The future of Kodak film

[Photo Engineer]

I've been thinking about this and discussing it with a number of people. Here is one thing that may be of interest to you all:

http://www.businessweek.com/magazine/content/07_08/b4022051.htm?campaign_id=yhoo

Read the last two sentences, please. The second from last has not been noted here and is very significant.

If Kodak continues in the film business, they sit on valuable property and sell a load of film and make a good income for the company. If they exit, as I stated elsewhere, we have either a 'new' film company, or a purchase by a group of investors.

In the latter two cases, we have to consider that any new company formed around the film units of Kodak or an outright purchase would have to contend with the problem outined in the sentence I refer to above.

Of course, a solely film company would have more interests in the customer but they would have some real problems.

As one wag said in the paper here, and which I quoted elsewhere, "Kodak may want to sell the film business but who would buy it".

Considering the reference above, I think this just might be true! This reporting explains one of the major reasons. Those who have commented to me either way may want to consider the words of this article carefully and especially the impact of that second from last sentence.

Kodak may or may not stay in the film business. The decision appears to be balanced on a razors edge.

PE

 

[PatTrent]

If they continue in the film business, however, might that not increase their environmental clean up problems? Just a thought.

 

[Oren Grad]

IANAL, but in principle would it not be possible for Kodak to assume that liability as part of any transaction? Although it hasn't been paid for yet (or has it? Do we know for a fact that it's not already reflected in Kodak's accounts?), in an economic sense it's like a sunk cost. It's already been incurred and will have to be covered even if the film business vanishes without a trace tomorrow.

Unless continued operation of the facilities is making the problem worse. That would certainly weigh not just on a sale but on any decision by Kodak to stay in the business itself.

 

[Jerry Thirsty]

I assume you are implying that the environmental cleanup costs are linked to the properties the film plants are located on. So would the costs then be transferred to anyone who bought the plants, or would Kodak have to remediate before they could sell them? It might discourage Kodak from pulling a Forte, if the land is too polluted to be sold for other purposes. Can remediation take place while the plants are running (i.e. if they shut down production all at once would they suddenly get hit with a major cleanup bill, and thus be more inclined to phase facilities out gradually)?

That was one thing about the Forte plant closure I found odd; they say the property is worth more for the real estate value, but if anything I would expect environmental problems to be an even bigger issue in eastern Europe (unless lack of laws/enforcement means they can build subdivisions on top without cleaning it up).

 

[Brac]

I doubt whether Kodak would have to worry too much about environmental concerns regarding its film plant in China. That fact, plus cheap labour coupled with no effective unions is why manufacturers are falling over themselves to locate there.

As for inkjet printers I wish Kodak well but they have left it a bit late as the market is dominated by just 4 makers - HP, Canon, Epson & Lexmark. Other people who tried seem to have given up, such as Olivetti & Xerox and Sharp didn't make any real inroads either.

 

[Michael W]

This is the sentence in the article that seems most significant to me,
"The digital world brings tougher rivals, lower profits, and increased investment needs."
Even though digital is everywhere, I keep hearing that not many firms are making profits out of it. You need to find a strong niche & dominate, something that firms like Sandisk appear to be doing. I'm not seeing any indication that Kodak have found their place yet. They might still be grateful for the cash that film keeps rolling in.

 

[Jordan.K]

I think "Goldie's" point is pretty solid. Nice point.

 

[kjsphoto]

Look t the bright side. If Kodak exits and doesn't sell, Iflord will be in first position and no longer tied which will ensure their future as being film king.

So in reality I don't really see this as bad news.

Also in terms of environmental hazards why does no one ever address the fact s of the hazard digital has on he environment; LCD’s, Monitors, Computer, cds, dvd, ink cartridges, printers, memory card, NiCad batteries, etc... And what of the landfill issues as well as these materials do not decompose and almost no one ever returns cartridges to the manufacturers when they purchase new ones to replaced the ¾ empty ones?

 

[Scott Peters]

Again, ...Kodak can sell the film business and retain the environmental liability for clean up...or the buyer simply won't buy the real estate, but instead lease it from Kodak and let them retain the liability...but this certainly will be an issue in any sale.....

At the end of the day, does film cash flow and generate a decent ROI for investors? Or, is it a cash drag or a distraction from their key strategy (digital, which could be a reason) OR, sell it because you NEED the selling price cash to grow the digital side...

