Sunbeam and "Chainsaw Al"
Sunbeam Looks Forward
Once again, Sunbeam faces a need to revitalize the organization, but the challenges have a different focus this time. Along with the shareholder lawsuits, Sunbeam is also in litigation with the American Medical Association regarding a botched endorsement deal. There may yet be legal action over Dunlap’s firing. In an interview on July 9, 1998, he stated that he intends to challenge Sunbeam’s efforts to deny him severance under his contract, although both Dunlap and Sunbeam agreed not to take legal action against each other for a period of six months. Dunlap claims that his mission was aborted prematurely, and that three days after receiving the board of director’s support, he was fired without being given a reason. He has not commented on his legal strategy.
The Securities and Exchange Commission is also scrutinizing Sunbeam’s accounting practices. On August 6, Sunbeam announced that the Audit Committee of the board of directors determined that it will be required to restate audited financial statements for 1997, possibly 1996, as well as the first quarter of 1998. Until the audits are completed, Sunbeam will be unable to report its financial results for the second quarter of 1998. On August 24, Sunbeam announced that it would discontinue a quarterly dividend of $0.01 per share.
On that same day, Sunbeam announced a new organizational structure and senior management team, and outlined a new strategy focusing on growth. It is planning on decentralizing operations while maintaining centralized support and organizing into three operating groups. Four of the eight plants that were scheduled to be closed under Dunlap’s management will remain open to ensure consistency of supply. Sunbeam’s focus is now on consumers. The company’s goal is on growth through increased quality of products and customer service.
By late 1998, Sunbeam had developed a new management team with Jerry W. Levin as president and CEO. Levin outlined his strategy for revitalizing Sunbeam in a press release:
Although we still have much to do in the short term to stabilize Sunbeam’s businesses, our strategic focus is on growth. With some of the most powerful brand names in consumer durables, we will focus on our consumers. We are now conducting consumer research which should have a significant impact on our rate of new product introductions in the second half of 1999.
In contrast to the prior management’s approach, we are decentralizing operations while maintaining centralized support. Our goal is to increase accountability at the business unit level, and to give our employees the tools they need to build their businesses. We are shifting Sunbeam’s focus to increasing quality in products and customer service.
Sunbeam had not recovered with a stock price less than $10 and is facing a long road back to investor confidence.
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*This case was prepared by Carol A. Rustad and Linda E. Rustad for classroom discussion rather than to illustrate either effective or ineffective handling of an administrative, ethical, or legal decision by management. (References)