stay ahead of schedule. For those on the webcast, we will plan on a break around about 9:30 A.M. and wrap up no later than noon. If we are ahead of schedule, we'll have about 45 minutes for Q&A following the formal about 3M's future performance and financial results. These statements are based on certain assumptions and expectations of future events that are subject to risks and uncertainties.
Item 1A of our most recent Form 10-K lists some of the most important risk factors that could cause actual results to this morning excludes yesterday's announcement of the divestiture of the communication markets business. That is not included in the numbers that you saw this morning. Our guidance this morning excludes any pending potential tax reform. I wanted to make sure everybody was clear on that before we started. With that, I'll turn it over to Inge. Thank you again for joining us.
Very good, Bruce. Thank you, Bruce. Good morning, everyone. Hope this is a good tradition, at least for me, I feel that I'm coming home just before Christmas and meeting a very strong 2018. We will also show you the evidence of the result, not only in 2017, but based on what we have done and our key metrics. You will see that from Nick Gangestad later today. We are very well-positioned for 2018, and when you see the outlook, Nick will take you through all those details in the end of the meeting. Let me make a couple of comments relative to how we have built the enterprise to now be very well-positioned for 2018. It started back in 2012, we articulated the 3M vision and launched six corporate strategies.
They are still all in place, as you have seen, that have step by step moved us forward to that we today have probably the best ever portfolio in place that we ever have had. I will make some comments later relative to that. During year of 2013 to 2015, we enhanced our capital deployment plan. We prioritized the three key levers in order to create more value for the shareholders and be more relevant to our customers. We defined the fundamental strengths in terms of technology and applied to life. That was what happened during 2013 to 2015. In 2016, we announced to you the new five-year plan that we now are two years into, you will see the metric on that later today. We accelerate the business transformation deployment.
As we went into 2017, we push forward on our portfolio, we execute even stronger relative to have a much better future. We also, as you know, put in some additional money in terms of commercialization capabilities and something we call core search. That is paying off. I will tell you in a second how we estimate the year. It was important for us, 2012, to clarify the vision for 3M. It was important for us to get aligned relative to the strategies, enhance and improve things we do. I think that's why 3Mers are waking up every morning to ask those questions. How can we advance, enhance, and improve? The way it's about education, it's about healthcare, about community, and it's about sustainability.
It's an important element for us because a vision should be a stretch, because it's what you can do. You can do it for every company, every home, and every life. It should be authentic to you as an enterprise. When we laid out this vision, we knew that's not only for us to put it on a piece of paper, this is who we are. This is 3M. This is what we can do. You look upon the six strategies that is the enabler, if you like, to come to the vision. The first strategy start with customers. Customers are very important to us. You can see expand relevance to our customers. As you see what have happened the last six years, that have also how we have addressed our portfolio.
We have made sure that we are more relevant. Places where we're less relevant, we should exit those businesses. We have also talked about profitable market share, not only market share, profitable market share. We talked about invest in innovation. We historically spend 5.5% in research and development. We made a comment we should be closer to six. We are holders. Intensify capabilities, achieve regional self-sufficiency is for us to build out our capabilities around the world in order to serve our customer. Of course, make sure that we build a high-performing, diverse global team. For us, inclusion, diversity, and sustainability is important because that is how you win. Finally, drive consistent, superior level of operational excellence.
You'll hear more about that today, both from HC Shin and from Jon Lindekugel relative to operation, which is, of course, including supply chain and Lean Six Sigma. The playbook that we have in place is working. It'd be important for us when we operate to understand the left-hand side of this is about the value for shareholders and for our customers and ourself, of course, in terms of portfolio management, investing in innovation or research and development, business transformation. We have been able to build a portfolio that is very diverse, both globally and from a business perspective. You can see in terms of size here, we have Industrial that is almost $11 billion estimated for this year. We have four other businesses in size of $4.6 billion to $6 billion.
Very diverse, and they'll be able to execute those in whatever economy we operate. You can also see for this year that we estimate an organic local currency growth of 5%. The estimation is 5% for the year, and we estimate operating margins to be 25%. Very robust and good growth. It's five steps, basically, in the evolution of an economy, and it always starts with infrastructure. You need to have an infrastructure in place in order to be able to move product around the country. The first investment is in infrastructure. When that's happening, manufacturing explodes or improving, because in many cases, in countries where the investment is coming, it's coming from more developed economies and companies than in developing. They raise the expectation of safety. When that is happening, you have created a lot of work that is now becoming disposable income available.
Retail starts to move in the country. Finally, healthcare is coming in place because the economy is coming to a place where government, if it's government-related, and/or private sector start to look for more sophisticated solutions. As I always have said, healthcare is there the whole time, but I'm now talking about the more sophisticated healthcare-providing opportunity. For us, we can capitalize that through the whole chain, which is the beautiful thing for us. Despite where economies stand in their evolution and development, we will be there to compete, and we are there to win. That's also one of the strengths when you look upon the business groups we have, the divisions we have, that we can compete wherever that stands in terms of evolution of an economy.
If that's in terms of road signs early in infrastructure or our biggest business, manufacturing, you will see where we capitalize on that. We will show a good example today with this roadmap out from China, exactly how that business is evolving for us in China specifically. We are leading with a customer-first mindset, and I think this is important that we are, by definition, not a commodity-related company. We are a scientific-based company that are working very close with our customers. The key here is to understand their business model and understand what they have promised their customers. If not, you will only be a transaction with your customer. For us, it's to understand, what is it that you have promised your customer, and how can we help you deliver on that?
We pay a lot of time relative to understand that at the current time. We have four fundamentals in the company that I will say is the differentiation in between us and many. The reason for that this is a vertical integrated model with four fundamentals that are owned by the company and can be used by all. We have technology, we have manufacturing, we have global capabilities, and we have the brand equity. The technology is around our 46 technology platforms can be used externally with our customers. The enterprise 3M owns it. It's not owned by one division or one subsidiary, so no one can hold it back and say, "This is my technology. You cannot use it." It's something that is very, very important for us.
In manufacturing, we have facilities that we can use together. I think the other thing here that is important to know and understand that one quarter of all patents and one third of all our technology platforms are used in connection with manufacturing. You take technology in manufacture, understand it's very sophisticated, and the barrier to enter is very difficult for anyone in most of those projects. We have the global capabilities, where we have subsidiaries all over the world. We have 40 labs around the world. We have 40 manufacturing plants. We have 36 laboratories. We have more than 50 customer innovation centers. That means that we can serve our customers around the world wherever they are, both if they are global or if they are local.
Finally, the 3M brand that stands for innovation, quality, reliability, and the 3M science applied to life is important in that element. If you take those four fundamentals, they are key to everything we do. They are actually connected to our portfolio management where demographic shift, we all know how that's happening, and you can capitalize on it if you're there in that country in order to do it. You need to be there. We are there. Technology conversion is different. You need to have technology platforms so you can work with companies and individuals. You look upon us at 3M, we can do both. We are right in the technology platform for technology conversion, and we can capitalize on demographic shift, as I showed you on that curve moving up.
If you see that evolution of an economy, at a certain point, it starts all over again if we build the business for the future. Now, two places where you must win if you have decided that you would like to be a global growth company. We have decided to be a global growth company. U.S. is $12 billion sales for us. It's the biggest subsidiary of our operation. It's the biggest economy in the world. It's our home arena. We will always win in U.S. Why do we do it? Well, here is where we have a machine that is very good, and we have a very strong and probably the strongest brand equity anywhere around the world. We will never lose in U.S.
You look upon the last five years, we have had a growth rate of almost 4% on an annual base. It's becoming stronger. Very good solid evolution of an economy. You're coming to a point where that portfolio will be very well-balanced. We have been for a long time in China. We are the first company ever that had a wholly owned subsidiary in China. Steve Shafer will talk more about it, but we are just in the beginning. It's today a $3 billion science-based technology companies there. We have done a lot of work on the portfolio in order to move the evolution of the economy. We have never been better positioned ever in China. Our growth rate is very impressive this year and will stay the same for 2018 and forward.
We will accelerate all our investment in order to capitalize on the opportunity in China. Let me make a couple of comments on the three key levels. Let me start with portfolio management. This was important for us in order to make sure that we could align our organization and put our resources at the best opportunity for the future. As I said, this is what we started back in 2012. It was also, of course, a way for us to deploy capital better than, which is a given of it. It's also to make sure that we strengthen our portfolio both through acquisition and divestitures.
I think you saw late yesterday, as Bruce talked about, that we have signed now a deal to divest one of our businesses that is in EEBG. We will talk a little bit later about the financials around that. This was an important element for us in order to prepare the real future for 3M. What we have done is we have gone from where we had six sectors to five business groups, and we've got from 40 businesses or divisions to 20. It's much more ability for us to execute faster in the marketplace. We also prioritized the portfolio very. Capital Safety, Scott Safety, Membrana, and Sumitomo 3M, that was a part of our operation in Japan, which all was sizable, very attractive acquisitions for us with good growth and very good margins.
At the same time, we went out on multiple businesses, and all of this the overall company. By definition, they will be better off somewhere else, and the businesses that are coming in to us will be better move that forward. As I said earlier, we've gone from 5.5% to 6% in our investment. I think the important thing is here to think about our platforms in the middle. It all start on the left-hand side. It all start with two processes, direct with one specific customer. Probability of successes to programs are very high because you work with one specific customer. Insight to innovation is a market-driven process where you have more commercialized product overall in the market.
You think about the two of them are the two processes that are used in order to capitalize on the platforms we have and get out higher-impact programs and activities to our customers. We have identified here in this case, eight top priorities of growth, which are investment for the next five. Mike Roman will touch on multiple of this in his presentation. You can see here, this is a $30 billion addressable market opportunity to us. We talk more about that this morning. I think the important thing is that's for us to capture around $500 million-$700 million annually in savings and half a billion in working capital improvement by 2020. The implementation is going very well for us. We're almost done with West Europe. We are now moving on.
As I said, Eric will give us more details relative to that after the break this morning. There are the 3 key levels, portfolio management, investment in innovation, and business transformation, that all are very important for us in order to make sure that we are becoming more relevant to our customers, more efficient internally, and giving premium return to our shareholders over time. There are two more things I would like to comment on before I am done here. The first one is Lean Six Sigma, and the second one is sustainability. Lean Six Sigma, we have been on this since 2001. We have 70,000 people trained in the company, and we have more than 100,000 projects closed. This is a key element for 3M in terms of efficiency in the model.
You will see not only what Jon Lindekugel will tell you today, but you will also see what Nick is showing you relative to the future for 2018 of where the real value is coming for 3M. A lot is coming in efficiency and productivity in addition to growth. This is very important for us, and it is also one of 3 elements of business development and point I would like to comment on is sustainability. Sustainability is a key value of 3M, and we have done this for many years and are well-known for the 3P program, Pollution Prevention Pays, that we started many years ago. We, in 2013, doubled down on sustainability. We said it is not enough only to do things right yourself. Let us see how we can help other customers.
It is a unique way for us to engage with customers on a global basis in order to help them achieve their sustainability goals. The beauty with this is we will in most cases, get direct access to the roadmap of their product development. When that is happening, the organizations around the world are then committed to what they would like to do in terms of developing new product solutions. Said earlier, I think the most powerful thing is in terms of our own business model moving forward, it is very much into design and spec-in solutions for [Dow Jones] S ustainability Index. It is a big, big commitment for us, and we are recognized for what we are doing, which is fantastic. I think that all and is coming around one of our values, that is around diversity, inclusion, and sustainability.
