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Author Topic: Kodak's bankruptcy imminent?  (Read 5428 times)
Slobodan Blagojevic
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« on: January 04, 2012, 04:40:19 PM »
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Still a "rumor", according to Kodak, but a rumor published by Wall Street Journal. Just a day after "... the New York Stock Exchange warned the company it could be delisted unless its fortunes rebound...".
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RSL
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« Reply #1 on: January 04, 2012, 06:29:54 PM »
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Very, very sad. But, unfortunately, inevitable once Kodak's miserable management decided to coast through the digital age on the company's film cash cow.
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Eric Myrvaagnes
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« Reply #2 on: January 04, 2012, 08:30:42 PM »
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So true.

I had an uncle who was a chemist for Kodak many years ago. Others in his family also worked for the company, and in those days it was customary for big companies like Kodak to take good care of their employees.

You said it just right, Russ. Very sad indeed.

Eric

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Slobodan Blagojevic
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« Reply #3 on: January 05, 2012, 12:13:07 AM »
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Very, very sad. But, unfortunately, inevitable once Kodak's miserable management decided to coast through the digital age on the company's film cash cow.

Ah, speaking of Les Miserables: read this and weep. A quote from the article:

"... Kodak incurred a cost of $309,407 through Perez's 'personal aircraft usage' in 2010..."
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Alan Goldhammer
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« Reply #4 on: January 05, 2012, 07:43:37 AM »
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Somewhat related to the Kodak "news"  Our local (Washington DC) camera retailer, Penn Camera filed for Chapter 11 bankruptcy yesterday and announced the closing of 5 of its 8 stores.  The press release indicated falling sales as the reason.  Their prices were pretty darn competitive with the big Internet retailers and they had a good knowledgeable in-store staff.  They also have/had a Internet site with decent prices as well.  More and more the Internet seems to be ending in store shopping.
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bjanes
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« Reply #5 on: January 05, 2012, 08:09:01 AM »
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Very, very sad. But, unfortunately, inevitable once Kodak's miserable management decided to coast through the digital age on the company's film cash cow.

Quite true and ironic, since Kodak invented digital sensors but did not implement them for fear of cannibalizing the film market. Bankruptcy would be a disaster for the retirees, since their pensions and health care would be adversely affected. However, management assented to generous benefits demanded by the workers during good times and now both management and the workers are paying the price.

Regards,

Bill
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Slobodan Blagojevic
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« Reply #6 on: January 05, 2012, 08:44:10 AM »
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...However, management assented to generous benefits demanded by the workers during good times and now both management and the workers are paying the price...

Seriously!? Workers' benefits doomed Kodak?

But I can see how today's top management is paying the price for the workers' childish behavior: the CEO' budget for a private use of corporate jets had to be limited to "only" 100K for 2011. Now, that's a cruel and unusual punishment!
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bjanes
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« Reply #7 on: January 05, 2012, 08:54:32 AM »
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Seriously!? Workers' benefits doomed Kodak?

But I can see how today's top management is paying the price for the workers' childish behavior: the CEO' budget for a private use of corporate jets had to be limited to "only" 100K for 2011. Now, that's a cruel and unusual punishment!

Workers' benefits did not doom Kodak, but the main reason for chapter 11 is to reduce the cost of benefits to retirees and abrogate existing contracts. High executive pay and lavish use of corporate jets are outrageous, especially when management is incompetent, but those expenses are only a small part of total corporate expense, whereas worker compensation is a much larger part of the expense pie.

Regards,

Bill
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Rob C
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« Reply #8 on: January 05, 2012, 09:15:56 AM »
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Well, it ain't Kodak, but I had a 'phone call yesterday from my bro'n'lo telling me he'd been to do a survey of a camera store. I knew the original man well; he sold me my 'blads, Nikons and he was also a Leica Specialist, which in those days at least (60s), was something else. He handed over to his son some years ago, and then that boy handed over to his daughter, I think.

