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Bankruptcy by Kodak emitting an eerie echo

Icon's plight reminiscent of Buffalo survival story

News Business Reporter

Published:January 19, 2012, 10:29 PM

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Updated: January 20, 2012, 1:14 PM

Eastman Kodak Co. of Rochester filed for Chapter 11 bankruptcy protection Thursday, an action that resonates in Buffalo, its sister city on the Thruway that has survived the demise of some its own iconic employers and now battles to adapt to a changing economy.

The struggles of Rochester mainstays such as Kodak call to mind the Buffalo area's loss of companies that once symbolized its manufacturing might, including Trico Products and Bethlehem Steel.

Over the years, Rochester has endured huge job reductions at Kodak, Xerox and Bausch & Lomb, and watched Xerox's corporate headquarters move to Connecticut.

Kodak is trying to reorganize its business, not shut it down, and some observers think the company can withstand the process in some form.

Both Buffalo and Rochester have faced dramatic downsizing by employers that in their heyday were sources of thousands of good-paying jobs. Competitive pressures spurred by technological innovations or by low-cost rivals down South or overseas compelled companies to make sweeping changes.

Andrew J. Rudnick, president and CEO of the Buffalo Niagara Partnership, sees an "absolute parallel" between the two cities. Namely, both have had to find ways to "re-engineer" their economies as some employers struggled.

Nallan C. Suresh, a manufacturing expert at the University at Buffalo's School of Management, also sees similarities but views Buffalo as "a little more blue-collar." He called Kodak's bankruptcy filing a "necessary phase" that will be painful for its employees for the next two to three years. But he believes Kodak will come through it.

"The struggles are very similar [to some Buffalo manufacturers], but I don't think Kodak will disappear," he said.

George M. Palumbo, an economist at Canisius College, said Buffalo's major decline in manufacturing started with the early 1980s recession, while Rochester's began about a decade later, based on measures such as earnings per worker.

"It's going to have similar impacts," Palumbo said. "Those are high-wage jobs."

The Buffalo Niagara region averaged 49,200 manufacturing jobs in 2011, compared with 92,600 in 1990, according to the state Department of Labor. The Rochester area averaged 60,000 manufacturing jobs last year, compared with 124,100 in 1990.

The loss of so many manufacturing jobs has forced Buffalo and Rochester to search for innovations and other industries to cultivate.

"We need to remember that advanced manufacturing is still a big deal here," Rudnick said, citing employers such as Moog Inc. and Greatbatch Inc., whose output is much harder for cheaper overseas competitors to match.

The region has also embraced sectors such as life sciences, logistics, back office operations and agribusiness. Financial services employers, including M&T and First Niagara, have shown strength.

Dennis M. Mullen, a former chairman and CEO of Empire State Development Corp. and now a partner in the Mullen Group LLC, said companies such as Xerox and Bausch & Lomb remain strong employers in Rochester. And even Kodak, for all its struggles, still has about 6,000 to 7,000 area employees.

But the Rochester area has also diversified, through employers such as Wegmans, Paychex and the University of Rochester and its health care system, Mullen said.

As for comparisons with Buffalo's manufacturing experience, Mullen said: "They are comparable, but the issue here is: Kodak technology was not able to keep up with the changing marketplace."

Observers say that there are notable differences between the two areas.

In Rochester, many of the employees laid off from places such as Kodak had engineering, management and research and development skills that they have applied to launching their own companies in technologies such as optics, Rudnick said.

In Buffalo, employees laid off from places such as steel plants were skilled in the precise technologies of the time but found it harder to transfer to their skills to other jobs, he said.

And the massive manufacturing cuts in Rochester and Buffalo have unfolded in different time frames, said Richard Deitz, an economist with the Federal Reserve Bank of New York. The steel industry in the Buffalo area contracted relatively quickly, and longer ago. The restructuring of the major Rochester companies, while extensive, has unfolded over a much longer time frame, and more recently.

Kodak's bankruptcy filing was not a surprise, given its troubles responding to photography's shift from film to digital. But the filing is still a significant moment in Kodak's storied history and its effort to survive.

Garry M. Graber, who leads the Hodgson Russ law firm's bankruptcy practice group, said a bankruptcy filing "certainly doesn't have the stigmatic effect that it used to have in the old days."

And the filing has actually enabled Kodak to obtain the type of financial support it needed but couldn't find before a bankruptcy, Graber said.

The filing gives Kodak the opportunity to shed unneeded assets and divisions, and unload unprofitable product lines, Graber said. And while suppliers and employees may be unfavorably affected, they are still inclined to support the process, in the interest of ensuring that a customer/employer endures in the long run.

Survival is the key question for Kodak. Graber noted that in bankruptcy, "every case is different, but I think it's very common for a company to be able to survive."

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Comments

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The media has pointed out that Kodak failed to act on digital photography causing the meltdown. It took a lot more than digital cameras and a few lazy US workers to kill our industries. What seems to be forgotten is that foreign makets were closed and in most cases still are to US products while FUGI film and numerous other Far East corporations freely sell their products here. Don't you recall that as an enlightened country were were moving away from manufacturing to service industries. Where were our representatives in Washington? Do any of you recall our steel industry, or US made TV's? It seem the service industries have arrived, so pick out a hotel that you would like to clean.

ANDY KULP, FREEHOLD, NJ on Sun Jan 22, 2012 at 11:07 AM

Hey Chuck, next time you fly, try hiring a guy with a private plane to take off from his own cornfield and get you to where you are going. Next time you want to go somewhere, try walking in the dirt. because we know that you would never want to use a road or an airport or an air traffic controller that the Gubmint paid for.

Want to get to the other side of the river? SWIM. Hopefully in the upper rapids of the Niagara river. don't worry, no "Gubmint" employee will be too eager to recover your dead body. We'll just let you bump around the rocks in the whirlpool until you are nothing but mush and a mass of tissue that is eaten by the carp..

The "gubmint" has not given out free cheese since the days of Reagan,. And a dimwit like you can never understand that they did it to help farmers from going under, not to feed people.

Yeah, I had a "Gubmint" job for 23 years. Protecting big mouth blowhards like you. Because we all know that you're not going to get rich in the service.

Why not quit your job and move on down the line if you hate it here so much?

JEREMY LEWIS, BUFFALO, NY on Fri Jan 20, 2012 at 09:28 PM

As an ex-Rochesterian living in Atlanta it's sad to see how the powers to be at Kodak got fat, lazy and reactive over the years allowing Kodak to file bankruptcy. I left WNY 15 yrs. ago for job opportunities & now live in a city with some of the highest unemployment, forclosures & poverty in the country. Our unemployment rate in Atlanta's been over the national avg. for the last 54 months. Bottom line is manufacturing's dead. Cities have to learn to reinvent themselves.

STEVEN NELSON, ATLANTA, GA on Fri Jan 20, 2012 at 04:46 PM

Strength in numbers. How about using federal stimulus and/or state funding to establish high speed rail service between Buffalo, Niagara Falls and Rochester. Combining resources could be a means of survival.

MICHAEL ZOTARA, DEPEW, NY on Fri Jan 20, 2012 at 04:44 PM

The only people who like living in WNY have a free cheese Gubment job.You know the ones we private sector slugs pay for. I am here becuase my company sent me here.Four more years I am out of this hell hole too. I do hate free cheese.

CHUCK GOODSPEED, WHEATFIELD , NY on Fri Jan 20, 2012 at 04:18 PM

Kodak will come back stronger and smaller by keeping some of its patents. It had so much invested in films in the 1970's it thought digital was not the way to go, just like AMPEX sold its video recording idea to SONY and Cannon sold its user friendly icons to Apple, and Dell never got into Ibooks and the US Post Office never got involved with e-mail. Technology changes about every 13 months or less so you really have to keep on top of things in business today and you have to keep enough capital on hand for these dramatic changes.

PHILIP JAMES JAROSZ, BUFFALO, NY on Fri Jan 20, 2012 at 03:17 PM

I hate snow. I took a picture of it today with my I pod. Remember them days when the film was bigger then the apple product in my pocket. I think there's a reason China and Mexico don't have Kodak on there home turf. Maybe Kodak should invest in 8 track technology. If you put a Kodak SLR next to a Nikon, maybe someone would buy it. Then again maybe the proof proves maybe they wont. They chose to die when they chose to stay in NY.

KEN ZACHARA, BUFFALO, NY on Fri Jan 20, 2012 at 11:15 AM

The reason NYS taxes are so high is due to the state's development pattern over the last half century. In WNY we've had a largely stagnant population and yet the amount of developed land has nearly tripled. All those utilities and public facility improvements have to be paid by someone, and when the region doesn't have the benefits of rapid population growth seen in Southern and Western States, then the tax burden is significantly greater on those residents that remain. Stop building subdivisions and single-use business parks out in second ring suburbs like Clarence and Lancaster and concentrate investment into the urban core where a majority of the population still lives and has access to.

With all of Cuomo's talk about regionalization, he needs to push for a constitutional amendment that revokes home rule authority from local municipalities and instead vests decisions on land use, transportation, an economic development in a truly regional entity.

DARREN COTTON, BUFFALO, NY on Fri Jan 20, 2012 at 11:08 AM

Mr. Kendall: You comments are not balanced in the least. My family situation is identical to your own. My observations living here is that the costs of governing here are actually worse, just more artfully hidden. The commute costs (time and $) is a tax.

In the North East at least, lower taxed states (New Hampshire & VA) come to immediate mind, tend to exert significant upward pressure on housing prices in areas having better performant school districts; compare Fairfax vs Laudoun. The result is a rather significant bank tax. I leave it to you to decide for yourself which evil sets best with you: government or banks.

In my case, the cost of home energy has indeed been reduced, but not in the same proportion to the reduction in affordable square footage of living space! Moving here requires a significant number of extenuating circumstances well beyond the escape of NYS's unhidden taxes.

Get real, dude. Stop being a parrot, Dittohead.

GREGORY KEDGE, CENTREVILLE, VA on Fri Jan 20, 2012 at 11:00 AM

Yahoo and Verizon Data Center... Need I say more? Downtown Buffalo should be giving space away for free. Data centers spend huge dollars on cooling... Buffalo provides free cooling from November to March and generally has cooler temps the majority of the year which whould provide huge savings to these companies looking to save a buck. We're way colder than places such are CA and AZ where most technology companies are based out of.

it took way to long to agree to the yahoo data center, and that had to be built in the middle of no where in Niagara county... Really? How cool would it be to see YAHOO on a building downtown.. Not to mention Microsoft now owns Yahoo.. How many operations could they have set up here with our cheaper work force and cost of living? This was a huge mistake by our so call "leaders"

Then there's verizon... Again, getting built in the middle of no where, but this time we blew it big time. One old lady was able to curtail the creation of hundreds of Jobs? are you f-in kidding me? We were on our way to being a destination for large company datacenters (Which is where the new boom is, heard of the cloud? It's all buildings packed with servers, storing data) But of course WNY wanted way too much money to do business.. This old women was able to block progress.. and again why wasn't a vacant down town location set aside? Sell it for $1 and assist with clean up costs! Buffalo let all these factories, close up shop and leave behind there waste and no we're stuck with multiple sites, that need to have massive environmental over hauls just to be built on again.. All i hear from any politician is creat Jobs blah blah blah..but when the opportunity is here they mess it up as usual!

JASON SINSABAUGH, CHEEKTOWAGA, NY on Fri Jan 20, 2012 at 10:35 AM

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