Sunbeam to Eliminate Half Its Work Force

Albert J. Dunlap, a no-nonsense corporate cost cutter whom Sunbeam Corp. hired in July to turn the small-appliance maker around, lived up to his reputation Tuesday and unveiled a massive restructuring plan that will eliminate 6,000 of Sunbeam’s 12,000 jobs.

Chief Executive Dunlap, known as “Chainsaw Al” for his record of quickly and aggressively slashing expenses at troubled companies, said the jobs will be cut from closing or selling 39 of Sunbeam’s 53 plants and other facilities, selling several product lines the company no longer wants, and otherwise consolidating its operations.

Its headquarters staff in Fort Lauderdale, Fla., alone will be slashed 60% to 123 people, Sunbeam said. The company’s major operations are mostly east of the Rocky Mountains; none are in California.

Sunbeam makes mixers, toasters and other small kitchen appliances under the Sunbeam, Oster and Mixmaster brand names, barbecue grills, electric blankets, and hair dryers and other personal-care products.

Sunbeam, with sales of $1.2 billion last year, will keep those lines. But the company plans to shed its outdoor furniture business; its Counselor and Borg lines of scales; and its clock, timer and temperature-measuring products, among other divisions.

Dunlap--perhaps sensitive to some critics who say he’s better at cutting costs than raising sales--also announced steps to increase sales of Sunbeam’s remaining products. The company plans to introduce new models, step up its advertising and marketing and widen its overseas distribution.

“There’s no question Sunbeam has the brands,” said analyst William Steele of Dean Witter Reynolds Inc. “What it needs are the [new] products and the ability to better communicate [to consumers] the advantages of using its products.”

Dunlap, in his trademark blustery manner, said much the same in a teleconference with analysts. “We’ve got a 90% [consumer] awareness of Sunbeam and Oster,” he said. “So we’re going to have a massive reassertion of our brands.”

The restructuring will result in a pretax charge against earnings of about $300 million but should produce annual cost savings of $225 million, Sunbeam said. The changes overall are necessary not only to bolster Sunbeam’s profit, but to secure its long-term future in the sluggish appliance industry, Dunlap said.

“The company, as it was going, would have been out of business in 18 months,” Dunlap, 59, told the analysts. “This is just the beginning. The best is yet to come.”

The statement about Sunbeam’s fate was probably hyperbole. But Sunbeam has under-performed many of its peers and it was beset by management turmoil before Dunlap’s arrival. For the last year, it has lagged the industry in sales growth, profit margins and return on shareholders’ investment.

Also, there’s little room for error in the staid small-appliance industry, which suffers from lackluster growth and thin profit margins. Manufacturers struggle to raise prices amid the mediocre demand, with discount giants such as Wal-Mart Stores Inc. insisting on low prices from vendors.

Sunbeam’s investors were thrilled with Dunlap’s arrival, and the company’s once-moribund stock has risen steadily in anticipation that he would shake things up. Sunbeam shares fell after the announcement, losing 50 cents to close at $25.375 in New York Stock Exchange composite trading.

But as is often the case in Dunlap’s world, what is good for stockholders is wrenching for thousands of workers and their families. The same thing happened at Dunlap’s last stop, Scott Paper Co., which was later sold to Kimberly-Clark Corp.

The stockholders are led by Dunlap himself, who typically is awarded stock options for millions of shares when he’s hired--stock that typically goes much higher after he slashes costs.

Regardless, Dean Witter’s Steele said Dunlap might be on the verge of shaking up the entire appliance business. If Dunlap can show how to persuade consumers to buy more Sunbeam and Oster products, and at higher prices, his competitors will probably try to follow suit, he said.

“This is an industry,” Steele said, “that’s begging for leadership.”