The remark may have been the understatement of the fiscal year. Readers didn’t know it then, but by the time the words appeared in print Steffen had already walked into Whitmore’s office to tender his resignation. The following day news of Steffen’s departure prompted a shareholder outcry and sent Kodak’s stock price plummeting almost 10 percent, to $47.25. While Steffen issued only a brief written statement to the press (he cited differences with the company in its “approach to solving problems”), Whitmore went public in an attempt to calm investors’ fears. The chairman told analysts that Kodak planned to sell at least one major asset by September and pledged to slash costs and give shareholders a better return.
Kodak is in desperate need of an overhaul. Like IBM and Sears, the company is another American institution with its name under siege and its CEO under fire. Last year profits totaled a lackluster $1.06 billion on sales of $20.2 billion, down sharply from $1.4 billion on $17 billion in sales in 1988. In January the company laid off 2,000 workers in response to growing competition from other film manufacturers, such as Fuji Inc. After Whitmore announced Steffen’s appointment, Kodak’s stock price climbed 17 percent.
What made Steffen walk? By all accounts, he and Whitmore collided over how quickly Kodak should be over-hauled. The 60-year-old chairman, a Kodak veteran and a supporter of consensus management, had proposed a methodical approach to solving the company’s problems. Steffen, a scrappy turnaround artist at Chrysler and Honeywell, promised to introduce a draconian cost-cutting plan, including layoffs, by Aug. 24. It became clear that the marriage was not a match made in corporate heaven. Whitmore told NEWSWEEK that he spent several hours trying to persuade Steffen to stay but finally conceded that the two could not agree on how certain objectives should be accomplished. “I said to him, ‘I’m trying to get some work done, change the company, change the direction, and if you don’t choose to do this, then I want to immediately [go] out and get someone else who can help me’.”
Wall Street clamored for Whitmore’s hide. “The market’s reaction tells you the wrong guy resigned,” United Shareholders Association president Ralph Whitworth said. Whitmore attempted to assure stockpickers at an analysts’ meeting that Kodak is not in a “crisis situation” like Sears and IBM. But shareholders suggested that Kodak’s true colors did not come shining through in Whitmore’s speech. “The stock is trading at 47 or 48 when it could be trading at 60,” said Kit Bingham, research director at Lens Inc., an investment-management firm and a large Kodak shareholder. “I call that a crisis from the owner’s point of view.” Whitmore’s woes aren’t over yet. Next week he will have to answer to shareholders again, when they gather for their annual meeting in Ft. Lauderdale, Fla. With the company in turmoil, they’re sure to demand that he waste not a Kodak moment in developing a brighter picture.
