Smug no more
is a rare mid-sized city that boasts
five Fortune 1,000 companies but the
economy has suffered due to problems
at Kodak, Xerox and Bausch & Lomb.
firms pay high price
want to make Rochester the best city in which to live
—George Eastman (1854-1932), founder, Eastman
been a busy year," says Carol Silver Elliott, CEO
of Career Development Services, a job placement centre
located a few doors from George Eastman House, the
world-renowned film and photography museum.
it's going to get busier, with Eastman Kodak Co.'s
recent announcement of plans to cut its local
workforce by as many as 3,000 jobs.
summer, Kodak said it would close a Rochester plant
that churns out its trademark yellow film boxes,
shifting 900 jobs outside the United States to save on
the past two decades, Kodak has already cut its
Rochester workforce by two-thirds, shedding almost
40,000 jobs in the city of its birth.
Corp. and Bausch & Lomb Inc., the other members of
this upstate New York city's so-called "Big
Three" manufacturing employers, have also made
deep cuts in their local workforces.
three giant firms, victims of complacency arising from
the near monopolies they enjoyed at the zenith of
their fortunes, have been struggling for several years
to beat back low-cost foreign competitors, and more
recently some technological threats to their flagship
lucrative film business is fast fading with the
increased popularity of digital cameras, which outsold
film cameras in the United States for the first time
last year. Kodak acknowledges that its U.S. film sales
will drop 10 per cent to 12 per cent in each of the
next three years, and will fall almost twice that much
in Japan, a key export market.
Xerox, which is emerging from recent accounting
scandals and a brush with bankruptcy, has cut 22,000
jobs worldwide in the past two years.
Mulcahy, the firm's turnaround CEO, has sold or closed
manufacturing operations, outsourcing much of the work
once done in suburban Webster, a sprawling industrial
park that rivals cross-town Kodak Park in size.
Mooney, CEO of the Rochester Business Alliance (RBA),
is stoic about the changes.
patriotic thing, keeping jobs in the U.S., is overcome
by thoughts of survival among these companies,"
he says. "They haven't been able to raise prices.
So they have to cut costs. They simply have to become
Elliott, the outplacement expert, is less sanguine.
had some growth in small business, but no huge
manufacturing companies have come in here to pick up
the slack in high-skilled jobs," she notes.
of Elliott's clients are engineers and scientists.
"They have very specific skill sets," she
says. "They're not suited to, for instance, the
boom in health-care jobs." These clients
"often have to set their idea of a dream job
aside, or relocate from Rochester."
the past, Elliott was able to place 90 per cent of her
clients in new jobs locally. Now that's down to 75 per
cent. "It bothers me to see jobs going
offshore," she says. "Who's going to buy?
What happens to local consumers?"
his 1957 book Smugtown USA, local author Curt
Gerling wrote that life in Rochester was as "unburdensome
as getting a job at Kodak and learning to pat the
the corridors of the Kodak Tower, the Art Deco
landmark built by Eastman not long before his death,
an arrogant complacency has ruled for years.
can remember meetings where we'd talk about how to
achieve our numbers," says Larry Matteson, a
Kodak executive for 26 years and now a business
professor at the University of Rochester. "We
essentially controlled the market, so the decision was
that we'd just raise our price. That was our marketing
is a rare mid-sized city (regional population 1.1.
million) to boast five Fortune 1,000 companies.
Besides the Big Three, there's rapidly growing Paychex
Inc., whose founder, Tom Golisano, recently bailed out
the nearby Buffalo Sabres.
Constellation Brands Inc. is a $3 billion (U.S.)
leader in beer, wine and liquor distribution, with
brands like Black Velvet and Corona.
has also benefited from the model of enlightened
capitalism set by Eastman, who said, "We are
running a very complicated and difficult business. I
know of none more dependent on the good feeling and
faithfulness of its employees."
profit-sharing, free medical care and other pioneering
benefits for his employees, Eastman's $100 million in
personal donations to the University of Rochester, the
Rochester Institute of Technology, and toward the
creation of one of the United States' top music
schools, among other benefactions, laid the foundation
for the city's reputation for outsized academic
the mid-century, Xerox founder Joseph Wilson, a
University of Rochester graduate, set his own company
on the same course of progressive enterprise, and
donated more than $20 million to local non-profits.
in the inner city have derived little benefit from
technology and no profit from it," said Wilson,
who died in 1971. "Technological companies are at
the centre of social change and therefore have a
Golisano has upheld the tycoon-philanthropist
tradition, donating more than $38 million (U.S.) to
local colleges and hospitals in recent years.
if it was a hotbed of innovation in the first half of
the 20th century, inventing amateur photography,
contact lenses and revolutionary office equipment,
Rochester by the 1980s had become a case study in
was Kodak that invented the critical piece of the
digital camera, the high-resolution sensor, back in
1986. But its sclerotic management let such
innovations languish, choosing to seek growth instead
with dubious forays into copiers, lithium batteries,
drugs and Lysol distribution.
Fuji Film beat a sleepy Kodak to the disposable camera
market, and well into the 1990s was catching Rochester
off-guard with price wars.
