Kodak to Scale Back Operations, Cut 1,000 Jobs

Eastman Kodak Co. (EK) , battling a steep drop in demand for photographic film and paper, is scaling back film manufacturing in China and closing various businesses in Rochester and West Virginia, eliminating about 1,000 jobs.

Kodak, which is navigating a tough transition to digital photography, said Thursday it will consolidate North American color photographic paper manufacturing at factories in Windsor, Colo., and Harrow, England, by shutting down an operation in Rochester by the end of October.

It said manufacturing of consumer film products will be cut back in Xiamen, China.

By year-end, the company also will close another business in Rochester that recycles polyester waste and shrink an operation that processes polyester raw material. It instead will buy finished raw material and hire an outsider to handle the recycling.

In addition, Kodak will close a printing-plate factory in Middleway, W.Va., by next March, as it consolidates printing operations after its $980 million buyout of Canada's Creo Inc. (search) , the world's biggest maker of printer software.

Kodak shares rose 22 cents to $25.26 on the New York Stock Exchange (search), near the lower end of their 52-week range of $24.63 to $35.19.

The moves are part of a dramatic overhaul begun by the world's biggest film manufacturer 20 months ago to eliminate up to 25,000 jobs by mid-2007.

To fortify its swelling digital businesses, Kodak moved to slash deeper than it set out to do in January 2004, when it targeted 12,000 to 15,000 job cuts. In July, it disclosed plans to lay off another 10,000 employees, 7,000 of them in manufacturing.

The latest round of cuts will result in charges of $153 million in the second half of 2005 from asset write-offs and severance benefits, Kodak said. About 900 jobs will be axed in both Rochester and Xiamen, China, but more than half of those layoffs will take place in Kodak's hometown. The West Virginia factory closing will idle 108 employees.

Analysts expect Kodak to earn 71 cents a share in the July-to-August quarter, and $2.04 per share for all of 2005, according to analysts surveyed by Thomson Financial.

Acknowledging in September 2003 that its chemical-based businesses were in irreversible decline, Kodak outlined an ambitious strategy to become a digital heavyweight in photography, medical imaging and commercial printing.

The transition triggered nearly $3 billion in acquisitions but has carried a high cost. The shutdown of film and other manufacturing operations around the world looks likely to drop its global work force below 50,000, down from 75,100 in 2001 and a peak of 145,300 in 1988.

Sales of conventional silver-halide film (search) — Kodak's cash cow for the last century — look set to drop by 30 percent in the United States this year.