This manager may be able to contribute to the bottom line, but the real bottom line is that he is contributing to dissatisfaction, conflict, turnover, and the possibility of serious claims against the company. The effectiveness of a manager should be measured against more than the extent to which his or her department is profitable.
In many cases, when managers are as combative as yours, their ability to run a profitable department is often short-lived. Employees may respond to these kinds of managers over the short term, while over the long term they tend to sabotage, undermine, or quit.
Because of the costs, damage, and potential exposure generated by this manager, it is important that he be given some specific feedback on his behaviors. He needs to understand the problems that they cause, along with the expectation that he try to make some changes. He also needs to understand the consequences if such behaviors continue.
Speaking of running a profitable department, it is important to note that providing this manager with additional coaching and training could also be profitable.
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