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Author Topic: Kodak's bankruptcy imminent?  (Read 5435 times)
Slobodan Blagojevic
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« Reply #20 on: January 06, 2012, 09:33:14 AM »
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... 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.

So, Russ, what you are saying is that it isn't "the hand of man" that matters after all, but "the brain of man"? Wink
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« Reply #21 on: January 06, 2012, 10:28:27 AM »
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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

Not necessarily.  It depends on the structure.  Health benefits quite possibly.  But pensions are hived off and managed separately from company assets.  If there's a funding deficit in the plan it could impact retirees but if the plan is fully funded or overfunded there shouldn't be a problem. 
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Robert Roaldi
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« Reply #22 on: January 06, 2012, 10:44:47 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.

It's a mistake to engage in political/economics discussions online, I know, but will add my two cents anyway.

I find this view a little too doctrinaire. GE may have had the spark and foresight to start up an enterprise, provided the germ and initial funding even, and it is correct and a useful thing that he acquire personal wealth because of it. Good for him. But he had hundred and thousands of employees who did their bit every day, and I bet some of them also came up with very good ideas, some maybe even better than his. To say that he created the wealth is a little over the top, he certainly did, but so did others. There's nothing to be gained by assigning too much credit to the superman, I don't believe. It is not instructive. The "rugged individual" is backed by lots of other people and a lot of luck. Just because some credit is given to some of the workers in an enterprise doesn't mean that Marx is being rammed down your throat. Real life is way more complex than that.

The behaviour at GM over the last 30 years was interesting to me. Throughout that period, management continued on a path that led to ruin. They kept designing and building cars that people chose not to buy. It was NOT the millwrights and machinists who decided which models to build and which automotive trends to ignore. But near the "end" there, I kept reading in the business press how GM was strapped by their health and pension demands, as if those were to blame for the company's demise. This is an all too typical pattern, when sales are going well, management pays itself handsomely for their foresight, after all, they created this wealth, goes the thinking. When things go wrong, magically, management is hardly ever to blame, and they don't have to give the previous year's bonuses back. How can that be?



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Robert
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« Reply #23 on: January 06, 2012, 10:46:43 AM »
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Unfortunately, many CEOs have driven their companies into the ground and exited with exorbitant golden parachutes while the workers' pensions and healthcare has suffered.

Right, Bill. There's no way to make crooks go away. And there doesn't seem to be any way to get corporate boards to pay closer attention to what's going on in the companies for which they have fiduciary responsibilities.

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It will be interesting to see what happens to Antonio Perez.

And it will be interesting to see if Corzine goes to jail.

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That said, a good workforce is essential to the success of an enterprise.

No doubt about it. And profit is essential to keep an enterprise like Kodak, q.v., going.
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RSL
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« Reply #24 on: January 06, 2012, 12:07:03 PM »
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I'd never take anything away from the people who do the work, Robert. I've been there. But that's not the point. In Das Kapital Marx demonstrates that the wealthy are wealthy because they've stolen the wealth created by the workers. His logic is close to impeccable. Only problem is that in order to accept his conclusion you have to start with the premise that labor is the only thing that produces value. He never attempts to prove his premise. I'll quote myself from an article I wrote long ago:


 "The efficacy of any correct algorithmic process depends on two things: the validity of its premises and the validity of the data fed into it. The premises almost always are unprovable. They are arbitrary perceptions of reality arrived at through a mind leap that suspiciously resembles faith. The data need not only be accurate, they need to measure what the algorithm purports to deal with. Without valid premises and valid data a process may be quite valid and work perfectly well, but at the same time produce garbage.

"Many who claim “scientific” methodology seem utterly uncritical about the premises upon which their methodology is based, and seem unable to distinguish between what can be quantified and what cannot. Most of what these people produce is garbage. Yet, it seems, our society has been taught to accept the results of any methodology provided it’s sufficiently complex and mysterious to hide the question of faith buried in its premises. Process itself has become our religion. Revelation and mathematics have become synonymous.
 
