We’ve written extensively about the once-great Eastman Kodak’s(EK) slide to bankruptcy, but what might be the result of a Kodak bankruptcy? What might Kodak, and the city of Rochester look like in 5 years. Perhaps some answers can be found in the story of another prominent manufacturing company synonymous with an upstate New York city, Oneida, Ltd. Oneida was recently the subject of a well-reported article at New York Times DealBook. There are certainly stark differences between the issues Oneida faced and the issues Kodak faces. Oneida did not face the disruption and obsolescence of its key products as Kodak has, but it faced its own set of challenges that were every bit as difficult.
What does Oneida look like today?
A third of Oneida’s roughly 450 employees still work at the company’s headquarters, a four-story granite building that stands across the street from the original Oneida Community house and doubles as a kind of living museum. Oneida advertisements from Life magazine and the Saturday Evening Post in the 1960s, some featuring then-spokesman Bob Hope, dot the walls of the office. A row of unused Kodak Carousels sits on a shelf outside the company’s in-house darkroom, long ago abandoned for a digital photography studio. Down the hall, a small group of model-makers hammers out prototypes by hand.
How did it get here?
Oneida’s financial problems were decidedly modern, and echoed the issues faced by companies in cities like Detroit and Pittsburgh. Starting in the 1990s, the company began to feel the heat of foreign competitors, who could produce utensils for a fraction of the price of American manufacturers. The attacks of Sept. 11, 2001, further hurt business, after the metal forks and knives Oneida supplied to airlines were banned on flights.
As its sales fell, Oneida hemorrhaged money — more than $157 million between January 2003 and October 2005 — and was forced to stop making flatware and close several facilities in Oneida and the surrounding cities, where the company had employed about 2,500 people at its peak. By 2006, the situation at the company, which in better times had been well-off enough to sponsor Little League teams, the golf course and other local activities, had become so dire that filing for Chapter 11 was the only option.
“Oneida tried to hang onto its manufacturing facilities as long as it could,” said James E. Joseph, Oneida’s outgoing chief executive, who is stepping down this year as part of the Monomoy transition. “From a pure business standpoint, you could argue we hung on too long.”
A few months later, Oneida exited from bankruptcy, under the control of a group of hedge funds. Led by Monarch Alternative Capital, the firms moved swiftly — if painfully — to make the company profitable. They moved a distribution center to Savannah, Ga., to save on freight costs, closed stores and struck an agreement that allowed Robinson Home Products to distribute flatware and dinnerware under Oneida’s name. The hedge funds even debated moving Oneida’s headquarters closer to New York City to give it a better shot at attracting top talent, but eventually decided against it, according to several people involved in the discussions.
Those decisions stabilized Oneida. In five years, the firms reduced the company’s debt load to around $60 million from approximately $150 million. The company now turns a small annual profit of around $15 million before interest, taxes, depreciation and amortization, according to several people with knowledge of the company’s finances who spoke on the condition of anonymity because the numbers are private. Its North American flatware business gained 3 percentage points of market share last year, according to Mr. Joseph, and still has a valuable brand name.
If Kodak is to emerge from bankruptcy a healthy company, it, like Oneida before it, will have to dispense with sentimentality, find its new core competencies, and jettison everything else. It’s the only way to keep the name of this iconic company alive and well for decades to come.
Disclosure: The author holds no position in any stock mentioned.
