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Where Have All the Jobs Gone?

Kodak, a brand name known world-wide, is headquartered in Rochester, New York. In many respects, it stands for photography just as Xerox stands for photocopying. At its height, it was the largest employer in the city and its facilities covered hundreds of acres in and around Rochester.

When you read a blogger or hear a politician talking about “good jobs”, it’s jobs like Kodak’s that they’re talking about. The best wages in the city. No union. Whole suburbs sprang up built with Kodak wages. In many respects, in the three decades after World War II homeownership in Rochester meant that you worked for Kodak.

Kodak was a good employer to work for. It gave preference to relatives of existing employees when filling new jobs. If you had a job with Kodak, you had a job for life. The work wasn’t overly demanding. The pay was fair. The company provided on-site recreation, sports leagues year round, a credit union. Lunch hours were long enough to support a number of strip bars around the plant. There were plenty of nooks and crannies in the plants where a fella could bring in a mattress and catch a few zzz’s in the afternoon or during an overnight shift. Nobody got fired. And no blacks were allowed.

The classic American manufacturing company. Hey, it even had its own set of antitrust cases, attempting to hold on to a monopoly in film.

Their European competition, Agfa for example, was hampered by the World Wars and the necessity to rebuild afterwards. Their Asian competition, Fuji ran behind, as well, for similar reasons and a limited market.

Life was good for Kodak and its employees through the 1970’s. Oh, sure, they had to let blacks into the plants. And the offshore competition was heating up. Kodak was harder to sell overseas.

In 1980 Kodak was 100 years old.

Little things began to pop up. The pro photographers began to talk about the films from Europe and Asia. They were good, as good as Kodak and half the price. Rather than haul your film to a shoot overseas, you could buy it there. Tourists began to discover the same thing.

Color photography was booming, and processing was expensive. You couldn’t do color in your home darkroom. Or, could you? The kits started to come, and then the processors for commercial developers. The number of places that you could take your films to be developed began to grow, rapidly, and they weren’t Kodak. They didn’t even use Kodak chemicals. Or Kodak paper.

By now, not only were Agfa and Fuji films being sold in camera shops, they were appearing in retail outlets. And they were always cheaper than Kodak.

The managers at Kodak had always tried to keep technical current, with the top machinery for manufacturing and processing, but somewhere… Their competition had gotten a five to ten year jump on them. The new machines and processes were faster, cheaper, and computerized. They required fewer and fewer people.

And the years of horror came to Rochester as Kodak began layoffs, massive layoffs that would cut its local workforce by 67%. Whole divisions closed. It is impossible to describe the sense of betrayal, the hurt, felt by the people of Rochester when the layoffs began. Kodak could always be relied on, for employment, for charity, for taxes, for stability. And then it couldn’t. In 1982, Kodak had over 60,000 local employees, now down to about 21,000, and dropping. The 500 acre Elmgrove facility emptied and sold in 1999 and is still mostly empty today as the Rochester Technology Park. 20,000 jobs right there, some transferred to other plants, but most gone, and gone forever. It began as a camera manufacturing facility in the ’60’s, expanding later into a facility of blood analyzers, photocopiers and tool and die work.

Kodak doesn’t make copiers any more. It sold off Eastman Chemical which it had owned since 1920. It sold off its digital printing division several years ago and has just announced plans to buy it back. It is abandoning its Advanced Photo System which it had hoped would save the 35 mm market.

Building after building has been demolished at the legendary 2,200 acre Kodak Park plant, some 60 in the last ten years. Kodak announced in January 2004 a plan to reduce assets world wide by one-third. That’s a whole heap, and reflects Kodak’s plans for manufacturing in the future.

Here’s what Kodak says:

ROCHESTER, N.Y., Jan. 22 — Eastman Kodak Company, which announced in September a digitally oriented strategy to accelerate earnings growth, said today it has achieved a series of milestones in pursuit of that goal.