"Marxism is a good example of this garbage in, garbage out variety of religion. In Das Kapital, Marx started with the premise that value in human terms comes only from human labor. Without questioning the premise, he proceeded to construct a process-oriented explanation for human endeavor which leads, inexorably to the conclusion that profit must come from exploiting the labor of others. His scientifically-arrived-at remedy for this warping of the human condition by capitalism is even more startling than the conclusion itself: that if the state owns the means of production, all will be well!

"No sane Marxist will argue with you about the source of value — any more than a priest will argue with you about the divinity of Christ. Either you accept the premise on faith or you don’t. The difference is that in the first case, if you accept Marx’s premise, everything else can be proven. In the second case, if you accept the divinity of Christ, nothing more need be proven, nor, for that matter, said."


Yes, there are plenty of managers out there who are ruthless and full of blame, often supported and coddled by the government, though if we get into that discussion none of us will get much done for quite a while.

But to paraphrase Churchill: capitalism is the worst economic system there is, except for all the rest.


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bjanes
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« Reply #25 on: January 06, 2012, 12:27:19 PM »
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Not necessarily.  It depends on the structure.  Health benefits quite possibly.  But pensions are hived off and managed separately from company assets.  If there's a funding deficit in the plan it could impact retirees but if the plan is fully funded or overfunded there shouldn't be a problem. 

Do you think that a company who can't pay its current bills would fully fund their pension? According to this report, the pension plan is underfunded by $2.6 billion.

Regards,

Bill
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« Reply #26 on: January 06, 2012, 12:53:28 PM »
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Oh Christ.  If I'd noticed it was your comment I was responding to, I wouldn't have bothered.  

But as I said, if the plan were underfunded it could be a problem.  Apparently it is.  OK, so be it.  There was no mention of that in your previous commentary.  Just a blanket statement that was unproven/unsupported by facts.  That said, the unfunded liability number isn't definitive.  If a raft of retirees die the liability will drop.  The return assumption is more than a tad optimistic which doesn't help.  Given the size of the company historically, the unfunded liability isn't that big. 
« Last Edit: January 06, 2012, 01:06:09 PM by BobFisher » Logged
Slobodan Blagojevic
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« Reply #27 on: January 06, 2012, 01:01:15 PM »
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Do you think that a company who can't pay its current bills would fully fund their pension? According to this report, the pension plan is underfunded by $2.6 billion.

Regards,

Bill

You are probably right, Bill. But in an ideal world, shouldn't those funds been funded at the time salaries are paid and remain "untouchable" after that? After all, both (salaries and benefits) are parts of the same compensation package and a contractual obligation. The contract was not "I'll pay your pension if I feel like it when the time comes" or "I'll see if something is left for you". After all, management bonuses are not subject to the same casual rules and the maximum you can "lose" is one year bonus. I say "lose" because it is not a contractually fixed obligation, but subject to performance, so you know from the beginning that bonus is not guaranteed. Not the same with benefits. Benefits are contractual, fixed, and used as a competitive instrument, to attract needed talent, and are not offered on a hypothetical basis.
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Slobodan

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« Reply #28 on: January 06, 2012, 01:22:08 PM »
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You are probably right, Bill. But in an ideal world, shouldn't those funds been funded at the time salaries are paid and remain "untouchable" after that? After all, both (salaries and benefits) are parts of the same compensation package and a contractual obligation. The contract was not "I'll pay your pension if I feel like it when the time comes" or "I'll see if something is left for you". After all, management bonuses are not subject to the same casual rules and the maximum you can "lose" is one year bonus. I say "lose" because it is not a contractually fixed obligation, but subject to performance, so you know from the beginning that bonus is not guaranteed. Not the same with benefits. Benefits are contractual, fixed, and used as a competitive instrument, to attract needed talent, and are not offered on a hypothetical basis.

