When the chain saw pauses, exaggeration starts growing

The Economy

November 25, 1996|By JAY HANCOCK

IF "Chain Saw Al" Dunlap did not exist, Wall Street would have to invent him.

Jerk, ogre, fiduciary Philistine, able to double small stock prices with the wave of a pink slip, Dunlap embodies both the alleged meanness and the swollen expectations of today's corporate overseers.

The stock levitation at Sunbeam Corp., Dunlap's latest project, seems as bizarre to some analysts as Dunlap's persona as a turnaround troll.

Item: Since Dunlap's July arrival as chief executive, Sunbeam stock has risen 133 percent and now sells for more than 100 times this year's projected profits and for 23 times next year's estimates. Even after tripling in the last decade and amazing even the most jaded expert, stocks as a group sell for only about 18 times profits.

Dunlap has "a lot to prove," said Lynne Hyman, who follows Sunbeam for CS First Boston. "The jury's still out."

Item: After a visit to the men's room at Brown Brothers Harriman, a starchy New York investment firm, Dunlap angrily started pitching rolls of toilet paper into the lobby because they weren't made by Scott Paper, his company at the time.

"I'm thinking, 'My job! My job!' " remembers Kathryn McAuley, the Brown Brothers stock analyst who had invited him in.

Fortunately for the economy and America, Al Dunlap does not exist. Not the Al Dunlap that everybody knows and hates, at least. That Al Dunlap is as much a figment of his own ego, ghostwriters and publicists as he is a fleshly executive.

Many of his antics -- like reneging on Scott Paper's $50,000 pledge to the Philadelphia Museum of Art -- are carefully calculated for their outrage value, say people who know him.

Dunlap fired Scott's morale officer by saying, "The hell with harmony. Get rid of her," he proudly recounts in his new book, "Mean Business." At another company, he met with the executive committee for the first time, pointed to two managers and said, "You two stay -- the rest of you are fired. Goodbye."

Some Dunlap anecdotes are exaggerated. He didn't fire nine members of Scott's 11-person executive committee his first week there, as he told Business Week a year ago. Three members had already announced their retirements; three were removed from the committee but stayed at Scott; four were indeed fired, but after five weeks, not one, Business Week found.

Short of growing a mustache to twirl, Dunlap never misses a chance to curry the world's disapproval. After being named CEO of household appliance maker Sunbeam, he plugged his book in a conference call with analysts. Lots of companies need to be "Dunlapped," he says.

"He loves to talk a really aggressive game and kind of likes to revel in a chain saw image," said Brown Brothers' McAuley. "He plays into that because he wants people to look at Sunbeam. He wants people to say, 'OK, there's something going on at Sunbeam.' I think a lot of this is about that stage management."

Dunlap is helped by gullible journalists who stretch the statistical span of his venom. Every newspaper reported this month that Dunlap will slash Sunbeam's factory roster from 26 to eight and shed 6,000 jobs. What far fewer said is that 3,000 of those jobs and as many a dozen of the downsized factories will continue to exist; they'll just be sold to other companies.

People magazine, in an awed Dunlap profile titled "The Terminator," said Sunbeam is "laying off half its 12,000 workers." Taking a tip from AT&T, which exaggerated the size of its own downsizing this year, Florida-based Sunbeam has not taken pains to make this clearer.

Tycoons like Dunlap have always earned public opprobrium in the cause of brandishing power and getting rich. But they've usually had the sense, like J. P. Morgan, to be bothered by the notoriety. Now they nurture it and revel in it.

But to say that Dunlap's pointy ears and horns are just airbrushed on is not to compare him to Albert Schweitzer. Six thousand layoffs or 3,000, firing most of the executive committee or just half -- it's still slash and burn.

The more dangerous fiction about Dunlap, say his many critics, is that corporate America has anything to learn from him, that what he does is more than just smoke, mirrors and meatball amputation to get a short-term earnings jag and a stock pop.

Yes, Scott Paper's stock price doubled in Dunlap's year-and-a-half tenure. But so did the stock price at James River Corp., a paper company lacking his presence, in exactly the same period.

What few remember is that Dunlap's term at Scott coincided perfectly with the most spectacular rise in paper prices in years. Everybody made money, and everybody's stock went up.

At Sunbeam, Dunlap says he is resuscitating a deeply troubled company and charging it for the long term.

To test that notion, I called Roger Schipke, Sunbeam's previous CEO -- and before that head of Columbia-based Ryland -- who lives in Harford County. Schipke, of course, is biased; Sunbeam's owners did not renew his contract, and Dunlap is undoing much of his work. But he's a good Dunlap antidote.

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