Caught up in a price war with Fuji Photo Film Co., Eastman Kodak said Tuesday it is cutting 10,000 jobs in a billion-dollar overhaul that will pare spending on research into new products and shift more of its factory work to other companies.
The work force cut amounts to 10 percent of Kodak’s payroll. But many on Wall Street had been expecting a more drastic move, and the company’s stock plummeted 6 percent, down $4.06 per share to close at $62.18-3/4 on the New York Stock Exchange.
Even after a half-dozen restructurings since 1983, Kodak still hasn’t shed enough excess weight to outrun a burst of global competition led by Tokyo-based Fuji. That rivalry intensified this summer when Fuji slashed color-film prices by as much as 30 percent in the United States.
Kodak Chief Operating Officer Daniel Carp said Tuesday the company would respond more quickly to Fuji price cuts, but said Kodak wouldn’t instigate cuts.
“It’s not our intention to lead prices downward in the U.S. market, but we’re not going to allow that value gap to open up and rise to the levels that we saw this summer,” he said.
The price war came at a time when Kodak was burdened by the dollar’s strength, which makes its products more expensive abroad, and was struggling to turn a profit in the emerging field of electronic photography. In all, Kodak anticipates a 25 percent slide in profits this year.
“Early on this year … we thought some of the pricing pressures would go away, we thought the strength of the dollar might go away,” said chief executive George Fisher. “We were deluding ourselves with what turned out obviously to be wishful thinking.
“Along with the fact that I think we’re out of denial, we are clearly determined to get Kodak back on an earnings improvement track,” Fisher said at a news conference in New York.
Kodak’s core business of amateur film, photographic paper and cameras generates half its profits. But its market share of domestic film sales has fallen below 70 percent over the last year while Fuji’s share has jumped to almost 20 percent, analysts say.
The cost cutbacks will be made over the next two years, as much as $750 million by the end of 1998. Kodak plans to set aside at least $1 billion during the fourth quarter to pay severance costs and other restructuring expenses. xxxx KODAK CUTBACKS 1983 Kodak lays off about 3,100 employees; another 5,000 take a buyout plan. 1986 - Kodak says it will reduce its work force by another 10 percent, or about 12,000 jobs. 1989 - Kodak cuts 4,500 jobs, sells some businesses. Ultimately, about 6,000 workers leave. 1991 - Kodak eliminates 3,000 jobs. 1993 - Kodak says it will cut 2,000 jobs, later says it will lay off 10,000 workers by 1995. 1995 - Kodak cuts 4,000 jobs. January 1997 - Kodak says it will cut 3,900 jobs over the next 18 months. November 1997 - Kodak says it will eliminate 10,000 jobs, or 10.5 percent of its work force.