Investor Rebellion at Kodak? Blood in the streets of Rochester??

[Jorge Gasteazoro]

Answer to last sentence question: The trouble is that the overseas worker isn't buying American products



I guess Mexico is not "overseas" per se, but here the predominant products are american cars, computers, etc, etc.



What chaps my hide is the fact that the same companies who come here to get cheap labor then turn around and sell their products as if they were made in the US. For example, IBM computers are made in Mexico, yet I have to pay as much for a computer here as I would pay in the US. Blockbuster always pays minimum wage to their front store emplyees, the difference is that minimum wage in Mexico is $200 a month, yet when I go to rent a movie I pay the same $3.50 you all pay in the US.



From a corporate point of view it only makes sense to move operations to countries where you can essentially get the same work done as in the US for what amounts to slave labor wages.



Frankly I am surprised Kodak made their new plant in Canada, as they have the same living standards as in the US, but I am sure they had good reasons to do so.



As to Kodak's desicion, IMO they undoubtely have to do something to become competitve in the digital area, after all it is the wave of the future for consumer imaging. I think the problem most investors have is putting all your eggs in one basket and turning a blind eye towards film, when the field still has enourmous value even if it is declining.

[David A. Goldfarb]

I suspect the Canadian health care system might be an attraction for Kodak, as compared with the U.S. system.

[Nick_3536]

Both of India and Mexico are losing jobs to China. That's right wages in India and Mexico aren't low enough.

It doesn't suprise me Mexican prices aren't any lower then US prices. If they were at best they'd risk a dumping complaint. At worse the product would be shipped back into the US via the grey market. Just look at how Canadian drugs are being shipped into the US.

[John Downie]

There was a long thread on this topic right after the announcement, on the other lf forum.

Kodak faces the "free cash flow problem." They have a highly profitable product, film, that is in a declining market. The chief problem is that managers do not like taking actions - paying out the film-generated dividends to shareholders - that shrink the company. Instead, they piss away shareholder value by investing in negative NPV (economically money-losing) projects. It is a ludicrous pattern that Kodak has followed over and over. Just because digital is the wave of the future does not mean Kodak can make any money in it. Hybrid vehicles and photovoltaics are also likely to sell more in the future, but people do not suggest, quite sensibly, that Kodak should invest there. Just because film and digital cameras both capture images does not mean that Kodak has any business in digital. We have seen that the Kodak brand name does not carry any punch on its own, so Kodak should follow the advice of the investment community and pull the plug on this latest, value-destroying investment.

[Mark Farnsworth]

Lots of countries are loosing jobs to China because the Chinese currency does not float to a “market rate” and is fixed by the government. The rate is fixed artificially low to encourage Chinese manufacturing jobs and exports. The US and other countries have complained about this, but so far there is no sign that the Chinese will allow their currency to increase in value. This keeps people in China employed, but lowers their standard of living because imports are very expensive.

Drugs are cheaper in every country outside of the US (including Canada). This is because all other countries have regulated drug prices, and/or they do not honor drug patents (making generics much more plentiful). Health insurance purchasers and consumers in the US fund all worldwide R&D for new drugs in the pharmaceutical business. People in other countries basically just pay the cost of drug production and marketing/distribution.

IBM computers are assembled in Guadalajara Mexico, but almost all the parts are made elsewhere in the world by contract manufacturers to IBM specifications. The final assembly does have some costs, but not enough to make a big difference.

John, I agree with you that Kodak is probably wasting its money investing in digital. Even if they became a major player, they will be just a re-marketer of technology developed by others, and there will eventually be a huge shakeout in the business just like the PC business. Stockholders would be better served if Kodak just paid big dividends and milked the film business cash cow to the end (maybe 10 years max) without and major R&D. But that would not be considered to be the “responsible” thing to do from an employee standpoint or from a community (Rochester) standpoint. That’s part of the dilemma that management faces.

[Tom Westbrook]

Looks like Kodak realized they might have made an error in the Wall Street Journal article. It might be good for those who use film to take the survey:

http://www.kodak.com/global/en/profe...4/survey.jhtml