CHAINSAW: The Notorious Career of Al Dunlap in the Era of Profit at Any Price. - Review - book reviews

Washington Monthly, Nov, 1999 by Robert Weissman

CHAINSAW: The Notorious Career of Al Dunlap in the Era of Profit at Any Price By John Byrne New York: Harper Business, $26.00

IF THE AL DUNLAP OF Chainsaw were a fictional character, he would be dismissed as a figment of bad writing, a one-dimensional caricature: He capitalizes on his notoriety for mass layoffs by writing a book called Mean Business. He seems to revel in firing people. He is fond of telling visitors, "I just love predators. They can't just call up room service when They must go out and hunt and kill to survive." An egomaniac, he screams at and purposefully humiliates his employees, including top management. He has a personal life to match: He cut himself off from his family, abused his first wife, and was stunningly stingy in child support payments to a son from his first marriage.

Naturally, when Wall Street met this character in real life, it rejoiced. Dunlap broke through in his position as CEO of Scott Paper. After his corporate restructuring (11,000 people and 35 percent of the workforce fired) he was able to sell the company to Kimberly-Clark. Scott shareholders saw their investment rise by 225 percent.

That Kimberly-Clark stumbled badly after buying Scott did not register. When Sunbeam tapped Dunlap to run the company, Wall Street responded with hosannas. Share price rose a record 60 percent the day after the announcement of his hiring and continued to skyrocket during the first months of his tenure.

Dunlap quickly began to deliver the goods. He followed advice from his slash-and-burn consultants at Coopers & Lybrand to cut the headquarters staff from 308 to 124. Before that target was achieved, Dunlap decreed further cuts.

"I only want 100 people in the headquarters," Dunlap told two top surviving executives.

"Al," one asked, "how did you come to this conclusion?"

"Look," Dunlap retorted, "we could do this the hard way or the easy way. We are going to have only 100 people."

"I figured that we either did it or I would have to resign," one of the executives later told Chainsaw author John Byrne. "So we ended up firing people who were trying to get things done."

Dunlap certainly did not limit himself to firing middle management. He soon announced plans to sell or close 18 of Sunbeam's 26 factories. Wall Street celebrated, and the company's share value continued to climb.

Byrne does an excellent job of chronicling the human torment resulting from these plant closures, where experienced and efficient lifetime employees of Sunbeam were suddenly thrown onto the unemployment rolls. He also shows that many of the closure decisions were completely irrational from a business point of view. Profitable facilities were shut down and the costs incurred from production shifts could not be recouped in the foreseeable future. But Dunlap was determined to impress Wall Street with record jobs cuts, and he refused to listen to cautionary warnings.

These were not the only foolhardy element of Dunlap's restructuring. His plan was to cut costs, register short-term gains in profitability, and find a buyer for Sunbeam within a year. He succeeded at cutting costs, but not at finding a buyer. When his year was up, the consequences of his cost-cutting for the company's medium-to-long-term health quickly became apparent. Production snafus were commonplace. Buyers were over-stocked with inventory, because Sunbeam sellers had inflated sales by offering deep discounts. Product quality slipped.

As profitability plummeted and the company fell into the red, the board of directors turned on Dunlap and fired him. Soon it became clear that earlier evidence of increasing profitability had been the result of accounting tricks that auditors retrospectively disallowed.

Byrne's rendition of Dunlap's year-and-a-half tantrum is remarkable, enriched by interviews with most of the top players in the drama, save Dunlap himself and one longtime Dunlap associate.

What is most disturbing about the tale, perhaps, is how many accomplices Dunlap had as he wreaked havoc on a venerable company and the lives of thousands of employees. Executive after executive echoes the one who told Byrne, "I was a greedy son of a bitch along with everyone else" and willing to do whatever Dunlap demanded in exchange for the promise of a big payoff in stock options. The auditors were bullied into going along with questionable accounting measures. And Wall Street analysts, the board of directors and the principal shareholders allowed themselves to be deluded by Dunlap's sham turnaround of the company.

ROBERT WEISSMAN is editor of the Washington, DC-based Multinational Monitor.