No, that's not quite how it works.  A pension plan receives contributions (from employers, employees or both) and those funds are hived off.  The company doesn't, normally, have access to use the funds for operations.  The funds are invested and the size of the fund required is based on the future pension obligations (payments to retirees).  The calculations of how much is required in the fund is based on the required monthly payment (in a defined benefit plan like Kodak's), projected investment returns and an estimate of how long retirees will live.  At any time the fund can be fully funded, underfunded or overfunded.  

Underfunding can happen due to a reduction in the actual investment return vs. the projected investment return (pension plans got hit HARD with the 2008 market crash), a change in actuarial calculations (people are projected to live longer), among other things.  If a plan is underfunded, the plan sponsor notes it in the financial statements and, over time, is supposed to make up the shortfall.  The shortfall is a fluid number due to the various moving components that make up the calculation of the required plan size and can rectify on its own.  This is why plan sponsors aren't typically quick to top up an unfunded plan.

Overfunding can occur for reasons opposite to the causes of underfunding as well as people actually not living as long as projected.  Depending on the jurisdiction, companies can reclaim an overfunded balance to bring the fund back into a fully funded position.  That clawing back of the overfunding ends up as profit for the company.  Don't know if Kodak's plan was ever overfunded or if they ever clawed back any overfunded position.  The risk of clawing back any overfunded position is that, of course, the plan can subsequently become underfunded more easily.

Not all pension plans are defined benefit; however.  DB plans were popular until, around, the late 80s and early 90s.  After that, defined contribution plans became more common.  Under a DC plan contributions are made at a prescribed level but the ultimate payout is determined based on the investment return on those funds.  Some companies left DB plans in place for employees employed prior to a certain date and started DC plans for new employees.  Companies just starting to offer a pension plan went with DC plans due to the lower cost.  It's rare to find a DB plan being offered any longer.
« Last Edit: January 06, 2012, 01:23:40 PM by BobFisher » Logged
Rob C
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« Reply #29 on: January 06, 2012, 01:57:13 PM »
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"Considering that the workers create the wealth then they can expect to benefit the most? Undecided"

Workers. They are employed to do a job. Period. There is no divine right to work any more than there is to have a successful business. One employs people to perform specific tasks. If they can do that well, they get paid; if they don't do it well, it's extremely difficult to fire them. How bloody nice.

That's one of the major problems that faces Spain: folks won't employ because it becomes a legal/political nightmare to end that employment when the employee is not up to scratch or, perhaps, is surplus to requirement when work slows down. As a freelance worker, I was never under the impression that a client should continue to pay me when he had no further work for me; because an employee is on a longer-term style of employment, why does he suddenly become a sacred cow, protected by laws and trade unions? I have often though how nice and instructive it would be for everyone in employment to have to go through the experience of self-employment, just to get a sense of what market reality actually is. What is it? Simply that nobody owes you anything; that you are valuable as long as you are valuable, and that there are hundreds if not thousands of other people willing and able to do what you do.

Rob C
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degrub
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« Reply #30 on: January 06, 2012, 05:11:01 PM »
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My understanding of the bugaboo for DB plans if that if they are funded to the federally required minimums ( which i guess assumes a going concern) - not 100% like they should have been, and then the company files for bankruptcy protection, the plans obligation can get dumped on the pension benefit guaranty agency which pays out much less than the promised benefit.
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stamper
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« Reply #31 on: January 07, 2012, 02:43:08 AM »
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Workers. They are empoloyed to do a job. Period. There is no divine right to work any more than there is to have a successful business.

Unquote

But if workers decide not to work for a certain employer then that employer won't make a penny profit? It doesn't matter the size or scope of his brain.
Employers would use robots if they could but workers would have to build them. Wink
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Rob C
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« Reply #32 on: January 07, 2012, 12:21:33 PM »
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Workers. They are empoloyed to do a job. Period. There is no divine right to work any more than there is to have a successful business.

