Re Dunlap: Another Blowhard Bites the Dust
[Note: The Barron's expose' may have been the trigger; nonetheless, the outcome appears to have been inevitable. -- RR]
FOCUS-Sunbeam axes "Chain Saw" Al Dunlap
By Jim Loney
MIAMI, June 15 (Reuters) - ''Chain Saw'' Al Dunlap, the
controversial corporate turnaround specialist both revered and
reviled for hacking thousands of jobs from his employers'
payrolls, was himself fired on Monday by appliance maker Sunbeam
Corp.
Dunlap, 60, was dismissed for failing to deliver on his promises
to boost the company's earnings.
''We lost confidence in his leadership and his earnings
forecasts,'' Peter Langerman, Sunbeam's new chairman, said in a
conference call with analysts and reporters.
Dunlap, who took over Sunbeam two years ago and halved its
workforce through divestitures and plant closings, was removed by
the company's board just three months after he was signed to a
new three-year contract.
Dunlap's attorney, Christopher Sues, said his client was not
immediately available for comment. Sunbeam had not paid any
severance to Dunlap and issues surrounding his contract had been
turned over to company lawyers, Langerman said.
Sunbeam's new leaders said the company was not for sale and
declared it ''fundamentally better'' than it was when Dunlap took
over. But they said they would tinker with Sunbeam's
restructuring and expected the company to fall significantly
short of 1998 earnings forecasts of $1 per share.
Sunbeam has been on a roller coaster in recent months.
In January, the Delray Beach, Fla.-based company reported record
quarterly earnings on a 26 percent surge in sales. In March it
announced the acquisition of camping gear firm Coleman Co. Inc.,
Mr. Coffee manufacturer Signature Brands USA Inc., and First
Alert Inc., the smoke alarm maker. Sunbeam's stock hit a high of
$52 on March 4.
But in May, Dunlap jolted Wall Street when he announced a
first-quarter loss of $45 million, or 52 cents a share, and a
second, massive round of job cuts and plant closures.
Sunbeam's bookkeeping and sales practices came under attack this
month. The company heatedly denied any accounting gimmickry, but
its stock dropped to a year's low.
A critical article in Barron's suggested Sunbeam's 1997 profits
of $109.4 million were largely due to improper shifting of costs,
write-offs and revenues, which may have added up to $120 million
in questionable ''profit boosters.''
Langerman said Dunlap's ouster stemmed from concerns for the
company's future, not its recent results. He said its 1997
accounting was ''accurate in all respects.''
Dunlap -- who in addition to ''Chain Saw Al'' has been dubbed
''Rambo in Pinstripes'' -- took over Sunbeam after turning around
Scott Paper Co. At Scott, he pleased shareholders by slashing
11,000 jobs and boosting its stock before selling it to rival
Kimberly-Clark Corp. In the process, in addition to winning the
hatred of employees, he walked away with a reported $100 million,
primarily in stock.
When Dunlap took the reins at Sunbeam, the stock traded around
$12. He hacked Sunbeam's work force in half, to 6,000 employees,
and the stock rocketed higher.
Dunlap has frequently said that rather than cutting jobs, he
saves them by resuscitating failing companies.
After announcing the acquisitions of Coleman, Signature and First
Alert in March and their thousands of employees, Dunlap unveiled
another round of cuts -- 5,100 workers and eight factories in a
plan to save $250 million.
A week later the company rewarded him with a contract worth $2
million in annual salary and stock awards and options worth $68
million, according to published reports.
Efraim Levy, an analyst at Standard & Poor's who downgraded
Sunbeam's stock on Monday from hold to avoid, said Dunlap's
ouster was ''probably something they needed to do. He was
creating more controversy than help.''
''It's kind of a fresh start. Cost-cutting is one of the
advantages he's (Dunlap's) put in. He had done some profitable
initiatives. Now it's a question of leveraging them.''
Langerman said Sunbeam faced no liquidity problems, but had put
on hold a $1.7 billion loan syndication it had been negotiating
with bankers. ''We are determined to restore Sunbeam's
credibility,'' he said.
Langerman, 43, is chief operating officer of Franklin Mutual
Advisers, the investment adviser to Franklin Mutual Series Fund,
Sunbeam's largest shareholder, with a 17 percent stake.
Sunbeam's new chief executive, Jerry Levin, 54, a former chairman
and chief executive of Coleman Co. Inc. and Revlon Inc., said he
believed the three recent acquisitions made sense and that the
company was on the right track. He described his future strategy
as ''tinkering.''
But he questioned whether Dunlap's centralization of Sunbeam's
operations would work.
''My feeling is that for Sunbeam, which has multi-businesses ...
it won't work,'' Levin said. ''It's too complicated to run this
style ... I'm leaning toward profit center management.
''I do believe Sunbeam is pursuing the right strategy,'' he said.
''I am committed to running Sunbeam for as long as it takes to
fix the problems.'' |
