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Kodak enlarges cost cuts
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December 18, 1997: 2:59 p.m. ET
Film giant raises charge to $1.5B, layoffs to 16,600 from earlier estimate
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NEW YORK (CNNfn) - Eastman Kodak Co. said Thursday its board has increased its layoff projections and therefore the one-time charge it plans to take in the fourth quarter.
The world's leading camera film company said it will take a $1.5 billion charge to restructure operations. About half of that represents separation payments to be made to about 16,600 employees whose positions will be eliminated.
On Nov. 11, the Rochester, N.Y.-based company announced projected reductions of 10,000 jobs on a pretax restructuring charge estimated at $1 billion.
While the company raised charges and layoff projections, it did not increase its expected cost savings - estimated at $500 million in 1998 and an additional $500 million in 1999. Those are the same amounts the company stated in its November announcement.
"This is a very good announcement in terms of dealing with what they need to do," said B. Alex Henderson, an analyst at Prudential Securities. "The problem is their business is eroding so rapidly that they have to do this [additional layoff] just to offset that [erosion]."
Appearing Thursday on CNNfn, Henderson said the company was forced into raising the charge and the number of layoffs in order to cut film prices and stem its market share loss to Fuji. (314K WAV) or (314K AIFF)
The problem with drastically cutting prices, Henderson said, is the cuts will eat into Kodak's bottom line. (308K WAV) or (308K AIFF)
Henderson said even if Kodak trimmed its prices by 10 percent, that's not likely to lead to a market share gain because Fuji would only need to lower its prices by half as much to eliminate the effect of Kodak's cuts. (322K WAV) or (322K AIFF)
The employment reductions will be from a current base of about 100,500 employees worldwide. The layoffs are in addition to the 2,500 positions to be eliminated under a restructuring reserve taken in the fourth quarter of 1996 and the 800 positions to be terminated under a reserve taken in the second quarter of 1997. Under the three programs, the company will have eliminated about 19,900 positions worldwide.
In total, about 8,700 positions will be eliminated in the U.S. while the balance of approximately 11,200 will occur overseas.
It is anticipated that nearly 4,800 job cuts will be completed by year-end 1997, another 12,300 by year-end 1998, with the balance to be completed during 1999.
In addition to severance costs, the charge will cover the cost of asset writedowns and other costs associated with plans to revamp certain non-strategic businesses.
The latest revisions will be reflected in financial statements scheduled for release on Jan. 15.
-- by staff writer Robert Liu
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Eastman Kodak
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