Unquote

1.   But if workers decide not to work for a certain employer then that employer won't make a penny profit? It doesn't matter the size or scope of his brain.
2    Employers would use robots if they could but workers would have to build them. Wink




1.  That's okay - he'll just take his business offshore. Is suicide part of union culture? Reminds me of Red Robbo and his valiant morons
    who destroyed the British car industry. Oh - were they early robots and not morons?

2.  Of course they would, and in great part they do already. Why would 'workers' have to do that? The idea's so 50s!

;-)

Rob C
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Les Sparks
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« Reply #33 on: January 08, 2012, 12:33:11 PM »
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If workers don't have money to buy products, then the business still doesn't make a profit.

Les
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Slobodan Blagojevic
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« Reply #34 on: January 08, 2012, 01:26:58 PM »
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My people have this little story about a guy who was training his horse not to eat... just as he thought he finally succeeded, the horse died.

So, for all of you proponents of "screw workers" theories, the moral of the story is: you can make workers work for next to nothing (or not work), but they will ultimately die (metaphorically speaking). And by 'workers' I mean blue-collar and white-collar ones, a.k.a. middle class. For one thing you proponents of "screw workers" theories are forgetting, is the double role they play in this world: they are not just workers, making things for you and helping you get wealthy, they are, simultaneously, your consumers, buying your stuff, and again helping you get rich.

So, go ahead, cut your cost, reduce your labor "burden" by frivolous bankruptcies, increase your profit and let your greed go crazy, starve workers to death... but remember you are cutting the branch you are sitting on.

You did that in the '30s, you are doing it now.
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« Reply #35 on: January 08, 2012, 05:17:29 PM »
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My people have this little story about a guy who was training his horse not to eat... just as he thought he finally succeeded, the horse died.

So, for all of you proponents of "screw workers" theories, the moral of the story is: you can make workers work for next to nothing (or not work), but they will ultimately die (metaphorically speaking). And by 'workers' I mean blue-collar and white-collar ones, a.k.a. middle class. For one thing you proponents of "screw workers" theories are forgetting, is the double role they play in this world: they are not just workers, making things for you and helping you get wealthy, they are, simultaneously, your consumers, buying your stuff, and again helping you get rich.

So, go ahead, cut your cost, reduce your labor "burden" by frivolous bankruptcies, increase your profit and let your greed go crazy, starve workers to death... but remember you are cutting the branch you are sitting on.

You did that in the '30s, you are doing it now.
Beautifully put, SB.

Eric
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« Reply #36 on: January 08, 2012, 06:12:21 PM »
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Well said, Slobodan. It's something Henry Ford understood, and it's something that made Henry straospherically wealthy.

Hmmm. That didn't come out quite right considering the prior comments. Henry understood that the people who were involved in manufacturing his cars also were his customers. He also started paying good workers enough to keep them on board.

I'm not coming on as an apolgist for Henry. He had a bag of flaws, but he did understand how to make things work.
« Last Edit: January 08, 2012, 06:15:52 PM by RSL » Logged

Slobodan Blagojevic
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« Reply #37 on: January 08, 2012, 06:53:13 PM »
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Speaking of the '30s... one of my favorite photographs (and no doubt captured using Kodak film):

EDIT: The photographer is Margaret Bourke-White
« Last Edit: January 08, 2012, 07:43:14 PM by Slobodan Blagojevic » Logged

Slobodan

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« Reply #38 on: January 08, 2012, 07:32:48 PM »
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i hope the press photographer that shot it won a Pulitzer for that one !
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stamper
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« Reply #39 on: January 09, 2012, 02:53:57 AM »
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Well said, Slobodan. It's something Henry Ford understood, and it's something that made Henry straospherically wealthy.

Hmmm. That didn't come out quite right considering the prior comments. Henry understood that the people who were involved in manufacturing his cars also were his customers. He also started paying good workers enough to keep them on board.

I'm not coming on as an apolgist for Henry. He had a bag of flaws, but he did understand how to make things work.

I think Upton Sinclair's book the Flivver King exposed Ford for what he was. On a par with Carnegie. Both despots. I haven't read the
book for a couple of decades but it is worth reading.
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