Eastman Kodak, founded by George Eastman in 1880, is exiting the camera business after finding itself unable to compete with Japanese camera makers. Although it was one of the pioneers in digital imagery, it was trapped by its lucrative film market into a technological dead end. The Rochester-based company will focus on inkjet printers. Closing the camera business will mean the loss of an unknown number of jobs — and perhaps an even greater number of pensions.
The company filed for bankruptcy in January of this year. “The bankruptcy may give Kodak, which traces its roots to 1880, the ability to find buyers for some of its 1,100 digital patents, a major portion of its value. Kodak now employs 17,000 people worldwide, down from 63,900 just nine years ago.”
“This is a necessary step and the right thing to do for the future of Kodak,” Chairman and Chief Executive Antonio Perez said in a statement on Thursday.
Kodak’s market value has sunk well below $200 million from $31 billion 15 years ago, when its share price topped $94.
The shares began trading on Thursday on the Pink Sheets. By the end of the day they were down 6 cents at 30 cents each.
In recent years, Perez has steered Kodak toward consumer and commercial printers. But that failed to restore annual profitability, something Kodak has not seen since 2007, and did not arrest a cash drain.
Kodak has struggled to meet its pension and other obligations to more than 65,000 workers, retirees and others who participate in its employee benefit programs.
As the company spiraled downward it became, like the Detroit, dominated by its past rather than its present, something its CEO called “legacy costs”. As Dana Mattioli put it: “here’s one way of understanding Eastman Kodak Co.’s problems: The company has twice as many retirees drawing benefits in the U.S. as it has active employees world-wide.”
Kodak’s hefty obligations to its retirees have long limited the company’s strategic options. … Now, it hopes to scale back what it owes retirees during its stay in bankruptcy court. That leaves thousands of its former employees in danger of becoming the next group of Americans to see their promised retirements benefits—mainly health care—disappear.
Kodak has been whittling away at those benefits for years and says it wants to accelerate the process in Chapter 11 proceedings …
The U.S. liabilities accounted for the single largest drain on the company’s cash in 2011, consuming $119 million, Kodak said. In a memo to employees Thursday, Chief Executive Antonio Perez said the company aims to use Chapter 11 to “fairly resolve our legacy costs.” …
Bob Volpe, president of the Association of Eastman Kodak Retirees … is most concerned that Kodak will petition the bankruptcy court to eliminate retirees’ health-care benefits … some retirees, particularly those with no income stream who are too young to collect Medicare, will choose to go without health care.
The Economist notes that Kodak joins the list of once-dominant companies which failed to reinvent themselves. The moral of the story, it says, is ‘change or fail’.
National Cash Register (NCR) was once one of the world’s top computer makers, but has been reduced to making ATM machines and high-end registers. Xerox, the pioneer of copying machines, is struggling in the competitive market for imaging products and services. Even AT&T, the telecoms giant, was not able replicate the dominance it once enjoyed in handling long-distance calls. The only American technology heavyweight that has successfully reinvented itself is IBM—and more than once. In recent years the firm deftly managed the shift from selling hardware to offering software and services.
But the fate of Kodak may also hold a few lessons for government, an ever greater proportion of whose revenues are also being consumed by entitlements and other “legacy costs”. The difference between Kodak and the Federal Government, however, is that Kodak knew what was coming, even though it was powerless to stop it. But White House spokesman Jay Carney, blithely considers the departure of people from the workforce as an “economic positive”.
QUESTION: Thats a reality that people stopped looking for work and then they have to re-enter.
CARNEY: Well, look at some of the facts. A large percentage of that is due to younger people getting more education which in the end is an economic positive. There is a fact this increase in the number of people leaving the workforce has been a trend and a fact since 2000 because of an aging population. Which is not say this is wholly disregarded as an issue.
Why is government so unconcerned? Unlike IBM, it lacks the competence to adapt. The Presidents flagship policies call for an expansion, not a change in the current government model. Unlike Kodak, government isn’t even willing to try to reinvent itself. Why? Because what government can do something neither IBM nor Kodak could, which is print money. That and the fact that it’s too big to fail.