The 3M Playbook is working, I think is evident based on the result we have had the last couple of years. It is very clear for 2017, it is also very good for us as we roll into 2018 with a very good 3M Playbook in place, with good processes in place, and that we can execute to that during this year. More than that, I am here to reaffirm our five-year plan with two years into it. You will see later today that there is no change of the plan that was a five-year plan announced in March 2016. We are delivering on all metrics, and you will see Nick talk about that specifically.
All right. Thank you, Inge, and good morning. It is my pleasure to be here today to present our outlook for growth in 2018, and what our global businesses will be doing to deliver that growth. Growth that again, outpaces our markets, growth that delivers on the promise of our 3M Playbook, and growth that creates extraordinary value for our customers and shareholders. Here's an outline of what I will present today. I'll start with an overview of our five businesses, their outlook for growth, and the key priorities that they will be executing to deliver that growth. I'll share some insights into what it is that uniquely positions us to create differentiated value as we move ahead. I'll share several examples of high growth, high value product platforms that will deliver growth in 2018 and beyond.
I'll wrap up with a summary of how we're positioned to win in 2018. Our playbook is working, and you'll see throughout my presentation how each of our businesses is utilizing this playbook to deliver growth in 2018. You'll see how their strategic intent is closely aligned to our vision for the total company. You'll see how their growth priorities are directly connected to the strategies and the three key levers you see pictured here. The three key levers, portfolio management, investing in innovation, and business transformation, continue to have a huge impact on our businesses, helping us to drive growth above our markets and create extraordinary value for customers and shareholders alike. The playbook is the key to our success in 2017, 2018, and beyond. Here again, you see our five businesses and their outlook for growth.
Our healthcare business is delivering very strong growth in the second half of 2017. That includes market leading organic product growth, as well as successful execution of several portfolio management actions. We expect that to continue into 2018 with an outlook of growth in the range of 3%-5%. Electronics & Energy is heading for double digit growth in 2017 thanks to wins in high growth emerging market segments, as well as successful deployment of solutions into both LCD and OLED displays. Finally, our consumer business returned to growth in the second half of 2017, led by strong performance from our home improvement business. We expect that to carry over into 2018 with growth in the range of 2%-4%.
Across all of our businesses, we'll take advantage of the positive economic outlook we see for 2018. Let's take a closer look at the growth priorities for each of our businesses, starting with Industrial. Industrial is almost $11 billion. Our top priority here is to accelerate growth in these four key platforms: automotive, abrasives, structural adhesives, and filtration. We also are enabling the electrification of the automobile, I'll talk more about this later in my presentation. We are bringing new science and technology bringing technology to our structural adhesives portfolio, helping our customers to solve their most difficult bonding challenges with new engineered materials.
We're leveraging the acquisition of Membrana to help accelerate our innovation in high-performing filtration, opening up the opportunity to penetrate the fast-growing biopharma processing portfolio, where we have an opportunity to introduce new and different solutions to our customers. Examples, such as new bonding solutions for additive manufacturing and new abrasives applications and digital commerce deployment. We're greatly accelerating our investment in our B2B digital content and also working with partners to ensure we optimize. Safety and Graphics is our second largest business at $6.1 billion in sales. Through this business, we have global leading positions in personal safety, product growth, together with leading positions from Capital Safety and Scott Safety to put together a portfolio that addresses the highest need.
We're also bringing innovative new solutions to help improve global transportation safety, including new products targeting opportunities in developing economies, as well as new materials that enable autonomous vehicles. We're also introducing new film technologies to help enhance our customers' brand image. Healthcare is our most profitable business with $5.8 billion in sales. Through this business, we are a global leader in medical and oral care markets with a proven track record of outgrowing these markets. With healthcare spending projected to grow again in 2018, we expect another strong year, investing in new products and innovation and expanded coverage. We are seeing strong growth coming from this strategy in 2017 and see that carrying into 2018 and beyond. We are also working to advance digital solutions in health information, oral care, and drug delivery.
Our leading position in health information is enabling new solutions in performance analytics, it's also creating a foundation of capabilities that enables us to develop new digital solutions in oral care and drug delivery. We're also working to expand our capabilities in clinical evidence and health economics, applying science to identify the most efficient and effective procedures, then sharing that with our customers through our Healthcare Academy. Electronics and Energy is a $5.1 billion business with leading positions across a broad range of electronic and energy markets. We are well positioned to win new applications and technologies for our consumer electronics customers, working to meet the needs of our largest OEM electronics customers today, while innovating with them to design in new solutions for the next generation products.
We also see an opportunity on the energy side of our business. Consumer is a $4.6 billion business with category-leading brands, products, and innovation. They are our face and our market penetration in developing economies, building out brand awareness, new products innovated for those markets, driving penetration opportunities, seeing strong results from that in 2017 as well. We expect that to be a growth driver in 2018. We're also introducing innovative new products for respiratory wellness and home improvement. New designs for disposable respirators, consumer designs for disposable respirators, and room air purifiers growth through our B2C model in consumer, through new models, new partnerships, a continuing shift into digital marketing, advancements in data analytics.
Our teams are positioned to win globally, positioned to serve large global OEM customers in markets such as healthcare, safety, electronics, and automotive, at the same time, executing locally to meet the demands of our regional end-use customers. Our top priority globally here, to build out the most efficient and effective engagement model for our customers, taking advantage of automation in our global service models and supply chain. You'll hear shortly from Steve Shafer how we're investing to accelerate growth in China. We also are investing to grow across developing Asia with significant opportunities through business transformation to put us well on that track, we are well on the way to achieving our targeted improvement. We're also increasing our focus on domestic-oriented markets, businesses, and innovation, such as consumer healthcare and construction.
Now, many developing economies are prioritizing a strategy to grow their domestic markets to balance out their traditional dependency on exports. We're well positioned globally to align to this strategy. It's important to understand the power of 3M model, what it is that we do that enables us to continually outgrow our markets and create differentiated value for our customers and shareholders. It starts with this customer-first focus and mindset. Our customer-inspired innovation model brings together our deep domain expertise model that leads to insights into what their needs are, often unarticulated needs that provide high-impact solutions. We leverage the fundamental strengths, technology, manufacturing, global capabilities, and brand to ensure that we develop unique and differentiated solutions. While we do this, we keep the focus on the end user.
A majority of our $31.6 billion in sales are either specified or designed in by the end user. It's critical that we drive our customer-inspired innovation to them. The channel to serve our end users may change over time, but keeping the focus on the end user will enable us to partner in the channel with solutions that will deliver where, when, and how our end users prefer. In the last part of my presentation, I'll share our top priorities for growth. The eight high-growth, high-value product programs that Inge introduced. I'll touch on four of these, automotive electrification, advanced wound care, connected safety, and data centers. HC Shin in his talk, automotive solutions and electronic materials. We're bringing that through a dedicated team connected directly to our electric vehicle OEM customers.
Opportunities we're seeing and our value that is being specified into early designs is at a much greater level than our base automotive business. This will enable us. Advanced wound care is a significant opportunity for our healthcare business with increasing demand to aid in healing of difficult-to-treat wounds. We're bringing together unique technology and domain expertise that can help our customers solve this problem across the wound healing process. From preventing. Our ability to combine multiple technology platforms such as films, nonwovens, biotechnology, and adhesives enables us to bring unique solutions that'll put us in a position to lead in this marketplace. Over the last three years, we've been building strength on strength in our personal safety portfolio, taking from our position as a lead markets.
We are taking our deep domain expertise together with that portfolio and continuing to innovate and develop new products and new solutions for our customers. To step ahead and create unprecedented safety results enabled by data. We are seeing strong growth from this strategy and this integrated portfolio in 2017, expect it to continue to accelerate into 2018 and beyond. We shared this view with you in the past, a high-level view of the strategies in Electronics and Energy Business. Simply put, we must with and ahead of our markets, while we add high-value, new opportunities through high-value market segments. Accelerating our growth to innovate in areas such as data centers with an increasing demand for bandwidth, in communication infrastructure with a near-term focus on 5G, in automotive electrification, energy grid modernization, and new storage solutions for renewable energy.
We're excited about the growth opportunities we're seeing here. I'll share a little more detail about the data, signal and energy management. Our increasingly deep domain expertise, together with our 46 technology platforms, help us to support needs in terms of air management, power distribution, and monitoring. In servers, we're helping to provide thermal management and cooling, but also new display technologies as well. On the systems side, we're bringing new innovative designs to meet the increasing demand for bandwidth and network interconnects, but also power filtering and battery thermal management solutions as well. Our unique solutions are helping our data center customers to reduce their costs, reduce how we are bringing this together with our customer-inspired innovation model to innovate and grow in automotive electrification and connected safety.
We also are applying this to the new, helping us to bring new business models and new innovative products to those do it for me customers. Customer-inspired innovation is a strong driver for our growth in 2018 and beyond. We are well-positioned to win. Our global teams will carry the strong growth momentum from 2017 into 2018 and utilize the 3M Playbook to continue to create profitable growth for our shareholders. We'll deliver another strong result in 2018 by prioritizing our highest growth markets, products, and applications, by executing ongoing portfolio management to deliver increased investor value, by accelerating new product successes through leveraging our 3M Playbook, and by implementing new commercial changes that leverage business transformation and digital commerce. With that, I thank you, and it's my pleasure to introduce Stephen Shafer, our vice president for the Greater China area. Thank you.
Good morning. As Mike mentioned, my name's Steve Shafer. I'm the vice president for 3M's Greater China area opportunity and give you a little bit of detail about what our business looks like today in China. Second, I'll share with you some detail about how our playbook is enabling us to win in China. I'll conclude with a brief financial summary outlook of 2018. I'm sure most of you can appreciate the size of China. 1.4 billion people forming the second-largest economy in the world. You may be less familiar, however, with 3M's presence in China, so I'll share with you some facts. We've been in China for a very long time, since 1984. As Inge mentioned, we were the first wholly owned foreign enterprise set up outside of the Shenzhen Special Economic Zone manufacturing base in China with nine manufacturing plants that primarily serve our Chinese customers.
Most global companies see China as an attractive market opportunity. We agree. We think the large market in China plays well to our portfolio of businesses and technologies. Just to give you a sense of how large China is, of the PC and smartphone capacity for the world sits in China. It's also a very dynamic market, one that requires you to move fast, but it creates the opportunity to change the game quickly. Just to give you a sense of that. It is transforming everyday life in China, and it's also allowing businesses and business models to transform. 3M has been evolving and certainly growing along with China and according to the model that Inge had laid out earlier this morning.
We have deep roots in infrastructure and manufacturing that form a solid base to our important parts of our portfolio as those sectors have emerged in China. Today, those businesses represent over $1 billion of our $3 billion. There are some unique characteristics of how the 3M Playbook works in China, however, that I'd like to highlight. The first is we leverage our strategies to help companies that are in China improve to both meet the increasing demands of the Chinese consumer. We also have a portfolio that is bringing convenience, quality, and health to the Chinese consumers, and this is exactly where the emerging Chinese consumer is trending.
