OUTPUT

In the first of a three-part interview, James Matthews-Paul talks to Kodak's vice-president of commercial marketing, Chris Payne, about the company's Chapter 11 situation and what it is doing to reassure customers.

What is Kodak doing to reassure customers while it's in Chapter 11, who must go to their banks for credit for the big-ticket items such as printing systems? What are your KPIs?

We had four goals when we filed for Chapter 11 in mid-January, and we're doing a lot better than we anticipated. [Firstly, liquidity.] In general you have to be cash positive, because you borrow money from a bank – $950m [£601m] in lending – and then you have to keep your business cash positive. We announced the Friday before [drupa that] we're actually ahead of our goals.

Secondly, we vowed to sell our non-strategic and intellectual property assets centred around digital cameras through a legal-based option as we go through the third quarter, which will generate more cash.

The third item is obviously to right-size our legacy costs: a business centred on commercial printing and consumer is a lot smaller than where our history is. We will never be a solid business with those. [For example,] the sponsorships which we have had for decades – [such as] the Kodak Theatre in Hollywood. There's no other way out of those and so Chapter 11 allows us to get out of [them], but other things too, like pensions and healthcare – and we have to be morally correct in how we do it. If you read that literature carefully it says [we have] to 'fairly treat' all our legacy costs.

Part of it is, there are people who have worked at Kodak – 60,000 to 70,000 world-wide – who have pensions and healthcare benefits. But it is very clear that if you carry over those liabilities then you never run an operating entity of the size of business we own.

Those three things fund the emergence of a business which has two pillars: consumer and commercial. If I'm sitting with a customer, I take [them] through those items and actually describe the commercial business. Our customers in general [know] what Chapter 11 means – it is a business tool that helps you deal with this kind of thing, to restructure the company financially. Take the airlines: almost every American airline has been in Chapter 11 and out again. Currently, American Airlines is in Chapter 11. Now, you can go to the airport, you can buy a ticket, get on a plane, speak to a hostess, the plane will take off with fuel, there's a pilot – the plane is absolutely no different.

We went and visited most of [our customers] and, interestingly, in the first two weeks [the response was], "Am I going to get my plates, my toners, my dry inks?" Now we're 14 weeks in and we haven't missed a beat. So, we have an ongoing business which is working and functioning from a customer perspective. Not knowing what I know, I would have said, "Well, we'll have problems signing equipment [at drupa]." Actually, the opposite is true. Customers [have] come on to the booth and they see all the things we're doing and they sign. Our problem is actually a perception problem rather than a reality problem.

Specific to leasing, it doesn't appear at the very high level to be a significant issue for most of our customers. There are lots of issues with our customers getting leasing, including their own balance sheets [and] the banks' perception of printing in general – but those are all issues that are out there. But customers are leasing today with their own cash, customers are raising their own cash with finance companies, and we have two financing arrangements: in Europe we use Key Finance and in the US we use GE Finance. Both those two credit facilities are working normally and providing credit to customers, as they were before Chapter 11.

If you go through the story I've just taken you through and you look at the performance that most of our customers have – remember we sell to 60 percent of the mid-sized to larger printers, depending on where you make the cut-off – you know we're in their shops every day of the week and they see our performance every day.

The holistic answer to the question is, because our customers actually work with us and we work with them. We need them, they need us, is kind of the way to think about it.  

Catch up with parts two and three of this interview on Output.