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Downsized decade

Rochester Business Journal
December 25, 2009

By ANDREA DECKERT

A decade ago, Eastman Kodak Co. and Xerox Corp. employed 38,750 area workers. Today that number has dropped by more than half, with the two biggest members of the traditional Big Three employing a total of 15,430 local workers.

The downsizing of Kodak and Xerox ranked No. 1 in a poll of Rochester Business Journal readers asked to choose the top business story of the decade.

Of the 548 respondents, 18 percent picked the employment drop at two of Rochester's largest employers over other choices that included the local impact of the global recession, the failure of the fast ferry, increasing health care costs, the closing of Midtown Plaza and the out-migration of young people.

Ranked second was the impact of state and local taxes, with 12 percent choosing that as the top local business story for the first decade of this century.

Kent Gardner, president and chief economist of the Center for Governmental Research Inc., said the decline of Kodak over the past 20 years is the area's top business story because it signaled the transition of the economy on so many levels, including the shift away from manufacturing, from analog to digital and from physical products to intellectual property.

"It so captures the way the American economy has transformed, and Rochester as well," Gardner said. "Companies that are successful now are those that do bring a unique idea and unique technical understanding to products and services."

While Gardner believes there will be continued job cuts at Kodak as the motion picture industry continues to change how it works and decreases its need for film, he said the greater emphasis on intellectual property can help the region, since firms including Bausch & Lomb Inc., Kodak and Xerox excel at research and development.

Xerox spokesman Bill McKee said the company's employment has been steady for the past year, with 6,896 local workers through the end of the third quarter.

Company leaders, including CEO Ursula Burns, have said they expect Rochester to continue to be a major base of employment and activity for the company. Xerox manufactures its iGen4 digital presses and Nuvera family of commercial printing presses in Webster, as well as a worldwide supply of emulsion aggregation toner, McKee said.

Kodak spokesman Christopher Veronda said Rochester remains Kodak's headquarters, noting that the firm has undertaken a three-year, multimillion-dollar project to renovate its Kodak Tower headquarters building. Rochester is home to Kodak's largest concentrations of manufacturing and research employees, he added.

"So Rochester will remain very important to Kodak's future, about which we are increasingly optimistic following a decade that saw a very difficult transformation to a digitally oriented company as the traditional photography market declined," Veronda said.

In an identical poll of 12 Rochester Business Journal editorial department staffers, the growing importance of the University of Rochester and Rochester Institute of Technology topped the list with 33 percent. That was followed by 25 percent voting for the closure of Midtown Plaza and plans for redeveloping the site.

The growing importance of UR and RIT ranked sixth in the readers' tally, getting 8 percent of the vote. Midtown ranked eighth with 5 percent of the vote.

While readers chose the drop in local employment at Kodak and Xerox as the top story, some noted on the bright side the rise of academic institutions such as UR and RIT.

"The stunning reductions in our core businesses would not have been believed if anyone had predicted it in 1999," wrote Rochester City Councilman Dana Miller. "The only bright spot in the decade has been the explosive growth and importance of the U of R and RIT as drivers for economic development."

Clifford Jacobson of Rochester-based WebHomeUSA.com said the emergence of UR and RIT as dominant employers and drivers of the economy was the top business story of the decade.

"The (UR) and RIT are also the driving forces behind innovation and entrepreneurship, which are the future of the Rochester area," Jacobson wrote.

Mark Zupan, dean of the UR Simon Graduate School of Business, said readers' choice of the top local business story did not surprise him but showed that negative news tends to get the headlines and people's attention.

Missing from the majority of the picks were choices that supported what Zupan called "the overall resilience of the past decade," seen in growth among small to midsize businesses. He pointed to companies such as Paetec Holding Corp., Paychex Inc. and Constellation Brands Inc., which have grown in the past decade.

"There has been an upside as well," he said.

Readers echoed Zupan's comments on the lack of positive news choices.

"I say this somewhat wishfully thinking that we need to promote the positive aspects of the Rochester business community, not continue harping on the negative, which is somewhat the trend of all of the other options," wrote Hutch Hutchison of In T'Hutch Ltd.

Wegmans Food Markets Inc., for example, has been featured in a number of business publications for its growth and has earned kudos as one of the best companies to work for and one of the most innovative grocery companies in the world, Hutchison added.

"Wegmans-how do you live without it?" he wrote.

The growth of Wegmans garnered 3 percent of readers' votes as the top story.

Zupan said growth will be possible in small to midsize businesses and even in the bigger firms such as Kodak and Xerox if steps are taken to rein in state and local taxes.

Gov. David Paterson and the state Legislature approved a 2009-10 budget that included an $8 billion increase in taxes and fees and an $11 billion increase in spending. Such taxes are hurting businesses of all sizes and inhibit their ability to compete in a global economy, Zupan said.

Readers agreed.

"The onerous tax base, which has gone far beyond what anyone would have thought to be reasonable at the beginning of this decade, will surely serve to ruin the prospects of this area for many decades to come," wrote Joe Fabetes. "The sad fact is that at the rate we are going, 10 years from now we will be wishing for this level of taxation."

Michael Hanna of H.P. Neun Co. Inc. agreed that taxes and fees at the state and national levels have a negative impact on local firms' ability to compete. Government must reduce spending to avoid creating an even worse environment, he said.

People must keep the pressure on for tax reform and approach the issue with common sense, Zupan said.

"We have faced challenges before and have prevailed," he said. "We need to keep pushing."

12/25/09 (c) 2009 Rochester Business Journal. To obtain permission to reprint this article, call 585-546-8303 or e-mail service@rbj.net.


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