Al Dunlap Revs His Chain Saw

Now, it's slash, burn--and maybe growth--time for Sunbeam

It was, as Sunbeam Corp. Chairman and Chief Executive Albert J. Dunlap himself put it, "vintage Dunlap." The massive overhaul of the Fort Lauderdale-based small-appliance maker announced on Nov. 12 has been eagerly awaited since the self-proclaimed turnaround artist took charge in July. The restructuring slashes the company's operations to the marrow while setting out an ambitious growth plan.

Dunlap's strategy: Slice Sunbeam's workforce in half, to 6,000; shutter 18 of its 26 factories; shed divisions that make outdoor furniture, bathroom scales, bedding, and thermometers; and cut the number of products offered by Sunbeam by 81%, to 1,500. These and other measures are expected to produce annual savings of $225 million. To pay for the overhaul, the company will take a $300 million pretax restructuring charge this year.

Dunlap also has laid out ambitious growth goals for Sunbeam, which call for doubling revenues (after divestitures), to $2 billion, raising operating profit margins to 20% from 2.5% currently, launching at least 30 new products a year, and increasing international sales to $600 million--all within the next three years.

LOTS OF LUCK. Some view his prospects with skepticism. "I wish him a lot of luck," says Lynne R. Hyman, an analyst with CS First Boston. "My view is that it's going to be very difficult to achieve." Dunlap's goals leave almost no margin for error, she points out. The pace of new-product introductions alone will require resources that will be difficult to muster, given the deep staffing cut. "There isn't that much growth in the market," says a competitor. "Where is it going to come from?" Adds Derek R.B. Brown, a partner at Deloitte & Touche: "Cutting costs and product mix doesn't make sense while you're trying to grow."

Dunlap is hoping to relive the slash-and-burn restructurings that earned him such nicknames as "Rambo in Pinstripes" and "Chain Saw Al" at Scott Paper Co. and other companies. At Scott, Dunlap dumped 31% of the workforce and engineered a stock market turnaround that added $6.3 billion in value to the company. For less than two years' work, he walked away with $100 million in salary, bonus, stock gains, and other perks.

Investors are hoping he can work the same magic at Sunbeam. Indeed, during a conference call with Wall Street analysts, investors, and media to announce the plan, Dunlap brimmed with confidence, even working in a plug for his book, Mean Business, which trumpets his record. Still, this time he is proposing his most ambitious cost-cutting and growth strategy yet.

Dunlap took over at Sunbeam when former CEO Roger W. Schipke resigned after five quarters of dismal returns. Once a unit of Allegheny International Inc., Sunbeam was acquired by investment banker Paul Kazarian in 1988 as part of Allegheny's bankruptcy proceedings. Kazarian improved operations and took Sunbeam public before he was forced out in a dispute with backers. When Dunlap arrived last summer, he quickly fired seven of Sunbeam's top executives and spent three months formulating his restructuring plan with his new management team.

FLYING TOASTERS? Dunlap hopes to build on the strength of the Sunbeam and Oster brand names. The first step is a $12 million advertising campaign to spur holiday sales, targeting in particular three new appliances--a toaster, an iron, and an electric blanket with new high-tech logic features. In addition, Sunbeam is set to roll out 40 products designed specifically for 220-volt international markets. "Our growth mission is to become the dominant and most profitable small-household-appliance and outdoor-cooking company in North America, with a leading share of Latin America and Asia Pacific markets," Dunlap told analysts.

Dunlap downplayed the stress of consolidating facilities and rolling out such a massive restructuring plan just as the company is entering its peak holiday sales season. "This thing has been planned like the invasion at Normandy."

It is unclear how Dunlap will use a $500 million line of credit for which Sunbeam recently applied. Dunlap says his goals can be achieved without acquisitions. But he conceded there may well be a part B to his plan. "We're going to be a very cash-rich company," he says. "We could do lots of things. We could merge, we could acquire. I think my record speaks quite loudly that I'll be looking for what generates the next quantum leap in shareholder value." Striking a deal to sell out before Sunbeam has to live up to its ambitious goals--now that, critics say, would be vintage Dunlap.

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