With Corporate Weddings, Showers of Pink Slips

Sunbeam buys Coleman, puts a mom out of work. But many jobless find new work.

The canyons of Wall Street are a long way from Janice Anderson's home in the farm town of Beryl, Utah. But the mother of two knows all about mergers and acquisitions. Two months ago, Sunbeam Corp. gobbled up her employer of six years, the Coleman Co., which has made sleeping bags in the nearby high-desert town of Cedar City for the past 28 years. This month it announced the plant will close on June 15.

"When I told him, my 11-year-old was real upset. He said, 'They can't do that to a single parent. Who's going to take care of us?' " says Ms. Anderson.

What happened to this working mom is the other side - the dark side - of the booming merger business. When two giant firms wed, they often close factories and warehouses. They make strategic decisions. There is also often less need for two corporate headquarters staffs, so the public-relations, legal, accounting, marketing, and finance functions get squeezed. The layoffs can run into the tens of thousands.

"When mergers take place, the layoffs sometimes happen right away or sometimes they are years down the road," says John Challenger, chairman of Challenger, Gray & Christmas, a Chicago-based outplacement company. "But inevitably in most mergers, there is overlap."

Flurry of job cuts . . .

In the past few months, there has been some noticeable overlap. Sunbeam, which took over Coleman, First Alert, and Signature Brands, is laying off 6,400. Compaq Computer, which bought Digital Equipment Corp., is giving 15,000 pink slips. Charlotte-based First Union estimates it will eliminate 4,400 jobs from its merger with Philadelphia-based Core States Financial.

With some megamergers announced earlier this year, such as Citibank's proposed merger with Travelers Group, BankAmerica's match with NationsBank, and Chrysler's combination with Daimler-Benz, yet more layoffs are expected.

Remarkably, because of the strong economy, many of those laid off are finding jobs, outplacement specialists say. Mr. Challenger estimates it takes about 3-1/2 months for a middle-level manager who makes $70,000 a year to find a new job. "Maybe 85 to 90 percent are finding equivalent or better jobs," he says.

. . . but hot economy helps

Companies giving their employees the pink slip are well aware that the job market is buoyant. As a result, they have shortened the help they will give their employees in finding jobs. "Five years ago they might buy a six-month program or even pay for a program until the employee was placed in another job," says Carlo Martellotti, Chicago-area sales director for Drake Beam Morin, the nation's largest outplacement company. "Now they are buying shorter programs of three to six months."

To determine which employees get to keep their jobs during a merger, some companies go through complex analysis. At First Union, for example, the company first determined how many people it needed in each department. It followed this with a detailed selection process, including interviews and performance evaluations. Employees who did not make the cut were given access to the company's total job postings and outplacement help. It also established a $16 million fund with area colleges. Displaced workers could take courses for free.

Sunbeam, which has gone through big cutbacks since its chairman, Albert "Chain Saw" Dunlap came on board in 1996, often asks an accounting firm to analyze the firm's needs.

In Cedar City, officials were optimistic that Anderson's sleeping-bag factory would stay open because it was profitable. But Ron Richter, treasurer of Sunbeam, says, "Work goes where production is done the most efficiently." This meant moving production to South Carolina.

The bloodletting is hard on employees. For example, employees at Digital Equipment Corp. (DEC) say the ax is just starting to fall on the 15,000 who will lose their jobs in the amalgamation with Houston-based Compaq. Most of the job cuts are expected to be in the Northeast. One Digital sales manager says the effect of the pending cuts has been to stifle employee initiative. "They spend their time trying to maneuver," says the manager. "The strategy is to stay around long enough to get the severance package and have another job lined up the next Monday."

John Alexanderson, a managing director with headhunters DHR International in Concord, Mass., says DEC employees will do just fine. "They have good problem-solving skills; they know how to get the work done," he says.

Jobs await the most-qualified

In fact, Jan Bunker, publisher of a newsletter for DEC alumni, has received requests from IBM, Fidelity (the mutual fund giant), Data General, and other firms that want to post job openings on her Web site (www.decalumni.com). "There is a population out there that values DEC employees, and they want the first shot at them," she says.

For other workers such as the 111 men and women at the Coleman plant, it's likely to be a longer road. There will be no outplacement services for most of them. Instead, they'll rely on the state's Department of Workforce Services, which will help them with retraining, including education and on-the-job-training stipends for employers. Most will be eligible for $284 per week in unemployment after their severance package ends.

Although Cedar City has a low unemployment rate (around 3 percent), most of the women don't expect to make as much money as they did at Coleman, says April Hiatt, an employment counselor with the state. At Coleman, the women made as much as $20 per hour, counting production bonuses. "Most likely they will start at $6 to $7 per hour in new jobs," says Ms. Hiatt. "It's sad."

After years of sewing, Anderson is planning to take advantage of the retraining funds to go back to school. But she says she's already learned something from the Coleman experience: Lifetime employment is not so certain anymore. "You go into a company and hope it lasts," she says.

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