They include:

* Strong revenue growth across a number of digital markets, including digital cameras as well as computed radiography and digital radiography systems, and improving economic performance across the digital products portfolio, including the KODAK DIRECTVIEW PACS System 5 for radiologists, and the KODAK EASYSHARE line of consumer digital cameras and printer docks;

* The acquisition of PracticeWorks, the world’s leader in digital dental imaging; the acquisition of Algotec Systems, a leading developer of advanced picture archiving and communications systems (PACS); and the purchase of Scitex Digital Printing (now operating as Kodak Versamark, Inc.), the leader in high-speed, variable-data inkjet printing, moves that bolster Kodak’s position in digital markets and complement our existing operations;

* The planned investment in Lucky Film Co. Ltd., which will strengthen Kodak’s position in the emerging markets of Asia, where demand is growing for traditional products and services.

Additionally, Kodak expects to generate enough cash flow in 2004 to pay down debt while maintaining the required level of investment to pursue its strategic objectives.

These achievements reinforce the company’s confidence in its business strategy. As discussed in September, the new digital businesses are already doing well and offer significant growth opportunities, while portions of the company’s traditional business are in decline. Therefore, Kodak will devote additional resources to digital growth opportunities and maximize the traditional businesses, including through selective investments. As part of this strategy, Kodak is determined to be the lowest-cost provider of traditional and digital products and services.

The company will continue to improve its competitiveness in traditional markets, and it is committed to success in digital markets, which are characterized by faster growth, tighter profit margins, aggressive pricing and swift product turnover.

Consistent with that strategy, Kodak plans to develop and implement a new, lower-cost business model for its silver-halide based film and paper products, which will allow the company to claim a larger manufacturing share of the traditional industry. This will create a flexible business model whose cost structure enables the company to compete aggressively in the traditional business and stay ahead of declining demand in developed markets.

“We are at the dawning of a new, more competitive Kodak, one that is growing profitably, that has a more balanced earnings stream, and that will have a dramatically lower cost structure,” said Daniel A. Carp, Chairman and Chief Executive Officer, Eastman Kodak Company. “We’re seeing success today from years of investments in digital that Kodak has made. To compete in digital markets, we must have a business model that lets us move even faster to take full advantage of the profitable growth that digital promises. Today’s announcement signals that we will make the most of our leadership, our technology and of the opportunities presented by the traditional and digital businesses.”

While continuing to make selective investments in the traditional business, Kodak will use a portion of the cash generated to fund investments required to accelerate its transition to a profitable digital business, reinforcing Kodak’s century-long position as the leader in bringing imaging innovations to the world.

Kodak is preparing plans that would achieve full-year continuing savings of $800 million to $1 billion by 2007 through the following:

* reducing total facility square footage by about one-third, building on current initiatives to consolidate operations and dispose of surplus assets resulting from the consolidation;

* and, to implement these changes, reducing worldwide employment by about 20 percent, or 12,000 to 15,000, during the next three years. This reflects targeted reductions in global manufacturing, selected traditional businesses, corporate administrative staff, and other areas.

To pay for these plans, Kodak may incur cash and non-cash charges totaling approximately $1.3 billion to $1.7 billion during the next three years. Of that, Kodak expects to spend about $700 million to $900 million on severance-related costs and about $600 million to $800 million for the disposal of buildings and equipment.

Since these plans will be developed and implemented over a three-year period, company units will provide affected employees with more information as details are developed. In keeping with past practice and consistent with requirements in various countries, the company will offer severance packages and outplacement services to those affected.

“These plans are the consequence of market realities, and they will help us to fund a future for Kodak of sustainable, profitable growth,” said Antonio Perez, President and Chief Operating Officer, Eastman Kodak Company. “They are absolutely required for Kodak to succeed in traditional markets as well as the digital markets to which our businesses are rapidly shifting. As we said in September, we are committed to being the low-cost manufacturer and provider in all the markets we serve. To succeed, we must make our business model more competitive with what the markets and our customers demand.”

“The plans announced today will allow Kodak to strengthen its already solid position in digital markets,” Perez said. “For example, during the 2003 holiday sales season, Kodak’s data indicates that our EASYSHARE cameras were the best-selling digital cameras in the U.S.”

