Why Sunbeam Is Shining Brighterby
Roger W. Schipke hadn't been on the job as chief executive officer of Sunbeam-Oster Co. for more than a day when one of his executives presented him with a dilemma last August. The company's big push into outdoor furniture was about to begin, but managers were hesitating to build inventories ahead of the springtime buying season. After all, Sunbeam's former CEO, Paul B. Kazarian, had frequently inveighed against getting stuck with unsold products. Schipke conveyed no such qualms. He ordered Sunbeam-Oster's factories into high gear--a move that is ultimately expected to contribute to a double-digit sales increase at the outdoor-products division this year.
That one decision says a lot about Schipke and Sunbeam's aggressive new style. Kazarian was ousted by the board in January, 1993, after a widely publicized and acrimonious exchange with Sunbeam's biggest shareholders. Schipke, 57, has restored much of the luster to the household-products maker's corporate--and brand--image. In his first year as CEO, Schipke has picked up the pace of new-product introductions and overhauled Sunbeam's management, while expanding the Fort Lauderdale (Fla.) company's global reach (table). "We want to be the premier small-ticket, durable-products company," he says.
By the looks of things, Schipke certainly seems to have a shot at that goal. Analyst Andrew J. Silver of Dillon, Read & Co. estimates that Sunbeam's profits could climb 14% this year, to $100.9 million, as its revenues increase 10%, to $1.17 billion. Wall Street seems happy with Schipke's accomplishments: The company's shares are now trading at about 23, up more than 22% from a year ago.
Sunbeam-Oster's direction looked decidedly less clear in the waning months of Kazarian's tenure. A former Goldman, Sachs & Co. investment banker, Kazarian was instrumental in rescuing Sunbeam-Oster from Chapter 11 in 1990 after its parent, Allegheny International, slid into bankruptcy. Together with investment-fund managers Michael H. Steinhardt and Michael F. Price, Kazarian formed a partnership that bought up most of Sunbeam-Oster's assets.
As CEO, Kazarian made great strides to turn Sunbeam around. Before long, however, some executives complained loudly to the board that Kazarian wasn't willing to commit capital to new products or plants. Kazarian denies any suggestion that he was a poor CEO. "The results speak for themselves," he says, citing improved sales during his tenure.
NO INTERFERENCE. Faced with a mutiny in the executive suite, directors fired Kazarian, setting off a nasty round of lawsuits. Kazarian contended that his ouster was simply a maneuver for Steinhardt and Price to pressure him into ceding control of the partnership. "If someone would have asked, I would have stepped down [as CEO], but I wouldn't have relinquished the control over the general partnership," Kazarian says now. The litigation ended in July, 1993, when Sunbeam-Oster paid $151 million to Kazarian and $26 million to other partners in a stock buyback. Steinhardt and Price held on to their shares in Sunbeam-Oster and now have a combined 57% stake.
Removing Kazarian from the picture was important to Schipke, who wanted a free hand at Sunbeam-Oster. He was accustomed to plenty of autonomy. He had spent 29 years at General Electric Co., including eight as head of its appliance division. The unit's sales more than doubled, to $5.2 billion, in 1989 during Schipke's watch. Still, not all of his tenure was so successful. In a major corporate embarrassment for GE, the company took a $300 million aftertax write-off in 1988 to fix problems with its refrigerator compressors. In 1990, Schipke became CEO of homebuilder Ryland Group Inc.
So far, Schipke says he hasn't felt any pressure from Price and Steinhardt, who couldn't be reached for comment on his management. Schipke says he has yet to talk to Steinhardt, though he has met with Price three or four times over the past year. "I've never had any interference," Schipke says.
With his authority clear, Schipke went about shoring up Sunbeam-Oster's executive ranks. To bring in fresh ideas, he hired a half-dozen top executives from the outside, including Paul M. O'Hara, the former chief financial officer of Fruit of the Loom Inc., who took over as Sunbeam's CFO. Schipke has also given his line managers far more independence. During Kazarian's tenure, some senior executives say they were not given enough autonomy. "Paul interfered much more with daily operations," says James J. Clegg, president of the household-products division.
Schipke also extended Sunbeam's product lines. Sunbeam is No.1 in an eclectic range of products, such as heating pads, electric blankets, bathroom scales, gas grills, and hair clippers. But staying ahead of the pack isn't easy. The household-products market is constantly in flux because of finicky consumers and fast-moving rivals such as Black & Decker Corp. and Hamilton Beach/Proctor-Silex Inc. To expand its share of the electric can opener market, Sunbeam recently introduced a version with a new feature: a detachable blade for easy cleaning.
The quest to bolster product offerings has also taken Sunbeam into entirely new household-gadget categories. Responding to consumer fascination with breadmaking, Sunbeam recently introduced its own breadmaker to go up against products offered by such rivals as Welbilt Corp. and Panasonic Co. In January, Sunbeam will also launch its own line of coffeemakers.
Acquisitions are another key to Schipke's expansion plans. In the past, Sunbeam-Oster has bought such companies as Charmglow Inc. (grills) and Borg Scales. Now, analysts speculate that Schipke wants a maker of health-care products for the home. That would complement Sunbeam-Oster's line of personal-care products, which include blood-pressure monitors and humidifiers.
GOING ASIAN. Schipke is also looking for growth overseas. Sunbeam-Oster is building on its strength in Latin America by offering more products to its existing markets in Venezuela, Peru, and Mexico. And it's eyeing potential joint ventures in the fast-growing economies of Asia. Schipke's goal: to increase international sales from 17% to 30% of revenues within three years.
Despite his initial success, Schipke faces big challenges. In an era of waning brand loyalty, Sunbeam-Oster has to keep up a steady flow of new products to keep consumers happy. And its retail customers can afford to be a lot choosier when it comes to stocking their shelves, now that almost every appliance maker is sprucing up its product line with new offerings and features to lure consumers.
And then there's Price and Steinhardt. There has been speculation among analysts that the pair may be tempted to sell its stake to one buyer rather than cash out gradually by selling shares to the public. That could unsettle other shareholders. Worse for Schipke, it could bring in an investor who might be far more meddlesome. For now, Schipke doesn't believe Price and Steinhardt are ready to sell. "They believe the company has further to go," he says. Still, he recognizes that the duo are not in the business of holding companies. Just as with Kazarian, keeping Sunbeam's biggest investors happy may be the key to Schipke's survival.
NEW PRODUCTS Extending existing lines by introducing new offerings, including breadmaker and can opener with blade detachable for cleaning. New designs stress easier assembly to lower production costs.
ACQUISITIONS After buying such companies as grillmaker Arklamatic and bathroom-scale company Borg to complement existing product lines, Sunbeam is considering expanding into other areas, such as personal health care.
GLOBAL PUSH Building on strength in Latin America with more product offerings. Considering joint ventures in Asia.