Kodak to Pull Out of S. Africa, Cut Off Sales
Eastman Kodak Co., the world’s largest maker of film and photographic equipment, announced on Wednesday that it is pulling out of South Africa, saying that it could “not see with any certainty a time when South Africa will be free from apartheid.”
Kodak said it is not only selling all its assets here and laying off its 466 employees but that it is also withdrawing its products entirely from the South African market in the most dramatic American business pullout yet from the country.
Government Blamed
Colby H. Chandler, Kodak’s chairman, said the principal reason for his firm’s decision to join other major American companies in leaving the strife-torn nation was the failure of the white-led, minority government here to end apartheid.
“We had hoped that by now the signs in South Africa concerning plans to dismantle statutory apartheid would be clear,” Chandler said in a statement released from Kodak’s corporate headquarters in Rochester, N.Y. “Unfortunately, we cannot see with any certainty a time when South Africa will be free from apartheid.
“The implication of that situation is a degree of business risk that we do not consider prudent, and we have thus concluded with reluctance that Kodak should withdraw from that troubled country.”
Significantly Further
Kodak’s action, a total pullout, goes significantly further than the withdrawals announced recently by General Motors, IBM, Coca-Cola, General Electric, Procter & Gamble, GTE, