BUSINESS/ECONOMY

Kodak’s new development

D’ARCY JENISH May 23 1988
BUSINESS/ECONOMY

Kodak’s new development

D’ARCY JENISH May 23 1988

Kodak’s new development

In early 1986 Kodak Canada Inc. launched what it called its Toronto Expansion Program, an ambitious and thorough overhaul of its manufacturing, distribution and warehouse operations. By the time it completed the program last October Kodak had consolidated its Canadian operations at a 57-acre Toronto site, eliminated a 200-acre manufacturing site in Brampton, 40 km northwest of the city, and demolished or sold five buildings. Kodak Canada’s facelift was part of a worldwide restructuring that its corporate parent, the Eastman Kodak Company of Rochester, N.Y., began in 1984. The objective was to make Eastman Kodak and its various subsidiaries more efficient, competitive and profitable.

The 750 shareholders who attended the company’s annual meeting in Toronto last week learned that the restructuring has resulted in a vastly improved financial performance. Eastman Kodak achieved record sales of $17.6 billion last year, up from $16 billion in 1986. But many investors and financial analysts say that they are still concerned about Kodak’s $6.8-billion acquisition last February of New York City-based Sterling Drug Inc., known primarily for its Bayer Aspirin and Lysol household cleaning products. That transaction pushed Kodak’s longterm debt to $2.9 billion.

Although Kodak is known primari-

ly as a manufacturer of film and easy-to-use, point-and-shoot cameras, the company is a vast, sprawling multinational conglomerate that manufactures more than 50,000 different products, including a new video printer, which can make instant color photographic copies of television images. Eastman Kodak chairman Colby Chandler said in an interview that he had set out to develop a strong plan for ensuring the company’s growth and profitability into the 21st century. First, he said, he divided Kodak into four separate sectors, then declared that their annual growth rate should average about six per cent, or twice the historic average increase in the gross national product of the United States.

Photographic products currently account for 40 per cent of Kodak sales and remain the largest of the four growth areas identified by Chandler. The second-largest growth area, accounting for 30 per cent of annual sales, is called information systems and includes photocopiers, computer printers and Atex personal computers, used by many news organizations, including Maclean's. And

chemical products, including textile fibres, make up 20 per cent of its yearly revenue. Said Chandler: “We have made some sacrifices to build this strategic plan. We have put some debt on the balance sheet but can manage it very well.”

Chandler has also put the entire corporation through a vast internal restructuring and reorganizing aimed at making it more efficient, competitive and profitable. One major change has been the institution of specialized factories. Under that system, different manufacturing plants have been designated as either the sole or main suppliers of certain products on a global basis.

A key ingredient in Kodak’s improved efficiency has been a war on waste, said senior vice-president William Fowble. Overall, waste in Kodak plants worldwide was reduced by five per cent in 1986 and another 10 per cent last year. Kodak is also demanding higher-quality products from its suppliers. Fowble pointed out that 190 major suppliers around the world are now enrolled in a formal program that involves training sessions and improved working relationships with Kodak subsidiaries. Those initiatives have dramatically cut Kodak’s costs and increased the output per employee by about five per cent in each of the past three years, said Fowble.

Chandler said that he is deeply disturbed by the decline of manufacturing in the United States. He pointed out that manufacturing represented only 20 per cent of the U.S. gross domestic product in 1985, compared with a figure of 28 per cent in 1960. Chandler added that the trend reveals that the United States is becoming a postan industrial, servicelt; based economy, and he 9 claimed that the net I result will be a decline g in the standard of livz ing for the entire couni try. But Chandler says that he is determined to maintain Eastman Kodak as a major force in manufacturing, adding that he is confident the growth plan now in effect will accomplish just that.

D’ARCY JENISH