And Kodak does have substantial debt - it's balance sheet aint all that great.

Aren't these guys a little late to the digital scene? And the digital camera scene is highly competitive, with tough margin pressure.

Wow, did prior management screw this thing up. Like, they didn't see it coming?

I think they are TRYING, Hoping, Praying to find A place...like "Gee, I guess film will eventually go away.....and we are in the Kodak Moment business,,,so I guess this means we should do something in the digital world, so we can try and make money so us execs and board members can have a job?"

What worries me more is that the rest of the world (china in particular) are skipping right over film to digital....not good for future prospects of film....

I loved reading the comment perez made about the Board deciding on what to do with individual business units...."it will be up to the Board to decide what is the best option" - now THAT's what I call leadership....

 

[25asa]

Kodak exiting is not looking on the bright side.
Ilford doesn't make 100UC.

 

[kjsphoto]

Kodak exiting is not looking on the bright side.
Ilford doesn't make 100UC.

Ok, they don't make one thing or the another but they make a ton of other and they are in it for the long haul. So as far as I am concerned the side is bright as the materials we want to use will still be available even though different. And there is still Fuji Film, Foma as well,

I don't see the problem.

 

[jd callow]

I doubt whether Kodak would have to worry too much about environmental concerns regarding its film plant in China. That fact, plus cheap labour coupled with no effective unions is why manufacturers are falling over themselves to locate there.

As for inkjet printers I wish Kodak well but they have left it a bit late as the market is dominated by just 4 makers - HP, Canon, Epson & Lexmark. Other people who tried seem to have given up, such as Olivetti & Xerox and Sharp didn't make any real inroads either.

Actually, I think the size of the chiness market is why so many are falling over themselves to get in.

 

[aldevo]

I doubt whether Kodak would have to worry too much about environmental concerns regarding its film plant in China. That fact, plus cheap labour coupled with no effective unions is why manufacturers are falling over themselves to locate there.

As for inkjet printers I wish Kodak well but they have left it a bit late as the market is dominated by just 4 makers - HP, Canon, Epson & Lexmark. Other people who tried seem to have given up, such as Olivetti & Xerox and Sharp didn't make any real inroads either.

Kodak, I believe, was obliged to build their joint facility with Lucky to the same environmental standards as in the USA. I'll let PhotoEngineer speak to that (if he's interested).

Incidentally, Kodak has moved its color film production back to the USA from China.

To make a long story short - wages are rising quickly in China and there's a factory labor shortage. Don't look for it to be a panacea for the film industry's ills.

 

[MattKing]

If I understand it correctly, Eastman Kodak has a long history of chemical manufacturing - and much of that manufacturing had wider applicability than just to the photographic industries. They developed and manufactured many products - at one time they competed with the likes of Dupont in the depth and breadth of their product lines.

I wouldn't be surprised if much of their environmental exposure relates to that history.

If my knowledge of Forte is correct, they are unlikely to have that type of exposure.

Kodak has a history of responding well to environmental concerns, as they become apparent, but much of Kodak's pioneering work was done before anybody understood those concerns.

I suggest that modern manufacturing processes are much more likely to be environmentally "gentle" - thus I would be surprised if the Kodak/Lucky facilities were very problematic.

IMHO it is the historic facilities and resources that create the most concern for Kodak.

Matt

 

[firecracker]

Why not move Kodak to Latin America? The entire region could be the next big market.

 

[ADOX Fotoimpex]

If my informations are right all eastern European manufacturers are facing little or no environmental cleanup charges.

All of them are located either directly next to densly habitated areas (housing) or actually in them since the 50ies and have been regulated very strictly in the past.

Most of them have been producing film and papers only, which is actually a pretty clean production with little bad side products.

Possible candiates for pollution are more the producers of the input materials like gelatin, silver nitrate, liquid chemicals or salts.
These have been made within these factories only to a very limited extend, also in the past.

I have seen almost every coating line in eastern europe and most of them are very, very nice pieces of land. Beautifully located with own woods and dwells. More of a recreation park than an actual factory.

The reason is simple: Back when they were founded in the 1920ies to 1940ies climatising and air purification was THE issue. So they planted trees (mostly cedar trees) in order to give shade and pure air around the factorie buildings which were neat looking, long, one story brick buildings.