Finally, we have the ability to. As I talk through the 3M Playbook in the next few minutes, you'll see these themes coming across, and they're very important to how the 3M Playbook is. I'm going to focus on two components of the 3M Playbook in particular, two of our value creation levers: portfolio management and invest in innovation. We're focused on building scale in domestic-oriented businesses that give us sustainable growth and are in large and attractive markets going forward. Finally, we're innovating in and around the very fast-moving electronics and industrial supply chains in China. I'm going to talk about each one of these three now in a bit more detail, starting with building strong domestic-oriented businesses. These businesses are businesses whose primary focus is on. In the automotive market, like everywhere else in the world, we are increasing our dollar per unit penetration.
-ends of the Chinese consumer. They look to innovation partners like 3M to help them do it. In safety, we're. Fall protection, SCBA through our new acquisition of Scott Safety are the next horizon of safety awareness for China. -expanding across China. These are dynamics that play well to 3M. Our portfolio brings better clinical outcomes, and our business model of training and educating on best practice healthcare practices into new markets allows us to really participate. You can see four of the top mega trends here. Air quality, where we have the strongest brand backed up by our leading air filtration technology. -world coming together with a very strong, well-established electronic supply chain that sits in China. Water and food safety. Finally, automation and robotics. Our consumables, with their precision, quality and performance, are. Cleanability and productivity, which is sweeping across China right now.
I want to spend a little bit more time deep diving on the air quality mega trend. As you may have heard on the last earnings call, especially if you've been up into the northeast or the west, you know what this means. There are millions of people walking around some of the biggest mega cities. We believe that with that trust comes a large responsibility, and part of that responsibility is making sure that we take our leading air filtration, whether it's at work, whether it's outside, whether it's in the home, or whether it's in the car, a task to have taken on. There's very unique challenges to child respiratory wellness, but it's the type of challenge that 3M will take head on.
We're also launching this year an integrated brand campaign that tells our story about air quality, and we believe it's a great example of brand. The third way in which we're using portfolio management to win in China is by taking innovations into the heart of the center markets to solve their next generation of challenges, including thermal management, signal management, and display performance. We do this with our bonding solutions that provide performance and efficiency in assembly operations. It is one of our four global research labs in China, and it houses over 600 scientists. We leverage this to both drive core research and development capabilities around our technology platforms, but also to help engage customers around technical collaborations. Here's what our R&D footprint looks in China. As I mentioned, our global research lab is based in Shanghai.
We also have four customer coverage across the country, but allow us to get very close to our customers in terms of collaborations. Here's some more specific examples for how we do that. We do it through our laboratory capabilities, where we work with, test, and prove out our applications. We also provide training and application support. Below, you can see two examples from our safety business, one where we bring customers to our training center, like our fall protection training. We have conducted over 3,000 seminars and have trained over 85,000 Chinese workers on safety. We do all of this in close collaboration with their customers, and they value us for it. You can see across the bottom some representative companies of Chinese companies that we work with around these types of testing capabilities. Bringing it all together, we expect the sustainable double-digit growth that we're seeing in China in 2017.
We're going to be aligning to mega trends that are meaningful in China that are giving us new growth platforms, and we're going to be launching new products to our Chinese customers in 2018. In conclusion, our Playbook in China is working. Portfolio management, investing in innovation. I'd now like to introduce our Vice Chair, Mr. HC Shin.
Thank you, Steve, and good morning again. Today, I'm going to highlight three and our continuous investment in research and development. First, I'd like to mention again that 3M Playbook is driving everything we do. It enables our growth, it enables our productivity. I think that balance between growth and productivity, those are very critical because they will ensure us for additional growth and profit going forward. Let's start with business transformation. Our business transformation journey began in 2011, that was some six years ago. It was not meant to be changed everything in the company and how we do business with our customers. The fundamental changes are two things that we want you to remember. First, global processes have been standardized and optimized. First time in our history, we have been implementing our global ERP system for the last few years.
What that does is that it gives us complete data access capability pretty much on a real-time basis, across geography, across function, and across all businesses. If we combine of our growth coming forward. If you think about portfolio work that we have done, streamlining our businesses on top of that's why the scale and leverage is possible, not only supply chain, but in all business processes. Combining those two with our scale and leverage strategy, particularly in supply chain optimization and all the transactional business services optimization, in a way that makes it a lot easier for customers to do business with 3M. This particular transformation is also increasing our sales and marketing time to spend with customers to generate higher growth for 3M. We are executing customer first approach, as you heard, in everything we do. It is about making each experience ability globally.
What we have done is we are integrating all customer touch points and contact method into one integrated and automated global platform. That's a very powerful tool to our customers. What that does is that it will make it stronger in terms of our digital online capability with our customers. It is also benefiting with our customers, with stronger quality and 360-degree view of our customer visibility pretty much on a real-time basis. 3M is also taking full advantage of our global e-commerce capability. That's the reason why we believe that business transformation enables practical and sustainable productivity framework for 3M. It basically consists of three pillars. One, our business services operations have centralized all of our customer-facing processes to in Costa Rica, and the Philippines, and Poland, are fully operational and provide a follow the sun service model.
Third, we have significant supply chain optimization opportunity now using our new system integrated capability. All in all, these actions will result in $500 million-$700 million of annual operational savings and half a billion dollars of working capital improvement by 2022. I'll touch on high level supply chain strategy and execution. Later this morning, Jon Lindekugel will spend more time. Reason that regionalized supply chain is effective are twofold. One, it is streamlining our value stream from a least productivity. Three regional centers of expertise are also creating value for our customer while they are close to the customer. At the same time, we are continuing to optimize our existing manufacturing footprint. We first talked about this at our Investor Day in March of 2016. It involves consolidating volumes from our less competitive sites, manufacturing locations to our best sites, typically larger sites. The focus is threefold.
It improves customer service, it also accelerates operational efficiency, and increases our cash flow. We continue to make very good progress on this plan. Along with our regionalization and footprint optimization strategy in our supply chain, we are also in process technologies. Highly automated, connected, lean, safe, and sustainable plant powered by advanced generates tremendous productivity for 3M. As you probably know, our manufacturing capability is one of our four fundamental strengths, along with technology, global capabilities, and 3M brand. We continue to invest in our manufacturing capability. Let's talk about research and development or investing in innovation.
Our commitment to increase our R&D spend to 6% of sales is a very important part of our company strategy. We are directing the vast majority of our incremental R&D investment to creating new products and new technology platforms for new and emerging market by unleashing 3M's strong 46 technologies. Many of you had the opportunity to tour our new Carlton Science Center in St. Paul, Minnesota last year, this one. The reason we are doing this is to make a direct connection with our customers and market needs with our technology platforms. We have global research centers in four locations of the world, the U.S., Germany, Japan, and China, as you heard from everywhere in the world. Here is an example of how one technology platform, in this case, adhesive technology platform, is applied to physically eliminating the need for mechanical fasteners like rivets, bolts, and screws.
At the same time, we engineer our adhesive technology to be gentle enough for human skin, as you can find in our medical tapes and dressings. Our adhesives are also inside your smartphones, making your smartphones stronger, lighter, and more durable. That's just one technology adhesive platform. Here's another example of 3M's proprietary nonwoven technology being used in so many different markets, applications, and products. They are widely used for acoustic and thermal insulated nonwoven technology. Some of our critical healthcare product lines, such as medical tapes and patient warming products, also use nonwoven materials, Filtrete brand filters, and Scotch-Brite cleaning products. There are similar stories with each and every one of our 46 technology platforms. If a single technology platform can be leveraged across so many markets and applications, think of the endless possibilities when we combine them.
Our window film product includes adhesive technology, film technology, nanotechnology, and light management technology. How about 3M's medical dressings? It consists of, again, adhesive technology, film technology, and six other technologies. If you look at Filtek, our line of dental adhesives and resins in the most contemporary manner. We see a huge need for 3M's material science technology in digital and interconnected world and the markets of the future. We embedded IoT technology and data analytical capability into our inhalers and biological indicators to make them smart and connected. Our unique material solutions find numerous applications in new and emerging markets, such as data center application, electric vehicle manufacturing, autonomous driving, and biopharma filtration for next generation drug manufacturing processes. I'll show you a couple of practical examples of this. Here is one example of how we are applying our technologies into large and fast-growing market.
In the biopharma industry processes. A few years ago, 3M developed and introduced new filtration product lines to provide new and unique purification solution, which allowed us to combine our existing filtration technologies with membrane technologies from Membrana to generate significant technology and product synergy. As a result, we have unlocked many new opportunities in biopharma purification processes. Overall, this is $5.5 billion market and growing with a double-digit growth rate. Here's another example of how we are evolving one of our fundamental technology platforms into new markets and new applications. It has been widely used in semiconductor manufacturing processes, firefighting applications, and various cleaning and cooling solutions in center applications, as you heard from Mike Roman. One of the biggest issues in large data centers is how to manage heat generated from so many powerful servers.
3M Novec Fluid provides very effective immersion cooling solutions, also is used to provide very efficient cooling for electric vehicle battery assembly. Cooling or dissipation of heat from the battery assembly is one of the most critical elements in extending battery life and increasing driving range with a single. Novec Fluid is also very sustainable product. The test show that Novec Fluid can reduce greenhouse gas emission by up to 99.99% compared to other competitive products. Talking about sustainability, 3M has deployed, as Inge said, innovation inspired by sustainability concept. It means we are incorporating more sustainable materials in the development of new products. For example, 3M developed and introduced a non-PVC based film product for vehicle wrapping application, the first of this kind in the industry. This way, 3M reduced our own greenhouse gas emission by 67% in the last 15.
By providing products that enable sustainable processes in the eyes of customers. For example, our paint preparation system replaces conventional metal can with disposable containers for paint mixing and dispensing operation in automotive body shop. Plus, is that it reduces the solvent usage in the body shop by 70%-90%. This way will help our customers reduce their greenhouse gas emissions by 250 million metric tons by 2025. 3M is committed to continue to come up with the products, basically inspired by sustainability concept and sustainability [philosophy ] share common values, science, technology, innovation, as well as diversity, inclusion, and sustainability. Customers, policymakers, and students. Topics in those meetings range from the future of artificial intelligence, aging population, and the future of science.
We think this is a great way to promote common value for the society and the world that we are living in, and also enhance 3M value and brand around the world. Let me summarize what I discussed with you this morning. Business transformation drives enhanced customer experience, and supply chain optimization is a huge opportunity, and will also drive 3M's competitiveness in the marketplace. We are, as you heard, unleashing 3M's 46 technology platforms to solve current and future market needs. All in all, 3M playbook.
All right, we'll get started. Good morning. I'm Jon Lindekugel. We presented key elements to our approach to supply chain, including investments in footprint optimization and disruptive technology. Today, I'll present our strategy and update you on both of those initiatives. Here's my agenda. I'll begin by outlining how supply chain provides a competitive advantage for 3M. I'll cover our strategy for extending that advantage forward. I'll talk about how we operationalize the strategy through high-impact global supply chain initiatives. Producing and delivering 3M solutions to every company, every home, and every life. It's embedded in every one of our six strategies, from gaining profitable market share to delivering superior levels of operational excellence. Supply chain utilizes all three of our key levers to create value for our customers and shareholders alike.