So what happened? I remember once when buying some Hassy stuff that he told me that he couldn't buy the things from VH at the same price that some London dealerships were selling! And there, I think starts the rot. I've long advocated that a manufacturer should only have one price at which any ultimate retailer can buy. That way, the mega retail firms could make extra money by taking advantage of their own economies of scale through better management, shipping etc. and not by buying more cheaply than can a small competitor. I'm surprised that governments allow this to happen: not only 'luxury' goods outlets are affected - look at how dairy farmers are being driven off the fields by the low prices the supers will pay them so that they can screw both ends of the chain - and all we get in the end is unemployment on today's disastrous scale. Nobody wins when there's huge injustice going down, not even the supers because they, too, will ultimately get trampled by the next bigger baron.

So now, that small town on the outskirts of Glasgow has no camera shop.

Rob C
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Slobodan Blagojevic
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« Reply #9 on: January 05, 2012, 09:56:14 AM »
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Rob, how about the following scenario: say you are selling prints of your photographs at around $400 a piece. Sales are sporadic and each time require your attention: corresponding, printing, packing, shipping, handling payments, etc. Or you pack a few in a car and start visiting nearby galleries, where they would take a 50% cut, if it sells. Say someone comes and offers to buy 100 prints immediately, but only if you give them a 30% discount. What would you do? Insist on $400 or no deal? Or ask the government to oblige your buyer to pay $400 for the bulk purchase?
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Rob C
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« Reply #10 on: January 05, 2012, 02:16:09 PM »
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Clever, Slobodan, but I don't think it fits. There's a finite cost for producing VH widgets and they would sell just as well - if not better - through a local shop where one could hold the things and really see and check them out first-hand. (That's how I bought in those days, and the big chains were already established. In fact, I think it's become even worse in today's world, with the Internet cutting prices even more, but hiking up delivery very expensively.) Selling into the public space via a local dealer or through a huge conglomerate, I doubt many more units of 'blad ever got shifted than for which there existed natural demand.

Making a case with prints, where you are just as likely to tear them up and dump them in a fit of pique (or even common sense) is no big loss in spent cash. Expensive sales of said bits of printed paper are pretty much limited, I'd say, and whether they sell or not doesn't really make or break you. If it does, you're in the wrong hobby! I don't think I'd feel that way if I were making cameras; I think I'd be very concerned about getting a good price and an even better distribution network than just a few, privileged heavyweights who, in the end, could pressure you more than you'd like.

Rob C
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ErikKaffehr
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« Reply #11 on: January 05, 2012, 03:01:36 PM »
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Hi,

I agree most with what you say, but I would say that Kodak was not really the inventive, nimble, mean and lean company it needed to be to survive. The core business of Kodak was film and processing. Both core markets disappeared rather quickly. A company cannot reinvent itself from one day to the other.

Kodak was not really successful in the camera business, their philosophy was always simple and low end, and the camera industry went in the other direction.

I guess the last installment is that with the arrival of high end digital video they also loosing a lot of the motion picture business. Fact is, most film industry is gone.

Best regards
Erik


Workers' benefits did not doom Kodak, but the main reason for chapter 11 is to reduce the cost of benefits to retirees and abrogate existing contracts. High executive pay and lavish use of corporate jets are outrageous, especially when management is incompetent, but those expenses are only a small part of total corporate expense, whereas worker compensation is a much larger part of the expense pie.

Regards,

Bill
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Steve Weldon
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« Reply #12 on: January 05, 2012, 03:39:01 PM »
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Hi,

I agree most with what you say, but I would say that Kodak was not really the inventive, nimble, mean and lean company it needed to be to survive. The core business of Kodak was film and processing. Both core markets disappeared rather quickly. A company cannot reinvent itself from one day to the other.

Kodak was not really successful in the camera business, their philosophy was always simple and low end, and the camera industry went in the other direction.

I guess the last installment is that with the arrival of high end digital video they also loosing a lot of the motion picture business. Fact is, most film industry is gone.