So you have always a HUGE piece of land with woods and some scattered small nice buildings and lots of alleys to walk on from building to building.
One of the major problems is that within their own property they tried to squeeze all possible poluters (like the energy creating building) as far to the corner as they could so no smoke hit the factory in bad wind conditions.

This is one big issue when trying to scale down the factories now. Changing all the steam pipes and mooving the generators is difficult and costly next to the spread out shematics of building locations on the lot.

Regards,

Mirko

 

[Photo Engineer]

If I understand it correctly, Eastman Kodak has a long history of chemical manufacturing - and much of that manufacturing had wider applicability than just to the photographic industries. They developed and manufactured many products - at one time they competed with the likes of Dupont in the depth and breadth of their product lines.

I wouldn't be surprised if much of their environmental exposure relates to that history.

If my knowledge of Forte is correct, they are unlikely to have that type of exposure.

Kodak has a history of responding well to environmental concerns, as they become apparent, but much of Kodak's pioneering work was done before anybody understood those concerns.

I suggest that modern manufacturing processes are much more likely to be environmentally "gentle" - thus I would be surprised if the Kodak/Lucky facilities were very problematic.

IMHO it is the historic facilities and resources that create the most concern for Kodak.

Matt

This is correct. Kodak Chemicals division, on Ridge Road in Rochester was one of the largest fine chemical manufacturers in the USA. They invented and pioneered the 'vacuum still' a method of making highly pure organic compounds and as a result became the worlds largest supplier of vitamins in the entire world. There specialties were vitamin E and vitamin A, and the work on vitamin E led directly to the original work on highly stable dyes in the 1960s, 20 years before Henry Wilhelm began his work. At that time, Kodak paper was far superior to any other paper on the market due to the use of antioxidants that were similar to Vitamin E.

Each year, they published a new huge catalog that contained many of the chemicals used in film making including developers, sensitizing dyes, and addenda.

This plant is now closed.

It was more properly called DPI or Distillation Products Industries.

PE

 

[Photo Engineer]

Why not move Kodak to Latin America? The entire region could be the next big market.

Kodak built a plant in Brazil for just this reason.

Due to economic growth, the South American economy is exploding and moving directly to digital.

The Brazil plant closed about 2 years ago.

PE

 

[Paul Howell]

Kodak built a plant in Brazil for just this reason.

Due to economic growth, the South American economy is exploding and moving directly to digital.

The Brazil plant closed about 2 years ago.

PE

It seems that China, Aferica, India and South American are leapfronging to digital. The loan Indian paper company closed a few years ago as well. A computer ink jet printer and digital camera are much less expensive than a start up analog system.

 

[PHOTOTONE]

Kodak built a plant in Brazil for just this reason.

Due to economic growth, the South American economy is exploding and moving directly to digital.

The Brazil plant closed about 2 years ago.

PE

What products did they make in the Brazil plant?

 

[Chan Tran]

I believe people in richer countries use more film than that of poor countries. I think Japanese is top in film consumption. If Kodak and its brand is for sale I believe the Chinese will buy it but to sell film in the US, Europe and Australia and not so much in China, Thailand, Vietnam etc..

 

[Photo Engineer]

What products did they make in the Brazil plant?

IDK, paper and film? I know paper was made there.

PE

 

[Neanderman]

Kodak may well be one of the last companies to abandon "(near) total vertical integration." It's never been clear to me exactly what they made, but I think at one time it included their own paper, their own film base and most of their own chemicals. Not sure about gelatin.

I think one of the last things Eastman did before he died was purchase what became the Tennessee Eastman Division in Kingsport, TN. because he was having trouble getting the quantities and consistant quality of chemicals that they needed. EK spun them off sometime back in the 80's.

But I think one of the quiet secrets about the entire move to digital photography is that much of it is being driven by environmental concerns. I'm sure it was a huge driver in their closing all of the labs.

 

[Photo Engineer]

Kodak had its own gelatin plant in Peabody Mass. Other than that, they used Rousselot gelatin from France.

PE

 

[firecracker]

I think Japanese is top in film consumption.

I don't know the statistics, but it seems it is not any more than the people in the U.S. One thing people outside of Japan don't seem to get is that we don't have a wide selection on film and paper compared to other big markets. Yodobashi Camera, which is our equivalent of B&H, for instance, isn't really the size of B&H at all. Maybe it used to be different...