Our supply chain capabilities create a competitive advantage for the company. Building and leveraging our fundamental strengths are basic to our business model. We use our 46 technology platforms to innovate new products. Then we deploy those technologies in manufacturing. You heard Inge highlight this morning that 25% of our patents and a third of our technology platforms relate directly to what we do on our production floor. We leverage our proprietary process technology, scale, and vertical integration to deliver the lowest unit costs in most of our product categories. We use our global capabilities to serve our global customers in every region of the world. Our iconic brand, synonymous with the quality we produce in our plants, also supports pricing that's commensurate with the higher value that our products provide.
The result of all of that is our gross margins being in the top decile of our peer set and a proven ability to deliver sustainable cost reductions year after year, 240 basis points since 2012. That's good progress with much more to come. Our supply chain strategy is directly on our customers. We put customer first in all of our decision-making at every level of our organization. Our strategy is straightforward. It's to create agile supply chains to deliver what our customers want, when and where they want it, with minimal lead times and inventory. We have three primary strategies that we operationalize through high impact initiatives. We optimize global processes to deliver operational excellence results. Lean Six Sigma, customer engagement, integrated business planning, and sourcing excellence are all great examples of what we do in that space. We regionalize our supply chains.
Here, it's agility in moving our supply chains closer to our customers, where we can adapt to changing market demands, reduce lead times, improve inventory turns, and deliver efficiency. We do that in a number of ways, in multiple ways, including footprint optimization. We're fully utilizing our supply chain centers of expertise and our global service centers. Finally, we're accelerating disruptive technology deployment to create our operations of the future. We're increasing our investment to develop and deploy disruptive process technology. Think of this as mixing 3M proprietary process technology with Industry 4.0 thinking to create something that only 3M can create, new supply chains, customer solutions, and results that only 3M can deliver. I'm going to highlight in a little more detail three of these initiatives, Lean Six Sigma, footprint optimization with the program.
Over that time, we've trained 77,000 employees, completed more than 110,000 projects, and delivered more than company. I was in the first class of Master Black Belts when we initiated this program in 2001. I trained some of our first Black Belts and Green Belts. I know firsthand the power of the Lean Six Sigma tools and the incredible results our teams can deliver when using those tools. The program's created great value for the company over the years, and we expect to be able to do more with it as we go forward. The second initiative I'll cover this morning is our Footprint Optimization Program. As we discussed in March of 2016, 3M has more than 200 plants in 40 countries worldwide. On the left-hand side of the chart, you can see those plants organized by sales value of production from largest to smallest.
That's annual production volume. Our global supply chain is anchored by a group of plants we call super hub sites. You see those represented on the left-hand side of the slide with the tallest bars. These sites are typically four or five times larger than an average plant and house many of our most disruptive technologies. On the right-hand side of the graph, you can see the group of smaller plants. Some of those plants are specialty sites providing a unique source of supply to a specific customer segment. Those small plants are really important to us, and we'll continue to invest in those going forward. Other small plants, however, create an opportunity for us to streamline our footprint, really an opportunity to optimize our footprint. We do that with simple objectives in mind, improving customer service, delivering operational results, and increasing cash flow.
In 2016, we launched a formal Footprint Optimization Program. We committed to investing $500 million-$600 million to reduce 5%-10% of our production space. This investment will improve customer service. It will deliver $125 million-$175 million of operational efficiencies. It will deliver $100 million of inventory benefit by reducing touches, number of inventory locations, and cycle time. The overall program will deliver a return of more than 20%, and some of the specific programs, much higher than 20%. 2018 by $100 million-$350 million. In addition to increasing the overall level of investment, we're also shifting our mix. Less renewal programs and more productivity, disruptive technology, and capacity investment. This is significant. In 2018, we're doubling our investment in productivity, we're tripling our investment in disruptive technologies, and we're increasing our investment in capacity additions that enable more growth by 40%.
Taken in concert, we're investing more to build and leverage our fundamental strength in manufacturing. Again, the customer is at the center of our thinking, creating agile supply chains to win with our customers by helping them deliver on their promises. This is about deploying advanced proprietary process technology to create the most automated, connected, efficient, safe, and sustainable operations aimed at one simple objective, delivering the highest quality and shortest lead times to our customers. Let's take a deeper look at how we do this. We go into our 46 technology platforms, and we pull technology, typically more than one. We combine them to create proprietary processes that we then deploy in our manufacturing operations, and AI and machine learning. I've been on the ground floor of many of our technology developments. I've seen them in the early days in our research labs.
I've tested them in our pilot plants and deployed them on our factory floors. This is something that is truly unique to 3M and incredibly exciting. Here's one example of how we go about doing this. This is our proprietary automated web inspection system. We're using these systems being produced. We're using digital scans along with machine learning algorithms to detect defects smaller in diameter than human hair, and more importantly, to control our processes by continuously adjusting our process conditions real time to optimize quality and throughput. Again, it's blending our proprietary domain expertise with big data analytics and machine learning to deliver real-time quality and productivity improvement year after year. We've deployed more than 100 of these systems on more than 70 production lines around the world, and they're having an outsized impact in our operations.
80% decrease in defective parts per million, a tripling in inspection speeds, and delivering $30 million company. Its supply chain, delivering 3M products, enhancing every home, and its supply chain through 3M innovation, improving every life. That concludes my briefing this morning, and it's my privilege to introduce Eric Hammes, Senior Vice President of Business Transformation.
Thank you, Jon. Good morning, everybody. It's a great pleasure to be here today and to have the opportunity to update all of you on the progress we're making with business transformation. Over the next short while, you'll see that we are further enhancing our customers' experience with 3M and our ability to grow. We are continually improving our internal processes and efficiencies, and we're increasing our ability to reach the marketplace in broader and in different ways. Throughout the morning, you have seen how 3M's Playbook is working, and business transformation is very much a key element of that Playbook. We help to enable our business leaders to more actively manage the portfolio. When we bring technology and solutions to our customers and employees, we also help to improve the highest return on our R&D.
Business transformation is an integral lever at 3M and one that further enhances the fundamental strengths of 3M Company. As you've heard and seen in previous conferences, we measure the success of business transformation through the eyes of our customers. When done well, we create the ability for our customers and 3M to grow in a partnered fashion. We can further streamline the buying experience. We can help to create easier access to the full breadth of 3M's innovative portfolio. We increase our ability to reach the broader marketplace in new and in different ways. We can also optimize end-to-end service, which enables sustainable productivity at 3M. Our customers can feel this in a very real way, while we can also improve within 3M from being more connected, increasing our accuracy, and very importantly, achieving operations at scale.
With that as a backdrop, let's take a moment to look at how the initiative of business transformation has evolved. We've learned and grown with every experience, and little by little, I can assure you that the full benefits of transformation are coming through at 3M. There are three areas that I'll talk about today. The first is technology, the second is process, and the third is value. Our technology platform started out as a single instance ERP, but we've enhanced that to include the right balance of both standardization and specialization, which enhances our ability to digitally enable our businesses and importantly, connect with our customers and employees in more relevant ways. You heard the importance of this this morning when Mike Roman spoke about the emergence of digital commerce within industrial markets or digital solutions within healthcare and e-commerce within retail.
Early in our transformation, we also focused heavily on process standardization. As we deployed in Canada and West Europe, we started to understand the importance of not only standardizing, but also redesigning and optimizing our processes to better connect with our customers. This helped create an improvement within our support functions. The visibility that we now have in terms of data across our end-to-end processes and across our geographies is enabling data and analytics to play an ever-increased role at 3M. Once again, it keeps us closely connected with our customers. We're excited about how this journey is unfolding. We have our three service models, which you all understand are the basis for our value realization play: global service centers, business services operations, and supply chain centers of expertise. These have been outstanding platforms that have helped to drive value realization in 2016 and in 2017.
They've provided 3M with innovation and scale. They also provide us the high confidence level that we'll deliver on our value realization commitments through 2020. As you heard from my colleagues this morning, and as you'll continue to hear from me, business transformation has the ability to drive benefits beyond 2020. Let's take a look at how we're performing through the eyes of our customers. Our first order of priority with any deployment is to create a seamless customer experience. Zero interruption to the business is our aim. As mentioned, we're also looking to improve the end-to-end service experience. This creates the ability for new growth opportunities. In 2016 and in 2017, we were very successful.
From 3M Canada to West Europe, to most recently the United States, our customers are feeling this experience, and you can see some testaments from some of our largest customers up on screen today here. We see strong communications and partnership giving us the ability to leverage a seamless transition. Our partner portal enables quick access to the right products and the right order information at the right time, at the right speed, which ultimately improves our customers' ability to grow with 3M. This gives us confidence, and it gives us confidence as we look forward. At the end of 2017, we will have deployed approximately 30% of 3M's revenues on the global ERP. With our technology platform well-designed and substantially built, our teams can now shift their focus from build to deploy.
This is highly advantageous in several ways, but predominantly because it gives us the ability to scale down our investment in the program and focus more wholly on value realization. By the end of 2020, we will have significantly impacted the customers that we reach, employees we engage, and supply chains that we transform. While still focusing on value realization in West Europe, our focus will shift more dominantly towards the United States and APAC. By the end of 2020, we will have deployed approximately 95% of our revenues on 3M's global ERP. Our teams in the United States have been challenged in a big way. Given the overall size and significance of the U.S. and our market position, we've enhanced our focus in two areas. The first is with our customers, and the second is relative to deployment.
With our customers, we're communicating with them earlier and more broadly. Through a multi-month campaign, we're ensuring that our customers have the broadest understanding of business transformation, but importantly, how each aspect can be leveraged for better service and growth. Better access, better information, and better personal touch points are the wins that every customer can expect from 3M. The second area of our focus is around deployments. With the United States, we have a thoughtful and managed approach, segmenting our business groups, plants, and distribution centers. This approach enables our teams to focus their efforts in a more prioritized way and ensure deployment success. We can already see how this is paying off, both in terms of customer engagement as well as deployments. In the second half of this year, we completed our deployment of the healthcare distribution center in the United States.
It was a critical part of our global supply chain and an even more critical part of healthcare's global supply chain. At $1.6 billion in annual sales, it was an outstanding milestone and it demonstrated the strength of our 3M teams. Our customer-facing business processes were robust at go live. Our cycle time for recovering productivity within our distribution center was quick, and it provides us confidence through 2018. In fact, several of our major medical distributors, channel partners, as well as direct customers, were complimentary of the seamless transition with 3M. Our 2017 deployment success, again, is giving us confidence that we'll succeed in 2018. Let's spend a moment on value realization. Our commitment to value realization has remained constant throughout the past few years and is unchanged as we look at business today and into the future.
Delivering a premier customer experience for our customers, expanding into new markets, growing together is all critical elements to ensure 3M's organic growth. All of you understand that organic growth is a primary metric at 3M, and perhaps it's the broadest financial measure of success for business transformation. We also see that business transformation can create a more efficient 3M. We've established three global service centers that provide seamless coverage around the world. Just two years since their inception, we're covering all of our major support functions, all of our major geographies, and all of our major business processes. We've grown a culture within these global service centers that has synergy to the rest of 3M, such as Lean Six Sigma. We've also built differentiated capability in the areas like language diversity, process automation, and service excellence.
