Dark Days at Sunbeam

April 17 1998 3:30 AM

Dark Days at Sunbeam

CEO Al Dunlap knows how to cut costs--but not how to build a company's future.

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And, in the long term, when there is nothing left to cut, the only way to increase profits is to increase sales. In this respect, it's striking that in the press release announcing the latest turmoil, Dunlap said, "I want to stress that getting the right cost structure is only the first step in the process of building a powerful global business." The fact that he felt the need to say this suggests he still doesn't fully believe it.

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Of course, in some sense Dunlap must think that growth is important, because otherwise he wouldn't have spent billions of dollars to buy Coleman and First Alert and Signature Brands. But here again, it's telling that when he thinks about the long-term sustainability of Sunbeam, he thinks automatically about acquiring other companies. Acquisitions are not necessarily mistakes. General Electric and General Motors, among others, have done a brilliant job of using acquisitions to strengthen both themselves and the acquired companies. But shuffling dollars from one column to another is not the same as creating wealth. It's not the same as improving productivity. It's not the same as adding real value to the economy. And there's just not much evidence that Dunlap knows how to do any of those. In the end, it's not that Dunlap is a short-term thinker. It's that even as a long-term thinker, he's thinking about the wrong things.

James Surowiecki writes for the Motley Fool. He can be e-mailed at surowiecki@aol.com.