Towns Dread Job Cuts But Investors Applaud The Role of 'Chainsaw'
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In one way or another, that's the question 25 communities nationwide are asking as they await with trepidation the edict of Albert Dunlap.
The corporate pruner, proudly known as "Chainsaw," has a reputation as one of America's most aggressive trimmers of organizational "fat." In July, he became the chairman of Sunbeam Corp., a Ft. Lauderdale, Fla.-based company better known for blenders and irons than gas-powered saws.
Almost immediately, Mr. Dunlap began preparations for the first rip cuts. He said the appliancemaker had too many factories and too many products. He hired a large accounting firm to prepare a report on each facility. Next week, he is expected to announce what factories he will close and how many of the company's 12,000 employees will still have jobs.
To many shareholders, Dunlap is a hero, boosting stock prices and leaving a lean corporate structure in his wake. But for many mayors and workers, his scorched-earth methods evoke apprehension.
At Scott Paper Company, now based in Boca Raton, Fla., Dunlap fired 11,200 workers, about 35 percent of the work force. At Lily-Tulip Company, a paper products firm in Toledo, Ohio, he unloaded 50 percent of the headquarters staff and 20 percent of the workers. At Crown-Zellerbach, a forest products company in San Francisco, Calif., he lopped off 30 percent of the administrative staff.
Dunlap maintains that his actions are necessary to save the company. In his recent book, "Mean Business," he says, "When I fire people, of course, I feel for them! But what I keep uppermost in my mind is that if I don't release them today, I'm going to have to cut more of them in six months or a year anyway." And, cut them, he does. He says, "My philosophy is to err on the side of too much. Too many asset sales, too many layoffs."
While he has been called Chainsaw, and the Shredder, Dunlap is most proud of the rubric "Rambo in Pinstripes." He says a rising stock price proves his case. In Sunbeam's case, the stock surged 30 percent after it was announced he was hired.
That philosophy has a lot of mayors worried.
"If we lose that factory, we'd be in pretty bad shape," says Mayor Clyde Brown of Shubuta, Miss., where the Sunbeam factory employs 350 people in a town of 577 residents. In Coushatta, La., population 2,300, Sunbeam's $10 million payroll supports 450 to 500 workers. "If it shuts down, you can imagine a town this small with a plant that hires this many people," says Mayor Archie Worsham.
Such concerns are not unusual these days. According to the Chicago-based outplacement firm of Challenger, Gray & Christmas, US corporations have laid off 362,297 workers for the first nine months, up 20 percent from the first nine months of last year. However, this is down about 50 percent from the peak lay-off year of 1993. This drop-off has led some analysts to conclude that downsizing has stopped. Not so, says John Challenger, executive vice president. "Downsizing is a permanent part of the landscape."
That's not much reassurance for a community that is about to see its main employer close. This has led some towns to try to deal directly with Dunlap, who has publicly advised, "If you want a friend, buy a dog." Hattiesburg, Miss., sent a representative to a Sunbeam stockholders' meeting to try to get some peace of mind. And, Mississippi Gov. Kirk Fordice has called Dunlap to assure him the state was pro-business.