Over the next 3 years, we will double our capacity in our global service centers, and we have great opportunities for additional services in our support functions and businesses. Our business services operations aims to enhance the customer experience while driving efficient growth and reducing costs. In a sense, it embodies business transformation with a focus on both growth and productivity. The customer testaments that you saw today are enabled by our business service operations. As HC earlier mentioned today, this organization also enables our sales teams to be more precise in their selling efforts, but it also plays a key role in standardizing our processes. For our deployed countries, we've driven nearly 50% automated order processing, nearly 100% automated pricing, and we've substantially simplified our pricing and incentive plans. This is a great example of how simplification and optimization can ultimately drive value.
As you also heard from Jon, our supply chains are organizing for success. Our ecosystem of technology is enabling end-to-end visibility, and again, for data and analytics to play a bigger role in how it contributes to productivity, planning efficiency, and capital efficiency. Our 3 service models are enabling our commitment to our $500 million to $700 million goal for value realization. It's also very important to understand that these organizations play a key role in driving our half a billion dollar in working capital improvement. A culture of continuous improvement is very strong at 3M. In 2017, we found that our deployed countries and global teams have great ideas how to take things to the next level. Our task is to complement those ideas with systems and technology. We've applied a couple of 3M basic best practices that can also be very powerful.
The first is to ensure we have a global process for collecting ideas and prioritizing those ideas, and again, attaching those to technology. We've also expanded our Lean Six Sigma resources and usage of Lean Six Sigma tools. We have Lean Six Sigma black belts within our business transformation initiative focused on end-to-end process optimization. We've also embedded them within our global service centers, and they're connected to how Jon mentioned Lean Six Sigma around the company. Better more, we've also improved the way that we organize and the speed at which we deploy technology to help get to the fastest path to value realization. The 3M culture of continuous improvement is alive and well, it's contributing today, and it'll continue to contribute into the future. As you can see, business transformation is progressing.
We're transforming 3M, optimizing 3M processes, and enabling data and analytics to play a bigger role within 3M. We are enhancing the customer experience, and we are improving our ability to organically grow while creating sustainable productivity. With that, I thank you, and I introduce Senior Vice President and Chief Financial Officer, Nick Gangestad. Nick?
Thanks, Eric. Good morning, everyone. Throughout the morning in the prepared comments, you've been hearing about our five-year plan and how we are executing on that plan. I'll close out the prepared comment portion of the morning before we head to Q&A. I'll first touch on how are we progressing on that journey of our five-year plan. Second, I will update you on our expected strong close to 2017. I'll spend the majority of the time detailing out our expectations for 2018. To start, in March of last year, we laid out our long-term objectives for the company. We shared at that time a plan of how the organization was focused on aggressive yet realistic goals. That 3M Playbook is working. You can see through two years of the plan that we are delivering on the financial objectives that we laid out.
Before I address the outlook for 2018, let me provide a few comments as we close out 2017. Overall, 2017 has been a strong year, even better than we expected entering the year. As discussed on the third quarter earnings call, we expect full year organic growth to be between 4%-5%, and we expect EPS to be between $9-$9.10. We expect to be in the top half of that range for both of those guidance figures. Also on the earnings call in October, we laid out four planning items that will impact the fourth quarter. Those are included here as a reminder. Operationally, we are tracking to our expectations, while at the same time investing in the business, investing in R&D, investing in CapEx to drive our business model that enables us to grow both now and into the future.
Cash flow and return on invested capital are important financial metrics for us. They are expected to be strong for the year. Let's now move to our outlook for 2018. 2018 will be another year of delivering on our five-year plan. As Bruce mentioned earlier, our plan does not include potential U.S. tax reform, nor does it include the pending sale of our communication markets business. The main drivers of our year-over-year growth in GAAP EPS will come from organic growth along with strong operational performance. We generate consistent and healthy cash flow due to the strength and diversity of our business model. In 2018, we expect another year of effective capital deployment, funded by operating cash flow along with added leverage. As always, investing in the business to fund organic growth remains our top priority.
This includes CapEx and R&D, which propels our organic growth, as well as strategic acquisitions, which augment our growth. While we invest in the business, we also plan to continue returning cash to shareholders via dividends and share repurchases. Our team continues executing our 3M Playbook and leveraging the four fundamental strengths of the company. Moving to capital, our strong operational cash flow fuels our capital allocation plan. We expect another year of strong operational cash flow generated from operations. We are estimating $9 billion-$9.5 billion prior to our investments in R&D and pension. As part of our five-year plan to shift our capital structure, in 2018, we expect to add leverage of $1.5 billion-$4 billion. All in, our 2018 plan calls for $14.5 billion-$17.5 billion of deployable capital. Our first priority for capital is investing in our business.
This includes research and development, CapEx, supplemented with acquisitions. While at the same time, returning cash to our shareholders and funding our retirement plans. Specific to acquisitions, our pipeline is active and healthy. All businesses are engaged in developing and prioritizing their pipeline, and our current priorities are in healthcare and industrial. In planning for 2018, we expect GAAP earnings to be between $9.60 and $10 a share, up 6% to 10%. This is primarily driven by organic growth and productivity. We expect our organic local currency revenue growth to be between 3% and 5%. Foreign currency translation is expected to be approximately a 1% tailwind to revenue, and we expect acquisitions net of divestitures to have a positive impact on revenue. Finally, we anticipate another year of strong free cash flow generation with a conversion rate between 90% and 100%.
Let's now take a brief look at the earnings per share roadmap for 2018. Our growth in 2018 earnings can be characterized in three categories: growth and portfolio management, productivity, and other financial contributors. Let me walk you through each of these. I'll start with growth and portfolio management and how we focus on delivering it. As I mentioned earlier, our first priority is to invest in organic growth, complementing it with strategic acquisitions while divesting and exiting businesses that no longer fit 3M's portfolio. By having this strategy, we are able to focus the organization on the right areas, shaping the portfolio, providing scale, and enhancing growth. Let's look specifically at 2018 organic growth, our top priority.
In 2018, we expect organic growth in the range of 3% to 5%, largely volume related, with price positive and in line with historical pricing power we have generated through our business model. Our growth in developed markets, we expect to be between 2% and 4%, while we expect growth in developing markets to be 4% to 8%. We expect this organic growth to add between $0.45 and $0.75 to earnings per share in 2018. Lastly, our investment in research and development and CapEx in combination is again expected to exceed 10% of revenue as we continue to fund organic growth in 2018 and beyond. Let's now look at organic growth by business. Mike touched on this earlier, so to recap by business group, both healthcare and safety and graphics are each expected to grow between 4% and 6% organically.
The industrial business group is expected to grow between 3% and 5%, and we forecast growth in electronics and energy to be in the range of 1% to 4%. Lastly, organic growth in the consumer business is expected to be 2% to 4%. Let's now move to organic growth by geographic area. We expect growth by geographic area to be very similar to our growth in 2017. Specifically, we estimate organic growth in the U.S. to be between 2% and 5%, and Latin America and Canada to be between 3% and 5% organic growth. Organic growth in EMEA is expected to be between 1% and 4%, with West Europe increasing in the low single digits. Finally, in Asia Pacific, we anticipate 4% to 7% organic growth, with China increasing in the low double digits, as you heard Steve talk about earlier.
Next, I will walk through investments in research and development and CapEx, which support and drive organic growth, generating premium returns for the future. Let me start with R&D. As you've heard from other presenters this morning, innovation is the heartbeat of the company. We connect 46 technology platforms to solve problems for our customers and their real needs, which enhances our relevance with our customers and delivers premium margins and return on invested capital. As both Mike and HC talked about earlier, we have focused investments in our priority areas for growth. R&D is a significant part of our commitment to building 3M for both short- and long-term success. We expect R&D investments to be approximately $1.9 billion, or 6% to revenue in 2018. Let's now move to CapEx investments.
CapEx investments are aligned with our portfolio prioritization process, delivering superior returns, and combined with investments in R&D, support our premium return on invested capital. CapEx enhances the fundamental strengths of the company by increasing our manufacturing capability, supporting innovation, and is leveraged across the business portfolio. We expect 2018 CapEx investments to be between $1.5 billion and $1.7 billion, or approximately 4.5%-5% of revenue. As Jon mentioned earlier, we are increasing our investments in CapEx in 2018 to add capacity to support higher organic growth and accelerate investments in disruptive technologies and automation. Let's now take a closer look at the impact of divestitures. We continue to focus our portfolio by divesting non-strategic businesses that don't leverage the fundamental strengths of the company.
With the majority of these divestitures in the safety and graphics business, in the last five years, we have sold 11 businesses for a total of $1.4 billion in proceeds, and they have a combined annual sales of $700 million. These businesses had organic growth and margins that were below our overall company averages and are better served in the hands of other firms. Let's now turn to the impact of 2017 divestitures on our 2018 earnings per share. In 2017, there were approximately $0.75 of divestiture gains that will not repeat in 2018. The majority of these gains came from the sale of our electronic monitoring and identity management businesses. As a reminder, we are not including the impact from the recently planned transaction involving our communication markets business. At the point that transaction is closed, we will then update our guidance to incorporate that transaction.
Let's now move from divestitures to acquisitions. Our recent acquisitions are enhancing shareholder value. Our acquisition process has led to more impactful deals, better strategic alignment, and improved financial performance. We have completed six deals of note since 2014, the earliest being Treo Solutions and the most recent being Scott Safety. The combined investments in these six deals total $6.6 billion. These acquisitions have delivered accretive organic sales growth with margins in line with our overall company average. Let me now cover the expected acquisition impact, specifically from Scott Safety to earnings per share in 2018. We closed the Scott Safety acquisition in early October and are pleased with how its integration into our personal safety business is going.
With 12-month revenue of approximately $575 million and EBITDA margins in the mid-20%, Scott Safety is a great asset to add scale to our safety business and leverage 3M's fundamental strengths to make it even better. As we have said previously, we expect this deal to be $0.10 dilutive on a GAAP earnings per share basis in the first 12 months, of which $0.08 are expected here in the fourth quarter. For full year 2018, the deal is expected to be $0.10 positive to earnings versus 2017. Let's now look at the earnings per share impact of foreign currency. As highlighted earlier, we expect foreign currency translation impact on sales to be a tailwind of approximately 1% in 2018. Our earnings per share estimate includes the impact of foreign currency on sales and operations, net of year-over-year changes in hedging.
In 2018, we expect a tailwind of approximately $0.10 per share, assuming exchange rates as they were at the end of November. Let's now move to how productivity is a core component of our earnings per share growth. While driving top-line growth is a priority in 3M, productivity plays an equally important role in our company. We are constantly looking for ways to make the company better. Let's start with the impact of our portfolio and footprint optimizations on our earnings per share range. Jon discussed earlier the progress we have made on our supply chain footprint plan that we originally laid out at our five-year outlook meeting in March of last year. 2017 is the peak investment year within the five-year plan for footprint optimization, where we are incurring approximately $0.42 in earnings per share charges related to portfolio and footprint optimization.