Best regards
Erik



A few points:

a.  Kodak FILM has unusually generous employee benefits which contributed to a culture which contributed to Kodak FILM's bankruptcy.

b.  The problem with a FILM company when the use of film keeps falling.. is that it's a FILM company.   This was the major contribution to Kodak's FILM's bankruptcy.

c.  KODAK was/is inventive, nimble, lean and mean..   Kodak Chemicals.  A direct takeoff of Kodak FILM.  By being separate.. and new.. Kodak Chemicals doesn't have the overly generous employee benefits or the old style management.. and not being legally bound to Kodak Film has prospered on, taken it's related technology, and reinvented itself as a profitable chemical company.  FILM and Chemical are both listed on the Exchange.  Hard to miss.

d.  Unfortunately the use of chemicals isn't falling.  Cancer is at a all time high.  I'm sure someone is going to tell me these are unrelated..  Roll Eyes
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louoates
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« Reply #13 on: January 05, 2012, 04:43:07 PM »
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I felt bad when I read the Kodak chapter 11 notice in the newspaper. My father was a processing lab foreman in their Chicago lab for about 35 years. So I always had a fond feeling for the way the company's insurance and pension plan stayed with my dad from his retirement at age 60 until his death at age 93. I can see how those generous benefits could mount to an incredible burdon on a company in the face of the dwindling film market. Not unlike our own U.S. social security's future I'm afraid.
  I also think that Kodak was incredibly stupid and horribly mismanaged. I recall that Kodak had most of the digital photography patents way back, maybe as early as the 1950's or 1960's if I'm recalling that right. Top management refused to keep pace with the practical digital applications, offering only marginal quality digital cameras way behind other digital pioneers who were more nimble and aggressive. Kodaks success and profits from film over so many years blinded them to film's ultimate demise that was certain to follow digital technology. I do believe that the chapter 11 filing may be able to save the company if they could shed much of their unfunded mandates. I think they still have a good presence in the digital movie distribution system to theaters. What else I don't know. The patents they still have, and mentioned in the bankruptcy news, may still have some value.
   One thing is certain. George Eastman would never have put the company in this position. He was a marketing genius, ala Steve Jobs. Eastman would have fired the entire management team who first tried to bury their digital future.
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Alan Goldhammer
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« Reply #14 on: January 05, 2012, 07:36:44 PM »
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There were multiple reasons for Kodak's problems of today.  In the late 1980s to early 90s I did a fair amount of work with Kodak during a period when the company was extremely entrepreneurial.  It was just before they spun off the chemical operations which became Eastman Chemical (not Kodak Chemical as Steve Weldon stated (ticker symbol is EMN and that company is doing quite well; one of my former direct reports is now the manager of investor relations there).  They were also working very hard in the medical diagnostics area and had a joint venture that developed Snomax that was used in snowmaking at the 1988 Calgary Olympics (I still have my Olympic pin somewhere).  They had also set up a pharmaceutical branch of the company to examine all the proprietary chemicals that the photo group had synthesized over the years for possible pharmaceutical activity (my PhD advisor was the head of R&D for that subsidiary).  The company also had a lot of R&D going on in new technologies and as most know has some essential patents on digital sensor technology.  I don't think management understood how fast things were going to change with regards to the movement from analog to digital and they sold off a number of subdivisions of the company since the film group was the cash cow of the company.  When film started going into the death spiral, the other groups which could have helped on cash flow were gone.

Ultimately this will be a business school case study for MBA students but it's still sad for those of us who started off with film and transitioned to digital.  In my mind they were doomed once they sold off the other units since they really did not have a hardware platform to manufacture digital cameras.  The patents they have are "valuable" but given Kodak's precarious financial position they may not be fully realized as they are sure to receive some low ball bids for them.  Contrast their behavior with that of Apple who are reinventing themselves every year with new products while getting rid of the older legacy products that are not generating cash flow (Ipod sales vs Iphone sales is the good example).
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Steve Weldon
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« Reply #15 on: January 05, 2012, 09:25:10 PM »
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There were multiple reasons for Kodak's problems of today.  In the late 1980s to early 90s I did a fair amount of work with Kodak during a period when the company was extremely entrepreneurial.  It was just before they spun off the chemical operations which became Eastman Chemical (not Kodak Chemical as Steve Weldon stated
Thanks for the correction.   Kodak Chemical is a separate company.

