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Published: Tuesday, 7/24/2001

Time in Toledo helped sharpen `Chainsaw Al'

“Chainsaw Al” Dunlap didn't spend a lot of time in Toledo, but while he was here he cut a pretty big swath.

He slashed the staff of Lily Tulip, Inc., from 200 to about 100 and moved the company to Georgia in less than a year's time. And he didn't even need to buy a house or rent an apartment - he simply rented a room at the Sheraton Westgate Inn (now the Clarion Hotel) while functioning as the chief executive officer of the firm that had been spun off from Owens-Illinois, Inc.

Mr. Dunlap has been in the news a lot lately. Last week, the New York Times reported that Mr. Dunlap - who was fired as CEO of now-bankrupt Sunbeam Corp. in 1998 and later accused of accounting fraud - apparently falsified his resume. The Times obtained court records and other documents showing that Mr. Dunlap's employment history omitted two jobs from which he was fired in the mid-1970s.

The executive who gained a reputation for mowing down corporate staff had been axed himself at Max Phillips & Son, of Eau Claire, Wis., and by Nitec Paper Corp., in Niagara Falls, N.Y. Even though his resume didn't show it, he was fired after seven weeks by the Phillips scrap-processing company for badmouthing his boss to the point of hurting business, and he was fired by the paper mill after two years - (and later was accused of ordering the books to be falsified at the firm that eventually went bankrupt).

By the time Mr. Dunlap came to Toledo in February, 1983, he was developing a reputation for cost-cutting of the most radical kind. But it was later, at Scott Paper Co., in the mid-1990s, that he got the nickname “Chainsaw Al.”

Before Mr. Dunlap was hired as Lily-Tulip's CEO, the maker of paper cups was lured to move its headquarters to Toledo - twice.

Owens-Illinois bought what was then Lily-Tulip Cup Corp., of New York City, in 1968. The firm's president was Norman Hartmann, a Toledo native. By 1970, the Lily Division of O-I moved its headquarters to Toledo.

In 1981, the Lily Division spun off as a separate company, doing about $150 million a year in business and operated by a group of former O-I employees headed by James Cobb, who had headed the division near the end of his 30-year O-I career.

That's where Kohlberg Kravis Roberts & Co. entered the Toledo business scene, and that's also how “Chainsaw Al” came to Toledo. KKR, which later came to be known as the “Takeover King,” financed the Lily-Tulip spinoff and about 18 months later brought Mr. Dunlap in to cut costs in preparation for a public offering.

By 1982, Toledo lost the first of several Fortune 500 firms when Questor Corp bailed out of downtown Toledo and moved to Tampa, Fla. Lily Tulip was looking to get out of town too.

Lily-Tulip was wooed by the governors of Florida, Georgia, Missouri, and North Carolina and by officials from dozens of Sun Belt cities, but eventually decided to stay here - after a blitz from the Toledo Area Chamber of Commerce.

Among those who helped Lily-Tulip remain in Toledo was Paul Putman, then president of AP Parts Co., which owned One John Goerlich Square, the downtown facility being vacated by Questor.

“Jim Cobb and I were old friends,” recalled Mr. Putman, now retired. “I said, `Come over and talk.' I showed him the third and fourth floors, and he like [the offices].”

But in early 1983, KKR hired “Chainsaw Al' to trim Lily-Tulip's costs and raise profitability so that its financials would look better for the public offering (which was made in March, 1984).

“Al Dunlap didn't like Toledo ... and I knew the company wouldn't be here long,” said Mr. Putman. Sure enough, in December, 1983, Mr. Dunlap announced Lily-Tulip would move within two months to Augusta, Ga., which just happened to be near his home in Hilton Head, S.C. By the time of the move its headquarters staff had dwindled to about 100; about half transferred to Georgia, where the number bottomed out around 70.

“I was very disappointed,” said Mr. Putman. “They were very good tenants.”

Donna Owens, who had just taken over as Toledo mayor when Lily-Tulip's move was announced, also was disappointed. “We worked like crazy to keep them here,” she said yesterday.

The move of Lily-Tulip's headquarters was probably inevitable, according to Clarence “Doc” Pawlicki, who headed O-I's Lily Division for seven years in the 1970s. The overhead in downtown Toledo was too high for the company's size, said Mr. Pawlicki, who went on to jobs that included Ohio's director of development in Gov. Richard Celeste's term and director of economic development for the Toledo-Lucas County Port Authority.

Mr. Dunlap cut research and development and marketing departments so that “all that was left was sales and manufacturing,” said Mr. Pawlicki. “He took out a lot of costs which have to do with the future of a company.”

But Mr. Pawlicki was hesitant to criticize Mr. Dunlap for what he did. “His objective was different from ours. We were trying to grow a company. He was trying to show an immediate profit.”

However, Mr. Pawlicki believes that KKR “ ... learned a lot about O-I from the purchase of Lily. Once you get into the books, you can learn a lot.”

KKR took O-I private in early 1987 - in a $3.66 billion takeover. When O-I re-emerged as a publicly held Fortune 500 company in late 1991, it had sold off several large operations and had taken on billions of dollars in debt.

Hardly a soul in Toledo would have recognized the name Albert J. Dunlap in early 1983. But now most Toledoans would recognize the name “Chainsaw Al.”

Homer Brickey is The Blade's senior business writer. E-mail him at homerbrickey@theblade.com.



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