These projects were initiated in 2017, and some will continue into 2018 with added investments of $0.10, net of the benefits we begin to see. Taking into account the combined impact from 2017 and 2018, we expect footprint and portfolio optimization to be positive to earnings per share between $0.30 and $0.35. Let's now turn to the impact of raw materials. In 2018, we are expecting raw material market prices to be up, with our sourcing team's efforts delivering cost savings primarily through negotiation, material substitution, and productivity efforts. All in, we expect raw materials to be between a $0.05 headwind to a $0.05 tailwind to 2018 earnings per share. As a reminder, about half of our cost of goods sold is spent on raw materials and purchased finished goods. Let's now move on to value realization impact from business transformation.
As you heard earlier, business transformation is one of our three key levers, creating value for our customers and enhancing the efficiency of our operations. Through business transformation, we are standardizing global business processes by implementing a new ERP system, which is now deployed in the majority of Western Europe, with the U.S. deployments ramping up in 2018. In 2018, we are expecting $0.05 to $0.10 of incremental year-over-year benefit through value realization in business transformation. This keeps us well on track to deliver $500 to $700 million in annual pre-tax savings by 2020, as laid out in our five-year plan. Let's now take a closer look at where we expect additional productivity savings. Continuous improvement and driving productivity each and every day is a way of life at 3M.
On top of our business transformation savings, we expect an additional earnings per share benefit of $0.15 to $0.25 by reducing structure and driving efficiency across the enterprise, particularly in SG&A. This benefit is net of wage inflation and is built on an expectation of improved volume-related utilization. We also continue to execute Lean Six Sigma company-wide with an emphasis on our global supply chain and business transformation. Let's now transition to the impact of the expected tax rate in 2018. We have a long track record of reducing our structural tax rate through supply chain optimization and utilizing centers of expertise. In 2018, we expect our tax rate to be in the range of 26%-27%. This will result in an earnings impact between a negative $0.05 to positive $0.05 to EPS.
As Bruce mentioned at the beginning of the morning, this guidance does not include any potential impact from tax reform. Let's now shift topics to other financial impacts to earnings per share. We continue to take a disciplined approach to allocating capital and structuring our balance sheet. As touched on earlier, we do plan to add leverage in 2018 to complement our funds available to use. Beyond growth investments, we are committed to returning cash to shareholders and funding our retirement plan. Let's start by reviewing our retirement plans and their impact to EPS. Retirement plans' earnings per share impact next year is expected to be a headwind of approximately $0.10. We estimate year-end 2017 worldwide pension OPEB-funded status to be 83%, with the U.S. pension plan at 90%.
Our 2018 assumptions include the U.S. discount rate down 40 basis points versus last year and expected return on assets unchanged at 7.25%. The 2018 cash contributions to our defined benefit plans are expected to be in the range of $300 million-$500 million. As a reminder, we have closed or frozen the majority of our defined benefit pension plans around the world, and the change to defined contribution pension plans has provided employees with greater portability and flexibility. Let's turn to the next slide for a closer look at dividends. 3M has a long history of returning cash to shareholders via dividends. Without interruption, we have paid the dividend for over 100 years, with 2017 marking the 59th consecutive year of increasing our dividend, paying out $2.8 billion. Looking forward, we expect the dividend to grow in line with earnings over time.
The second way we return cash to shareholders is through share repurchases. In 2018, we are forecasting to deploy between $2 billion and $4 billion of cash to gross share repurchases. We estimate this will reduce average diluted shares outstanding by approximately 0.5%-1.5%, increasing earnings per share by $0.05 to $0.15. As always, the timing and the amount depends on the relative value and other potential uses of cash, such as M&A. We continue to execute our plan to further enhance our capital structure. In 2017, we added $2 billion of debt while repurchasing more than $300 million in high coupon debt. We expect to add between $1.5 billion and $4 billion of incremental debt in 2018.
As we continue to invest in the business, return cash to shareholders, and further shift our capital structure, we expect net interest expense to decrease in 2018, which will increase our earnings per share by approximately $0.05-$0.10. Let's go back and look at the earnings per share components in aggregate in the earnings bridge on the next slide. We expect 2018 earnings in the range of $9.60 to $10 per share, up 6%-10% year-over-year. Our earnings growth will be primarily driven by organic growth, supported by operational productivity. In summary, I'll wrap up where Inge started this morning. We have continued to execute our plan. Our Playbook is working. We are executing on our three key levers. We are well-positioned and ready for 2018 and expect to deliver organic growth between 3% and 5% and earnings growth between 6% and 10%.
With that, we'll take a moment to get everyone on stage, and then we'll open it up for Q&A. Thank you for your attention this morning.
Ready.
I've got a mic.
All right. First question, Andrew Obin.
Hi, how are you? I'll ask one question, but three parts to it. You talked a lot about internal process optimization, and you would think that you will see a significant reduction in lead times internally as you simplify your processes and internal supply chain. I guess three questions. First, where are you versus your targets when you sort of embarked on this journey? Second, what does it mean for your free cash flows going forward beyond the targets that you have set? Finally, things are really good right now, but what does it mean about 3M's performance in the next downturn as you reduce internal lead times and complexity? Thank you.
Sure. Andrew, let me take that, others can add on as they see fit for this. In terms of business transformation and all the things we've been doing to optimize our performance, from an earnings per share standpoint, we've always known that we will get benefits year after year, not quite linear, but very close to linear. The progression we've seen between 2016, 2017, and now what we're projecting for 2018, we're right on track to be delivering the operating income benefits that we expected. As part of that, we also said that we expect to take about a half a billion dollars of capital out of our supply chain.
That we have always known will be much more back-end loaded in the five-year plan that we laid out because much of the savings there, we need to have a more complete set of our supply chain in place in order to be fully realizing what we're expecting for the supply chain inventory value realization. We continue to see that on track. Part of your question is, over the five years, what do we see with free cash flow conversion? Through the first couple of years, we're right around 100% free cash flow conversion. We're guiding right now 90%-100% for 2018. That's a couple things going on. First of all, there's growth going on, and we are stepping up our investment in CapEx, both to be having the capacity to be delivering on the growth that we are experiencing and that we expect to experience.
Also working capital investments with that growth, we think in 2018 will also contribute to a 90%-100% free cash flow conversion. As I look to the complete five-year, we still see ourselves very much aligned around 100% as an expectation. The real kicker there in the last couple of years of the plan will be realizing more of that $500 million of supply chain value realization of taking inventory out of our supply chain as we get closer to having more of our entire footprint on our new transformed business process. Andrew, there was a third part of the question that I'm frankly forgetting.
Just as you simplify your lead internal supply chain and lead times, historically, 3M has been very responsive in terms of downturn, but it would take a quarter or two for things to recalibrate. How do you think company will behave differently if and when the next downturn comes, given what you're doing internally?
Scenario planning for all kinds of economic scenarios is part of what we do in running this company. Making sure we don't get too far ahead of ourselves in any type of one particular investment that we can react in the event of a downturn. Part of our reaction is reevaluating some of the investments we're doing, where are things we need to scale back, any things we need to pause on. We've demonstrated through multiple business cycles the capacity to adjust our business model down and our spending down when needed when we see that happening.
Any changes given what you're doing, right? If you simplify internal supply chain, it should give you a lot more flexibility than historically.
As always, part of what we're doing, Andrew, it is giving us more flexibility. I think what we're doing in transforming our business process only enhances our flexibility going forward.
Thank you.
Andrew Kaplowitz.
Nick, you mentioned positive pricing for 2018, I think you'll end the year in 2017 probably closer to flat, maybe up a little bit. Maybe break down the pricing guidance in the sense that, are there specific businesses where the environment's just better, industrial or healthcare, versus are you also being proactive? I know you guys have talked in the past about whether it's discounting or rebidding. Is 2018 different than 2017 as you think about that?
Yeah, Andy, when I compare 2017 to 2018, 2017 is a year where our price growth will be approaching flat. What's going to change on the margin to be back to our historic pricing growth range of 30-50 basis points? There's three places I'm seeing the most marked change from what we've experienced in 2017. First of all, geographically, the U.S. will likely be the area that has the most significant change from the price growth we saw this year to what we're seeing in 2018. From a business perspective, our industrial and our safety and graphics businesses are the two that we see the most change from our price growth trajectory where we were this year to what we'll be seeing next year.
Okay, that's helpful, Nick. Inge, I wanted to ask you about China. When you look at your guidance of 10%-15% growth in 2018 versus 2017, that's off of double-digit growth, I think, in 2017. Difficult comparisons, yet that kind of growth. You talked a lot about the mega trends, if I look at 3M in the past, 3M, as you said, has been in China for a long time but never really had this kind of growth. How sustainable do you think this growth is moving forward? These mega trends feel like they're here to stay. Should we be thinking that 3M could grow faster in China for longer year as we move forward?
Yeah, you should. We have had very fast growth in China in the past as well. Of course, that was a smaller base, we have been up and growing very fast in China for many years. I think what is happening now is a couple of things. First of all, our capabilities is much better, and our portfolio is much more aligned to what is happening in China. There is a shift in China, if you think about the industrial sector, from what they are shifting step by step from try to copy and do things slightly better and coping versus doing things differently, and try to use technologies in order to develop new things that make a significant difference in the market. That is a shift today versus 5, 10 years ago. That plays very well to our capabilities by definition.
There's also multiple companies that have been purchased by Chinese owners that now start to operate much more in China. That piece is very positive for us based on our portfolio, how we can serve them. That's a lot of it going to the local market, a lot is also exported. You think about the last two pieces of that transition and economy in terms of retail, consumer, and healthcare. We have shifted a lot the last 5 years in order to focus on that, and we have made significant investment in our nonwoven technology around air in China specifically. We saw that early, I would say. We made a corporate investment around that platform that made investment in China in together with what we're doing in St. Paul.
We made investment both in research and development, and we made investment in terms of capacity that we're using. I think as Steve said, in terms of our brand equity in China, everything around air is 3M. I would say in terms of your question, is this sustainable as we go ahead? In my mind, yes. I would say, we have a $3 billion U.S. business there. If you just look upon China, that look big, you look upon 3M, it's nothing. In my view, I've been traveling into China for 20 years, I don't think we ever have been in a better position as we are now relative to capitalize on it. There's a big shift going on in China relative to the future, what they try to produce and what they will consume domestically.
You need to be there and walk the streets and understand it, to feel it, that there is a clear change as we move ahead in China. Also the shift for them in terms of the leading equity of the enterprise in China as a country will not shift. They are very eager to make sure they continue to invest, both to have a good ending for the regime sitting now and a good start for the next ones. In terms of what we see, this is very positive and I'm very positive for the future, and the growth for us is sustainable based on our portfolio.
Deane Dray?
Thank you. Good morning.
Morning.
I was hoping you could comment on the pipeline of potential divestitures ahead and timing. Then for Nick, I know you're not including this $0.40 gain coming through in 2018, but what are you considering in terms of potential options against this gain, potential restructuring? Are you concerned at all about the optics of having any of this gain fall through to reported earnings for 2018?
Maybe I start with the portfolio management, that is key element of what we have done the last 5 years and so on. As you know, when you start to move your portfolio to a better place, it take you some time before you're ending up there. That was key element to identify first where every business stood inside of 3M. That what we did 2012, when we identified heartland, push forward, in transition, and under strategic review, was an important element. When you overlaid the 4 fundamental strengths of 3M in terms of technology, manufacturing, global reach, and brand equity, when you looked upon them, it became very clear which one you should continue to invest in, and some you couldn't fix them yourself, you should exit.
