‘Chainsaw’ Downsizing Cuts Communities, Jobs

Stock analysts love Sunbeam Chairman Al “Chainsaw” Dunlap, who this week announced plans to slash thousands of jobs from the Fort Lauderdale-based company’s payroll, sell factories and write off millions to finance the restructuring.

In company after company - Lily-Tulip, Crown-Zellerbach, Consolidated Press Holdings and Scott Paper - he has increased stock prices and/or company value by cutting costs and selling unprofitable units.

Just by showing up in Fort Lauderdale, just by taking the helm at Sunbeam, Dunlap has doubled Sunbeam’s stock price and capitalization. The day before he took over in July, Sunbeam stock was selling at $12 a share. Now it’s trading at about $25.

But increasingly, business commentators are asking whether the Dunlap style of management really creates value.

CNBC analyst Joe Kernen asked Dunlap about this. At Scott Paper, Dunlap often brags, the company’s market capitalization went from $2.4 billion to $9 billion as a result of his efforts.

But some academic commentators, Kernen said, are saying Dunlap doesn’t create value by his moves - he only transfers value from workers and the community to shareholders.

“The shareholders own the business,” Dunlap protested. Employees get paid every day, he said. Communities get taxes.

Invest in senior glut

The U.S. population is aging, so the newsletter Dow Theory Forecasts sensibly suggests that investors look at industries that will benefit from the senior glut.

One is manufactured housing and recreational vehicles. Business should boom as oldsters look for cheaper, simpler places to live and ways to meander in search of the sun. Dow Theory recommends Fleetwood Enterprises, which built 69,000 prefab homes this year, and Patrick Industries, which makes paneling and other furnishings for RVs and mobile homes. Patrick trades at a rock-bottom price-to-earnings ratio of 8.