Gates learned first-hand about the lack of urgency in
the Kodak Tower during a meeting to discuss a Photo CD
project, when Kay Whitmore, then chief executive of
Kodak, indulged his habit of nodding off during
still sees itself as an `industrial intellectual
town' unlike Buffalo
similarly ignored the breakthroughs at its own Palo
Alto Research Center, letting others reap the gains of
its invention of the fax machine (exploited by Ricoh),
the laser printer (Hewlett-Packard), and the computer
mouse and graphical user interface (Apple Computer
Inc. and Microsoft Corp.). Xerox also diversified,
quite unhappily, with insurer Crum & Forster, long
since sold which is now a headache for Toronto-based
Fairfax Financial Holdings Ltd.
that Kodak and Xerox are fighting for their survival,
"We have to take responsibility for the success
of our economy," says Thomas Richards, chairman
of Greater Rochester Enterprise (GRE), a
private-sector economic development group.
used to be that the economy was assigned to
Kodak," he says.
is the last of the string of once-thriving cities
along the Erie Canal to succumb to the Rust Belt era,
after more than a century and a half of prosperity
dating from the construction of that gateway to the
chain of upstate New York communities from Schenectady
to Buffalo began to suffer heavy losses of
manufacturing jobs in the 1970s.
prodigious industrial ingenuity and the benevolence of
its major employers left it ill-prepared for upheaval.
was a steady, slow decline," says Richards,
"because of the benign nature of the layoffs.
Kodak and Xerox offered such generous layoff packages
that in the first rounds of job cuts, the high-skilled
employees they cut were often able to launch their own
wasn't like the devastation for steelworkers in a
place like Bethlehem, Pa., where 6,000 people would
suddenly lose their jobs with two weeks' pay. The
absence of those kinds of shocks lulled us, and
allowed us to ignore the problem for a long
in recent years has Rochester begun to make a
concerted effort to attract new businesses, focusing
on its strengths in optics, photonics, digital
imaging, biotech and fuel cells.
Cronyn, community relations officer at Xerox in
Webster, says the repeated, severe rounds of layoffs
in the area, while painful, have helped diversify the
Kodak, Xerox has cut its local philanthropy as
judiciously as possible — "it's only the fair
thing to do when you're taking jobs out of the
community," Cronyn says. And Xerox executives
still serve on the boards of local non-profit groups.
"But we've told people they can't expect as much
help from us," Cronyn says.
that's healthy, that you don't have a situation where
Kodak or Xerox sneeze and the city gets pneumonia. The
non-profit groups have learned to broaden their base
of support, to prove themselves to a wider community
may be true, but many of the non-profits would rather
have been spared the adjustment.
Big Three support to non-profits is nothing like their
extreme generosity of the past," says a local
businesswoman. "The pain is deep and
at University of Rochester says the city is finally
emerging from denial, "from waiting for Kodak to
make everything the way it was."
first major Rochester layoffs at Kodak and Xerox were
in the 1980s. But "as recently as five years ago,
you didn't talk about the facts, you didn't read about
it in the paper," says Matteson.
we're facing up to the decay in manufacturing. We had
to go through this stage of mourning. You don't make
progress till you get past that."
has been slow to adjust to new circumstances. The GRE
is only a year old. And only in the past year did the
city's two leading business groups unite under the
banner of the business alliance, after some 90 years
of frequently being at loggerheads.
says author Curt Gerling would not recognize today's
Rochester as Smugtown. "It
isn't insular or complacent," he says.
in the next breath, Mooney draws a distinction between
Rochester — "an industrial intellectual
town" — and Buffalo or Syracuse,
the latter having just suffered the blow of learning
its mainstay Carrier air-conditioning company is
pulling up stakes.
a white-collar town, they're blue-collar towns,"
says Mooney, explaining his reluctance to join other
upstate cities in a joint effort to promote the region
to prospective new businesses.
don't have their huge pockets of poverty. Buffalo and
Syracuse are in a more desperate mode."
of joining forces with Buffalo or Syracuse on a big
regional airport, or a combined symphony, or a new
performing arts centre to compete with Toronto, is
often undermined by local civic pride.
proposed fast ferry from suburban Rochester to Toronto
scheduled to begin service next spring was cause for
lengthy debate between city and county officials. And
skeptics like Matteson still dismiss the ferry venture
as "the wrong kind of political economic
fact Toronto appears to have made scant preparation
for the ferry service has resulted, the RBA's Mooney
says, from "our folks not doing as good a job as
they should have in getting all the elements in place
its candid strategic plan, the GRE concedes that
"the region is quickly falling behind the
nation's top 75 metropolitan areas in economic
standing. ... This stagnation marks the continuation
of a 30-year decline in relative economic performance
GRE development group is convinced that other cities
"with lesser assets are realizing better
performance" than Rochester. So it's aggressively
promoting Rochester's above-average number of
scientists and engineers, and its abundance of
first-class colleges and hospitals, cultural and
sports amenities, and house prices that average
$92,000. In the upscale suburb of Pittsford, mansions
can be had for $500,000 or so.
a perverse fact of life, complains Richards of the
GRE, that while Buffalo has a national reputation for
being snow-bound much of the year, "We have no
reputation. We have to get our message out, about
our high quality of life in a city that has a
many people in town, Richards doesn't blame the Big
Three for Rochester's predicament.
not a city that wouldn't kill for 20,000 Kodak and
8,000 Xerox jobs," he says. "Look at what
those companies did for their community at the height
of their success."
are still doing. In the past two decades of their
decline, the Big Three still managed to generate a
combined total of $665 billion in revenues.
you know, China is now more important to Kodak than
Rochester," says Richards. "We have to be
careful not to lament that. Success for us will now
occur in an entirely different world.
let's be proud of the heritage, but get moving.
Nostalgia is not a good policy."