Kodak/Eastman has already been used as case studies in MBA programs.  At least they were in 1999..  There is a lot of interesting history there.

Sometimes I wonder if the old guard knew exactly what they were doing, and they did it to sustain a culture that sustained a standard of existence for those who retired after decades of service and a decent level for the employees they knew would someday get the short end when the company closed or was sold off.  A sort of company for the people so to speak, vs. the profit at all costs more corporations are ran under today.  It would make for an interesting investigation.. and most of the answers would probably be found within 5 years of either side of the Eastman Chemical start up.

I don't know why people think it's sad they're going under.  Most companies don't exist indefinitely and many more go under than go on.
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jpegman
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« Reply #16 on: January 05, 2012, 09:54:00 PM »
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Does anyone see a parallel to Polaroid demise? Remember them.

I worked in Cambridge, Mass near the Polaroid headquarters and watched them do a nose dive as many friends who used to try to get me to join the Polaroid gravy train in good times, got thrown under the bus by Polaroid (mis)management and lack of innovative growth as their one and only product went down the tubes.

It seems when Kodak lost the patent infringement battles with Polaroid (1985), they had enough "smarts" to see the instant photography business had no future, paid the infringement fees to Polaroid and shut down all their instant photography camera and film production. Why didn't Kodak soothsayers see the advancement of digital over film the same way?

Polaroid continued with their instant photography, tried to bring out "instant movies", specializing in extremely high speed instrumentation cameras (at astronomical prices since they knew they had no mass market for cost scaling) and went into the pit with that business as digital tapes (VHS) were available for cheap and more instant than Polaroid, but, they stuck with instant movie film a la SX70 technology. Maybe VHS weren't high speed, but, the instant movie market had no place for a proprietary Polaroid movie, when every consumer store was selling VHS equipment cheap. As the world moved to digital, Polaroid had no product in their research lab to compete, only Dr Land's patents and technology, and it just was passed by like the Kodak Film business.

As someone said, the chapter 11 lets Kodak off the hook on employee benefits - ask any former Polaroid employee who's retirement was tied into Polaroid stock which went from $100's of dollars per share to pennies, and the people that gave the corporation their sweat and toil for many years left with NOTHING. Only management got (very generous) severance packages as they bailed out before the stock pot was empty.
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stamper
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« Reply #17 on: January 06, 2012, 03:56:51 AM »
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Workers' benefits did not doom Kodak, but the main reason for chapter 11 is to reduce the cost of benefits to retirees and abrogate existing contracts. High executive pay and lavish use of corporate jets are outrageous, especially when management is incompetent, but those expenses are only a small part of total corporate expense, whereas worker compensation is a much larger part of the expense pie.

Regards,

Bill

Considering that the workers create the wealth then they can expect to benefit the most? Undecided
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RSL
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« Reply #18 on: January 06, 2012, 08:06:56 AM »
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Amazing. The labor theory of value, that "workers" create the wealth, is right out of Das Kapital, a theory that has absolutely no foundation in logic or experience. The guy who created the wealth at Kodak was George Eastman, and he created it with his brain. Same thing was true of Apple and Steve Jobs. The "workers" manufactured the products, but the only reason they were able to do that was because of the brains of Eastman and Jobs.
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bjanes
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« Reply #19 on: January 06, 2012, 09:17:25 AM »
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Amazing. The labor theory of value, that "workers" create the wealth, is right out of Das Kapital, a theory that has absolutely no foundation in logic or experience.

The guy who created the wealth at Kodak was George Eastman, and he created it with his brain. Same thing was true of Apple and Steve Jobs. The "workers" manufactured the products, but the only reason they were able to do that was because of the brains of Eastman and Jobs.

That's why George Eastman and Steve Jobs became rich. Eastman also gave back much in his philanthropy, while the philanthropy of Steve Jobs is still in doubt (see Washington Post article). Unfortunately, many CEOs have driven their companies into the ground and exited with exorbitant golden parachutes while the workers' pensions and healthcare has suffered. It will be interesting to see what happens to Antonio Perez. That said, a good workforce is essential to the success of an enterprise.

Regards,

Bill
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