The one that we have divested during the last couple of years, or 3 to 4 years, been very clear that they were not in the top end of the shot, and they couldn't leverage more than one and a half of the 4 leverages or fundamentals that we had in the company. By definition, long-term, you couldn't win in them if you were 3M. Number 2, they were not strategically important for us. That way of us driving it have been very good, and we have had a good roadmap of how we have done it. As we announced yesterday, the communication markets business, I would say we have now gone from $2.5 billion in that corner of under strategic review to basically couple of hundred of millions that now are only product lines in some of the bigger divisions.
The communication markets business that went out yesterday is, in my mind, the last standing business that was a business that did not really will capitalize on this financial strengths for that business into 3M, and, or fundamental strengths as an enterprise. Nick, you can talk about the-
Yeah, Deane, at the point this closes, when it does close, we expect a couple things to happen. Of course, there'll be a gain on transaction that will occur, a gain resulting from that sale. When we divest of a business that large, there are also stranded costs that are left in the company. We expect, anticipate, that we will be taking some actions to address stranded costs, and that's why we're quoting a $0.40 Net of actions to address those costs. We'll be announcing that. We'll also have some impact, depending on when this is in the year, of what this does as far as divested income, of what is the income from that business that will not be in our results going forward. We'll disclose all that when that happens.
In terms of the optics of it, as always, we'll include that in our results, and we'll be very transparent about what's included in those results. We're doing it not around earnings, but we're doing it around trying to set up a portfolio that we think is the right portfolio for 3M.
Jeff Sprague.
Thank you. Good morning.
Morning.
Just a quick follow-up on that point, Nick, or Inge. The $0.40 is net of kind of cleaning up the aftermath of the divestiture. Are there things that are clearly visible on the board for you to do that perhaps accelerate some of what we've heard today? Or, I don't know, anything clearly come to mind from a restructuring standpoint that could be chunky and expensive?
Not really, Jeff. What we have and what we've laid out there, that encompasses what we're looking at. The other piece you may be talking about, as we've guided our footprint actions, there are some footprint actions that are continuing into 2018. That is incorporated into the guidance that we laid out.
Just further on capital deployment, you're not alone in having this high-class problem that you've got capital to deploy, you've got a highly valued stock, your targets are highly valued. How do you navigate through this to be careful that we don't look back a year or two or three from now, and we found that we hurt returns because we were buying things too expensively? Give us a little color on how you're making sure you guard your return profile that you're expecting when you do M&A.
Yeah. As you know, we've laid out over a number of years what is our plan around both our capital structure and what we're moving our capital structure to, and how we're allocating capital. In that, we laid out some broad ranges. I think another equally important component to that is the concept of patience and discipline. Throughout our metrics, as we look about how we deploy that capital, we are looking at what are the right strategic fits, as well as the financial returns on them, and we remain disciplined in 3M at making sure that they're going to generate the right return, and sometimes that requires more patience than we probably originally guided when we laid out that plan.
Just one unrelated one. I thought perhaps you might even do a bigger accelerated pension contribution or something to kind of put that to bed, given kind of your excess liquidity. Any thoughts on that?
I've laid out $300 million to $500 million to our pension. All of these are not assuming a tax reform. If tax reform were to happen, we will update guidance both for our earnings estimate and what that will do, as well as if there are any minor changes we would have on capital deployment. Pension could be one of those items.
Scott Davis.
Thanks. Just following up on that, Nick, I mean, had a chance, I'm sure, to look at the House and the Senate bills. I mean, can you just give us a sense of what you think the magnitude of impact on tax and cash is?
Yeah, Scott, this is going to be an unsatisfying answer to you that while it's still a bill and something that's being worked through in the government, we're not going to talk a lot of specifics on it. The direction that we've been advocating for years, both the House and the Senate version make a lot of progress towards that. We are pleased with those versions. We think they're beneficial to 3M. The specifics it would mean, both from a transition tax and then to a longer-term impact, we'll share that when all the details are worked out, and we're ready to be sharing that at that time, Scott.
Okay. Fair enough. Then, can you give us a little bit of color on the sale of the communication markets business? I mean, I think Corning's wanted this business from you guys for a long time. What was the catalyst to move you at this time?
Well, I think as I said earlier, we're working this in a process, right? I think that's a business that I have looked upon over time with question of, do we really have relevance, and would we like to get relevance with the investment that is needed in that space? It was a very good business for us, but it was by definition, not totally global for us. It was difficult for us to get scale as we move forward, and given the opportunities that we have inside of our company to invest in other areas, is maybe always we come short relative to those discussions. It's also part of our EEBG business, where we have had a lot of focus in order to make sure we get a very relevant portfolio and get people focused on what they should do in that space.
When we went through our process from a strategic perspective, it looked like Corning Incorporated was one of multiple companies that will be able to take care of this asset in a way that will be beneficial, both for them, for our employees, and what could be done with that business moving forward. As I said also, Nick said earlier in terms of growth rate and margins, they were not up to the level of 3M's average. In that case, you look upon it and said, would you like to have a business that you see yourself difficulties to build out real scale and leverage and be relevant to your customers when you have those other wonderful opportunities inside of 3M? The timing came in a discussion, and we decided to move forward at this point in time.
Personally very pleased that it's ending up with Corning Incorporated, based on the commitment they have made to us relative to what they will do with the business, what they will do with the people, et cetera. I think they will be more successful in that regime and with that owner than they had been with 3M. You have seen what we have done with our portfolio, and we are committed to certain spaces, and where we are, we make the investment. We like to be relevant, and we build around it. Right? I didn't see myself that the communication piece was one that we could really, over time, build a really relevant position for us.
Steve Tusa.
Thanks. Can you just talk about, within the segments, maybe healthcare as well as consumer, what is accelerating next year to get you to the high end or beyond for those two businesses?
Yeah.
The 6% and the 4%?
Yeah. Well, I will let Mike Roman make those comments, but I think you look upon those two businesses specifically, we have a higher growth rate, and we are delivering that specifically. Mike will give you some comments relative to what is there in order to come closer to the high end.
Yeah, I think you saw in my presentation some of the growth priorities that we're driving in each of those businesses, and those are not things that we're starting now going into 2018. They've been underway as we come through 2017. In the case of healthcare, investing in developing economies, and talked a little bit about it, relative to China. This is driving strong growth for us and adding additional broad base of business opportunity for us to what we've had established in developed economies around the world. We see our broader portfolio delivering strong growth as we come through the second half of the year in the current market opportunities for developed, and adding that developing pushes us to that outlook in that 4-6 range for next year.
It also got that accelerated growth in developing economies that's been adding strong growth in the second half of the year. A couple other dynamics that I touched on that are strengthening as we come through 2017 and we see them going into 2018. That is this home improvement business that's been a strong leader of growth for us, and it's not just a U.S. home improvement center kind of model. It's building out globally, and we see expanded opportunities in the improving economies and the do-it-for-me customers around the world, and our innovation is targeting those, and we're getting strong growth from that. This digital commerce, this leadership in digital commerce, we are a very strong partner to digital commerce plays around the world with our portfolio, our brands, and we're getting category-leading growth in those categories.
Digital's a big part of that. We see those as very good momentum as we go into next year, and we'll build upon the growth that we saw in the second half this year.
Just remind us, how fast did you guys grow as a company in China this year when all is said and done? When the books are closed in 2017, what's your organic growth in China this year for total 3M? For 2017?
Where is Steve? Steve.
We'll be around 15%.
Okay. Just one last one for Nick. You said pricing that's normal for 3M. Just remind us what that means within the zero to one or whatever it is, where you think you're going to be?
Steve, when we look at our price growth over time and pull out FX movements where we adjust up price in relation to a strong U.S. dollar in some developing markets, when we pull that out, we find that we pretty consistently have 30 to 50 basis points of price growth power, we see 2018, that's the zone we're going to be in.
Just to come back to your question as the first relative to consumer on healthcare. If you think about the way that the economies are moving, our pie of portfolio for both consumer healthcare is smaller in developing economies. That's where you see a lot of growth coming. You see consumer specifically in terms of doing B2C is actually a good opportunity for us in terms of disrupting channels in India, in West Europe, and eventually in China. There is good upside for us in those businesses. Consumer, the real big base for us is actually United States, big opportunities in international.
Rob McCarthy.
Two questions as a follow-up to some of the questions that were asked this morning. One, within healthcare, can you talk about dental trends? Because there's been a lot going on in that market and your outlook for 2018. In the context of acquisitions, and this is part B of one, could you talk about how you feel about that business or the dental-related business as a whole in terms of core to 3M, and I'm sure it is, but just maybe you could walk through the exercise a little bit of how you feel about dental. The second question is just around China and distribution in general. Is there opportunities to partner with folks that perhaps have pretty good local brand distribution? I give a specific example of A. O. Smith in China with its water heaters, building into water treatment, air purification.
Just an example of a potential go-to-market, because I know distribution in this environment, you probably have to be a little more creative about.
Starting with oral care, if you like, right? We like that business very much. We are, in fact, doing very well. When you look upon that business, I think where the challenge have been lately for the industry is restorative products in U.S. If you really start to segment the business, both business-wise and geographically, it's coming down to restorative products in U.S. It's a very good business for us. We are leading in terms of innovation, R&D, and new product introduction. That is the model for us. Is there some disruptiveness in the channels? Yes, there are, but you have that everywhere, and it's coming back to, as I think Mike talked about earlier, it's important that you focus on your end customers, and this case is on the dentist industry, by definition.
I think maybe some consolidation will come there, but I think it's important that you stay close to what you are all about, and for us, that is material science development. A good business, we are committed to it. We like the business as such. In terms of China and different ways of go to market, you talk about channels. I think that's an evolution as you go. I think our strength is very much that, as you know, that we are very much spec-ing and designing, by definition. That is a direct business for us. If other opportunities is coming in terms of channels, then we will evaluate that at the time as we move forward.
I think the important thing, again, that you yourself, I will not use the word control, that you manage the way you go to market, that you make a strategically important decision, who do you play with? That you make strategically important decision of what is your strategy in order to grow. In my view, for everything we do, it's the telescope that is important. You can go wrong if you use the microscope. You can be pushed to do deals that is short term beneficial for you. You have to have a long plan relative to what you do, and that's the same if it China or it's in U.S. with some consolidation of channels, some new players coming in from overseas. You have to make strategic decisions relative to how will you commercialize with or without them, and some cases it's without them.
You have to make sure you understand what your long-term goal is for the enterprise and how you will like to execute your plan. I think with that said, generally speaking, partnership is increasingly important in most things that enterprises are doing, right? Because you cannot do everything yourself over time, but you need to think it through so you make the right decision.
John Inch.
Good morning.
Good morning, John.
Good morning. Nick, the free cash conversion in the 2018 guide's a little light. Versus last year, it's sub-100. Is that just the elevated CapEx? It looks like the CapEx is still 4.5%-5% of sales. I'm just wondering why don't you think 100% free cash conversion, which is your long-term target, is the target this year?
The two single biggest components changing that are contributing to that range of 90%-100% for 2018 are both growth related. One is working capital investments that we're expecting to be growing in 2018 with the growth, and that's happening because we're not quite yet getting to the value realization that we're expecting from business transformation in 2018 related to the half a billion of working capital. Part of it's growth. The second part of it is our uptick in CapEx. Those two pieces are the two largest. There are other more minor things, but those are the two biggest impacting that in 2018.
