News: Analysis & Commentary: MAKEOVERS
WASTE MANAGEMENT TURNS ON THE COMPACTOR
CEO Miller is working hard to finish what his predecessor started
Although he holds the title of "interim" chairman and CEO of Waste Management Inc., Robert S. (Steve) Miller couldn't be confused with a caretaker executive. In the two weeks since he was rushed in to pull the troubled trash hauler out of its financial dumpster, the Mr. Fixit of Corporate America has set about remaking everything from the cozy board to the very culture of what was one of the hottest growth companies of the '70s and '80s.
Miller is carrying out a makeover plan that Ronald T. LeMay, the outside CEO recruited in July, had plotted. Apparently frustrated by resistance to change at Waste, LeMay quit on Oct. 29. The board tapped Miller, who became a director last May. He was one of three outsiders who joined the board in response to agitation from investors, including George Soros.
On Nov. 11, Miller announced plans to chop jobs and equipment and say good-bye to founder and former Chairman Dean L. Buntrock. His aim: to bring management order and financial discipline to a sprawling company that used aggressive accounting to buoy its stock. "This company had one eye on the stock ticker," says Miller. "I look at efficiencies." He previously helped turn around Chrysler, Olympia & York, Morrison Knudsen, and Federal-Mogul.
"SPOOKY." To create efficiencies at Waste Management, Miller will ax 1,200 managers by Jan. 1, as the company centralizes sales, marketing, and buying activities. Deeper cuts are expected at the 37,700-employee company, especially in the Oak Brook (Ill.) headquarters. Miller wants to wring out $100 million in savings annually. But he also has to spend some money to replace outdated information systems and an aging truck fleet. One former manager suggests as much as 10% of the 23,000-vehicle fleet needs replacing, at $150,000 per garbage truck.
Some shareholders--who have seen their stock languish for years--are lobbying for structural cuts. Several want Waste to think about selling its holdings in Wheelabrator Technologies and Waste Management International. "Everything should be considered," says Peter H. Huizenga, a cousin of Waste co-founder H. Wayne Huizenga and one of its largest shareholders.
Another issue: cleaning up Waste Management's bookkeeping. In October, LeMay warned that 1996 third-quarter results were inflated by as much as 20% because nonrecurring items, such as gains from sales of discontinued operations, were booked as income; the company had used a slower-than-typical depreciation schedule; and it had taken inadequate environmental-cleanup reserves. LeMay, who declines comment, alluded to the company's "spooky" accounting on his way back to former employer Sprint Corp. Miller says he'll get to the bottom of the overstated earnings by yearend and promises more conservative accounting. Miller warns that this year's fourth-quarter earnings report will be another shocker. Some analysts expect write-offs of up to $1 billion.
The most symbolic change since Miller took the wheel is the earlier-than-expected resignation from the board of Buntrock, architect of Waste's growth-by-acquisition strategy and a recent target of investor ire. While Miller says Buntrock's decision to resign is his own, he adds that any new CEO will be better off without the founder looking over his shoulder. The board, which has added five new members this year, will get two more by spring.
The market is far from sold on the notion of a Waste Management rebound. "At the end of the day, what will determine the success is not strategy but execution," says analyst Marc H. Sulam of Donaldson, Lufkin & Jenrette Inc. Waste's shares have barely budged.
Miller knows he has a lot of convincing to do. But he insists there is no black hole in the books. "This is not an Oxford Health Care," he says. Meanwhile, the interim CEO is pushing ahead with the search for his replacement. Now, the company will look at candidates beyond the service industry for somebody who really knows how to clean up.By Richard A. Melcher and De'Ann Weimer in ChicagoReturn to top