Kodak reorganizes, again, on its way out of bankruptcy

ByABC News
July 11, 2012, 3:44 PM

— -- ROCHESTER, N.Y. -- Six months after slimming down from three arms of business to two, Eastman Kodak is reorganizing again -- back to a three-prong operation.

Judging from the company's statements and interpretations of its moves by management experts, Kodak's surprising realignment from consumer and commercial divisions to consumer, digital printing and entertainment raises the prospect of more layoffs and asset sales.

In a memo to employees this week, the company said it is shifting some top bosses as it aims to get out of Chapter 11 bankruptcy next year.

The printing and imaging company now has three operating groups: a consumer group overseen by company co-President Laura Quatela; a digital printing and enterprise group headed by co-President Philip Faraci; and a graphics, entertainment and commercial film group directed by Senior Vice President Brad Kruchten.

Since entering bankruptcy in January, the struggling company has filed notices indicating roughly 500 layoffs here, almost 10% workforce in the Rochester area. And Chief Executive Antonio Perez is now talking about a "leaner cost structure."

"This new business model ensures that I have the cleanest possible connection to our senior leadership," Perez said in this week's memo. "It is also the first of several steps to flatten our organizational structure."

Since declaring bankruptcy, the company has unloaded Kodak Gallery and gotten out of the digital camera business, among other divestitures.

Companies are constantly rejiggering to find the best way to operate, said Jim Brickley, the University of Rochester's Gleason professor of business administration. "Firms struggle to get this right. When you combine units together, there are certain benefits to it. If you over-combine them, it may be better off to say 'let's give you clearer responsibility and more rights.' "

In Kodak's case, the company said the three-prong structure is more streamlined because it reduces 16 strategic product groups to three.

The new organizational model could make further sales of business lines easier, said Daniel Tessoni, assistant professor of accounting at Rochester Institute of Technology.

Earlier this year in its U.S. Bankruptcy Court filings, Kodak listed a variety of potential sales, including Cinesite, a special-effects business it unloaded in May, as well as its polyester film business, paper and output systems operation, and the motion-picture film business.

Kodak, through its spokesman Christopher Veronda, denied the reorganization was done with sales of any of those latter business lines in mind.

But retired U.S. Bankruptcy Court Judge John Ninfo II saw another possible reason for the changes -- clearer branding of Kodak's remaining operations.

"If you're going to split it off, you have to call it what somebody wants to buy," he said.

All these realignments and cost-cutting plans come as Kodak plots its exit from bankruptcy, planned for 2013.

Perez said in the memo that Kodak has presented a full-year business forecast and a strategic business plan to its board and creditors.

"Achieving the projections in our forecast is a critical factor in building creditor support for our plan," he said.

The memo didn't go into detail about the forecast or the company's strategic business plan. Kodak lost $88.3 million in May, according to its most recent report to Bankruptcy Court.

Daneman also reports for the Rochester (N.Y.) Democrat and Chronicle