Right. On the CapEx, Nick, remind me, what is the uptick for? Because it's still the same % of sales.
We're going from approximately $1.4 billion this year to a range of $1.5 billion-$1.7 billion in 2018. Two biggest things that are driving that increase: One is increasing in capital to be manufacturing the goods for this higher demand, and then the second is investments in the disruptive technologies that you saw Jon talking about this morning, that we are accelerating some of those investments in CapEx related to automation and disruptive technologies.
Okay. The Electronics & Energy, the 1%-4% organic guide seems very conservative. Last year, we talked about the impact of OLED. Is that still a significant factor in terms of why that business is not, given the strength of short cycle, China, et cetera, growing a little bit faster than that? Maybe you just put some numbers around that.
Yeah. A year ago, John, you heard us talk about that we felt each year the conversion from LCD and LED to OLED would reduce our revenue between $50 million and $150 million a year. That is what we said a year ago. What you are seeing in 2017 is we are getting enough penetration into OLED devices that we are not seeing that headwind materialize. In 2018, if there is a headwind, we expect it to be on the low end or below that, and that is part of the guidance. When you look at our growth this year, we are estimating approximately 10% growth. Part of that, John, is being driven by the amount of growth that we had in 2016. We were down organically about 8% in 2016, and now part of that is a rebound in 2017 with the 10%.
2018 is a bit of a more normalization in the supply chain and demand there.
That is fair. Just lastly for me, the global economy, Inge, is very strong right now relative to certainly where we started the year.
Yeah.
I think you are a big short-cycle company. Your targets for top line seem very reasonable. The 6%-8% EPS growth, is there some gating factor as to why 3M cannot be a double-digit sustained EPS grower? Because you are buying back shares, you are doing sort of all the right things. What is that gating factor? It is not really apparent. Is it that your margins are already very robust, and it is sort of hard to push them higher? Or maybe you could just shed some light on what you think the.
Yeah.
-the prospects-
I think maybe it's tough to push them higher by definition. I think that what we can do is, of course, get the efficiency in the organization. When we have talked about EPS growth, we have talked about that in line with other things as we move forward, as you know. When you look upon the economy around the world, where you started your comment, it is better today than when we started as we entered the year, and I think we see that in our result, generally speaking. I think as we lay out plans, we are always making sure that we lay out the plan that we are pretty sure that we can meet and hopefully exceed. As you have seen, as we have laid out our EPS over time, we have improved.
I think as we execute the plan, we have to see which pieces are coming together in order for us eventually to come where you will like us to be, which is much higher.
Martin Sankey.
Thank you. Inge, earlier this year you discussed the outlay of $100 million or so for accelerated commercialization-
Yeah
of new products.
Could you discuss with us how did that work out? Where were the successes, where were the failures, and what might we see going forward? Would that program be repeated, or you didn't like what you saw and-
No
Not do it?
No.
would accelerated commercialization investment be a use for the $0.40 gain next year?
First of all, if we go back to where we started, we put in $104 million, $105 million, something we call core search, where we identify certain program on the corporate level where we have to accelerate our investment in order to grow that business on a global scale. We said we expect 50-100 basis point of growth, and I always said 50 plus 100 is 150 for me, so we should expect more. I think you see the growth. We estimate this year now a growth of 5%. Clearly, an impact is coming from core search and investment we have done. I don't see any disappointment in the investment that we did. If you have an enterprise like 3M, and others, I'm sure, one thing for you is to make sure you prioritize your investment as you move ahead.
Sometimes that's difficult to do when you just run one division, you focus on every quarter in order to make sure that you deliver the result on the plan. That was why we decided on the corporate level to give value into the businesses with additional investment for those programs. As we go into 2018, we will not do that, because I think that every business now recognize with those investment, they should be able to do it themselves based on prioritization they will do in the business. The answer is, the growth is coming. That's good. The answer is, it will not continue to be supported with additional investments from the corporate level. It will now be done in each business group and in each division as we move forward. Yes, Jeff.
Thanks. I just had a couple questions on the growth priorities, a couple of them that you laid out. First, on automotive electrification, can you give us a sense of what your content per vehicle is and how you view the entitlement? I'm sure that entitlement's changing with automotive technology.
Is there inherently a larger content opportunity in EVs for 3M, or are you agnostic to that?
Yeah. I will let Mike talk about the specific, but I would like to make one comment that is important relative to 3M in this space. We are a very good and big supplier in automotive. We are the world leading in road safety, and we have our electronic and energy business. Those three components is going right into this trend moving forward. You can see the addressable market is $6 billion, growing very rapidly, 8%-10%, probably. If we pull those things together and we have now formed a special organization, here's a big opportunity for us, where we believe that we can provide something to that industry that is very difficult for anyone else to do because most, if not all, are very fragmented in those three segments.
It's actually one of the bigger growth platforms over time that we see in 3M based on what we can do. Mike will talk about what we see specifically in terms of the vehicles, et cetera.
Yeah. Maybe I'll start with our automotive business today. We continue to d evelop new solutions and advance applications for the internal combustion engine. Many of those are going to play in the electric vehicle. Assembly methods and light-weighting kinds of technologies and acoustic insulation, all those are going to be important in electric vehicle, in some cases more important. Acoustics will take on new dimensions, and there'll be opportunities to expand our number of applications as we move ahead. As I talked about, and Inge laid out, we bring not just our automotive base, but we bring our electronics materials and our transportation safety, and those are bringing together new applications and new combinations of technology that can help our electric vehicle customers solve some of their problems. We'll play bigger in the powertrain of electric vehicle.
We'll play bigger in terms of areas like thermal management and insulation in the electric vehicle and in battery designs and assembly methods and so on. Light-weighting will be amplified in its importance. There'll be new assembly methods. Electronic materials will play an increasing role in electric vehicles. There's a shift to a higher value in automobiles of their bill of materials being electronics, but it's going to be even amplified in electrical vehicles. We see that as opportunities. As I mentioned, we're early designs. We're early days in terms of percentage of the overall build that is electric vehicles. But early designs, we're at a much higher value per vehicle than we are in our base automotive business.
We see those opportunities continuing to grow out of that combined capability we bring from our three different bases that we bring into this: transportation safety, automotive, and electronics.
I just want to follow up on that. Can you define much bigger? Are we talking 50%, 2X, 3X? Separately, just unrelated, it was also just a little unclear to me what you're calling out as the opportunity in automation and abrasives, what exactly you're doing new and different there. If you could elaborate on that.
Just maybe to start with automotive. Again, it is early days. We see, like I say, a much bigger opportunity in the powertrain than we have in internal combustion. That's one of the areas that will advance it. We continue to drive penetration. We're a relatively small part of the bill of materials in the automobile today. We'll be a bigger part as we start out in automotive electrification. I'm not sure what the multiple will be as we move ahead. When I was talking about kind of examples of where we can go in higher value spaces across our industrial portfolio, one of the areas is robotics are playing a big role. There was a tipping point for robotics in welding. We're seeing some similar signs as you look at abrasives and automation in factories.
That kind of robotics automation coming into the factory requires very precise performance from its abrasives. Our precision-engineered abrasives is uniquely positioned to fit into that. We've been working in partnership and really rolling out some new designs that really optimize that robotics application. It's a little bit early days there, too, but it's moving ahead, and we are uniquely positioned with those precision-engineered abrasives to take advantage of it.
Andy Kaplowitz.
I just wanted to follow up on Electronics & Energy for a second in the sense that someone asked about it being conservative guidance. When we're talking about the high value add business that you have, and it's still sort of early days, if I look at the 1%-4%, how much of the growth in 2018, maybe even 2017, you did 10% growth, how much of the high value added business is contributing to that 10% growth? When I look at the 1%-4%, things like automotive electrification, grid-type work should be boosting that 1%-4%. You're penetrating Chinese OEMs. I asked you the question about China. You're going to grow double digits. E&E is big China exposure. It seems kind of conservative when you kind of put it all together. You know.
Yeah. Well, if we go back to, I think in March 2016, when we talked about 0%-4%, I remember some of you really thought that that was very conservative when we talked about 0. I agreed, if you remember. I agreed to that. You would like to have a faster growth in that business. We have done a tremendous work in order to focus that portfolio the way we like to have it. What you see is one thing when we report every quarter. The thing that is going on as we shift the portfolios, what Mike showed on that chart, with a bigger market growing 1%-3% and a smaller market that is growing 10%-15%, that is where the shift is going. We have talked about that internally in terms of should we guide differently?
We have decided at this point in time to wait and make sure that we really feel the traction on what we are doing. I'm very pleased with the portfolio work that have gone on in that business, which is for me the most important thing, that you type of feel that the action that I've been taking and putting you in the right direction moving forward. I hope that we can update our outlook in that business rather sooner than later. We have had a very good year this year. I think it will continue, but we have also to make sure that we are very realistic as we roll into 2018 specifically.
I think that will be a year that we will get the answer to what is the real growth rate with our new portfolio and the way we focus in that business as we move ahead.
Just one more, I guess, unrelated, Nick. The March 2016 Analyst Day, you introduced a curve for business transformation where you talked about a pretty big acceleration in 2019 and 2020 versus 2018, if I remember correctly. It's true that your margins are high, but at the same time, you get more of a boost from that and from factory optimization as you go into 2019 and 2020. When we're thinking about your incrementals, could your incrementals actually get better in 2019 and 2020 from these initiatives? How should we balance that with the fact that your margins are already pretty high?
A couple of things that will get better beyond 2018. Business transformation will be going into the most significant part. We haven't too back-end loaded it. There have been nice contributions we've been making over the last two years and continue, but 2019 and 2020, we do expect to be higher than what we've averaged the last two or three years from business transformation. The other thing that will be changing from 2017 and 2018 going into 2019 and 2020 is, we'll really be moving into the value realization phase on our footprint optimization, that 2017 and 2018 are largely about the investments, and we expect in 2019 and 2020 that that will be having a more noticeable positive impact. Those are a couple that are changing. Am I ready to declare a new incremental margin? No.
Those are two things on the margin that are improving and will get better in 2019 and 2020.
All right. With that, we'll wrap up Q&A, and I'll turn it over to Inge for some final comments.
Okay, thank you. Thank you very much for coming this morning and listen to our story. As you have seen, we are coming off 2017 with very strong and good results on all our metrics. We are very confident as we're rolling into 2018 and beyond that we will continue with this performance. As you have seen, things are lining up very well for us. The four fundamentals are in place and are working. Our portfolio is stronger today than ever before in the history of 3M. All initiative we are taking, everything from the customer focus until the business transformation and our supply chain is building us for a more efficient 3M as we move ahead. We have talked in other meetings relative to margin expansion, that one of the key element of that is West Europe, which will benefit all businesses.
On top of that, all the efficiencies we are doing internally is helping us. We are, by definition, a project-based company and process-oriented, and I think the last years, we have actually added very good competencies relative to customer interaction. From our team on this side, we would like to send you the message that we are very confident that we will capitalize on this very well as we go into 2018 and beyond. I think also when you look upon the five-year plan, as we are two years into the process of meeting all metrics, that is a good sign of a continuation of our success. Thank you very much for coming this morning.