Kodak also is the No. 1 provider of online photofinishing services through its Ofoto subsidiary; the No. 1 seller of photo kiosks found at retailers worldwide; tied for the leading share in the U.S. market for photo-quality inkjet paper; the leader in medical laser printers; and the No. 1 seller of high-speed document scanners.

This success reflects in part the ongoing shift of resources to digital products and services, mirroring increased customer preference for digital. As the company said in September, about 78% of Kodak’s research and development dollars will be spent on digital equipment, services and media by 2006, compared with about 66% currently. The balance will be invested in traditional imaging products and services.

“Make no mistake we remain committed to film and printed output, which are, and will continue to be, great businesses,” Carp said. “We will continue to invest appropriately in these media for consumers, cinematographers, professional photographers, the health-care industry and others. We will enter new markets with film and other media, and introduce new products consistent with market demand. We will be the industry’s most competitive participant in traditional products and services.”

With the cash generated from the continuing operation of the traditional business, Kodak will have more resources to build on its market-leading digital products and services, such as the KODAK Picture Maker kiosks, KODAK inkjet papers, and the KODAK DRYVIEW laser printers for radiologists.

“As we have said for many months, Kodak will be a leaner, stronger, more competitive and more diversified company in the years ahead,” Carp said. “The actions we’ve reported on today support that vision, and position Kodak to remain the leader in providing customers with the products and services they need to capture, share, store, use, print and enjoy pictures. Kodak will thrive precisely because we have the leadership, technology and brand to do so. By continuing to act swiftly, we are creating a business model that will allow us to compete more effectively in all the markets we serve.”

Kodak is continuing the process of going digital, which they’ve been working on for fifteen years or so. Much of what they’re doing is remarkable, but it’s not manufacturing in the way it was in 1960.

Everything they make is made with fewer people, smaller machines, different materials, and for different markets. The 35 mm film industry, the reason for Kodak’s existence, is fading. Camera makers and computer manufacturers such as Canon and Hewlett Packard rule the digital world. Kodak had based its business model upon people buying rolls of film, having the rolls processed, and having a print for each frame on the roll. Digital changes every step of that model.

And, thus we see a classic example of what is happening to manufacturing in America. “Good jobs” vanishing. Other “good jobs” being created, but in vastly fewer numbers. From the numbers, Kodak plans to be the same company with 2/3 fewer employees and 1/3 fewer assets. The jobs are gone and they are not coming back in this form.

But they are coming back, in other ways and in other forms. Different skills are needed for these jobs, computer skills, for example. And the jobs won’t necessarily be in Rochester. Some may be half a planet away, because manufacturing in 2004 means worldwide, not next door. And the restructuring of Kodak has meant a new vitality for the Rochester area in a way that many do not see. A host of new businesses have been started, with new products, new concepts, new markets. And they all started with the answer to a question: “I used to work for Kodak.”

In this community, Kodak layoffs hurt. Add to them layoffs by Xerox, General Motors, and a number of other manufacturers, and you begin to see a community in pain. Or, maybe not.

YEAR UNEM % WORKING UNEMPL
JAN 1994 5.9% 539,864 34,089
1997 4.0% 561,019 23,525
1999 4.2% 555,557 24,474
JAN 2001 4.4% 543,049 25,106
JAN 2004 7.0% 528,900 39,600

The median household income is above the national average here in Monroe County. That suggests that something has made up for the loss of 40,000 plus manufacturing jobs in the last decade and more. The numbers don’t seem to show tens of thousands of Kodak workers out on the street.

It almost looks like the job market in Rochester and Monroe County is absorbing most of the laid off workers from the big manufacturers. In which case, the answer to the title of this post is: they haven’t gone anywhere.

Much of the research for this blog post was done through the web sites of the Eastman Kodak Company and the Rochester Democrat & Chronicle newspaper. Any errors in transcription or comment are mine, not theirs. This is an opinion piece, and the opinions expressed are mine alone.


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