It has always been called Bonus Day, a semiofficial local holiday in mid-March when Eastman Kodak Co. rewards each one of its 132,000 employees, nearly a third of whom live in the area.
In the way others might flip through an album of bygone Christmases, auto salesman Andy Eggleston sorts through mental images he retains of the day in years past: bars that overflowed, lines outside restaurants, crowds in bank lobbies, celebrations broadcast live on the news.
Employees would begin their expectant shopping at the area’s car dealerships weeks before, he remembers. And on that day, the workers would come to pay and drive away.
Kodak’s bonuses remain generous-the average worker received several thousand dollars this year-but now the sum is spent sparingly.
The photographic company, once prosperous, is troubled, and so are those who depend on it for their livelihoods, including so many in this city near Lake Ontario in northwestern New York.
“I know a girl who’s high up there and she says people are crying in the ladies room they’re so afraid for their jobs,” said Eggleston, general sales manager at Bill Gordon Chevrolet, located on a three-mile stretch of road that runs between Kodak’s largest manufacturing facility and its 19-story headquarters.
George M. Fisher, the departing chairman and chief executive of Schaumburg-based Motorola Inc., will move into that headquarters building of brown stone at the edge of Rochester’s downtown Dec. 1, becoming the first outsider to lead Kodak since George Eastman founded it 113 years ago. Technological change, competition and financial damage from failed attempts at diversification have eroded the cozy dominance Kodak has enjoyed over photography.
The company that opened photography to the masses with inexpensive cameras and the first easy-to-use flexible film-the maker of the Brownie camera and the Instamatic-is now known too as the developer of the short-lived Disc camera.
Its ubiquitous yellow film boxes are now stocked alongside green containers of Fuji film. And its corporate balance sheet is riddled with debt from mistakes like the $5.1 billion purchase in 1988 of Sterling Drug, a highly priced pharmaceutical company that has proved lackluster.
Kodak’s difficulties have permeated Rochester, a metropolitan area of 714,000 so closely tied to the photographic giant that even the gray climate seems to replicate the atmosphere of a darkroom.
From peak local employment of 60,000 in 1982, when Kodak was gearing up for production of the Disc camera, the company’s regional work force had declined to 39,000 by the end of last year.
This August, reacting to long-building investor pressure for cost cuts, the company announced it would reduce its worldwide payroll of 132,000 by 10,000 jobs before the end of 1995. Many on Wall Street would like to see cuts totaling at least 20,000 employees.
The feeble financial performance of Kodak in recent years has not been a debacle on the order of the staggering losses at General Motors and IBM. In fact, the company continues to post an operating profit, $319 million in the third quarter, albeit a disappointing one. And Kodak-the brand still seen as a mark of quality-retains an estimated 70 percent share of the profitable U.S. consumer film market, according to Strategic Marketing Analysts Inc.
Still, Kodak often has been lumped together with the sclerotic corporate giants, based on its management’s seeming reluctance to take severe action.
In January the company had sought to appease investors with the appointment of Christopher J. Steffen as chief financial officer. But Steffen, an unsentimental cost-cutter who had helped turn around Honeywell Inc. and Chrysler Corp., quit after just 11 weeks, suggesting that his efforts at Kodak had been obstructed.
The August announcement of staff cuts came 12 days after Kodak’s board ousted chairman and chief executive Kay Whitmore, a gentlemanly chemical engineer with 35 years at the company.
A product of the insulated environment of Rochester and of a time when Kodak was virtually unchallenged, Whitmore is viewed as a decent man who resisted driving the blade deep enough to satisfy the financial community.
“If he (had been) running the Kodak of 15 years ago, he would have done fine,” said Nell Minow, a principal of Lens Inc., a Washington, D.C.-based fund that invests in underperforming companies.
In the 1980s the growth in Kodak’s core consumer film business slowed, but the company’s cost structure continued an unrelenting climb upward. By last year the proportion of sales revenue consumed by selling, general and administrative expenses had risen to 29 percent from 22 percent in 1982, calculates B. Alex Henderson, an analyst for Prudential Securities. “This is a mature cash cow. If you overfeed the cow, you get a fat cow, not more cash,” Henderson said.
Competitors such as Fuji and private-label brands have gained by keeping their costs under control.
Moreover, in the age of digital technology, as electronics evolves to produce sharper images at lower costs, the danger grows that the film-based photographic technology that is Kodak’s franchise will become obsolete. If a sharp digital picture can be delivered instantly, why bother with film and chemicals?
So far, Kodak has fumbled in its attempts to grapple with the emerging digital challenge. Most recently, the company responded with the Photo CD System, a $400 compact disc player that displays photos when connected to a television screen.
Originally sold as a mass-market product that consumers would use to display photo albums, the product has not caught on, partly because consumers must pay a professional service to scan their pictures into CD format. Kodak is now focusing more on selling the system to commercial users.
Fisher brings from his years at Motorola a record of success in maintaining a vision for consumer products-wireless communications and cellular phones-that keeps up with fast-changing technology.
Fisher already has signaled he intends to stake the company’s future on pursuing a path of growth in the information revolution. Existing plans for layoffs should suffice for the time being, he said.
In a news conference the day after his Oct. 27 appointment, the new chairman and CEO declared Kodak to be in “the content side” of information technology and called the company “an important part of the front end” of the developing information networks.
His most difficult challenge may be injecting dynamic thinking into a Kodak management that is inbred. Historically, the company has almost never brought in senior executives from the outside, and the location of its corporate offices minimizes contact with outside influences.
“In Manhattan or Los Angeles or Chicago, the corporate culture can’t just take over a town. But in Flint, Mich.; Columbus, Ind.; or Rochester, there aren’t a lot of competing cultures,” said Minow, of Lens.
The only other major corporation with headquarters in the area is Bausch & Lomb, the optical company.
The region around Rochester, locals note, is marked by a conservative ethic.
It is apparent in cultural tastes. Although this is a city of museums, there is little that could be considered avant garde. And it is apparent in the style of dress: The bridal shops sell nothing but the most traditional of gowns, notes Kathleen Connor, a newlywed who had to return to her smaller hometown to find a dress.
At Kodak, “We are a little insular. We talk to ourselves. We tend to convince ourselves of things,” said Neil Murphy, a former senior vice president, responsible for worldwide manufacturing operations until his 1989 departure.
Even Kodak spokesman Alan Brakoniecki concedes that the ingrained corporate culture was a factor in the company’s decision this summer to move its marketing operations to Washington. “It will open up the thinking,” he said.
The most important contribution Fisher could make would be to accomplish just that for the entire Kodak management.
“The best thing about Fisher,” said Minow, “is that he represents a culture of questions, a culture of renewal, and that’s what Kodak has been missing.”
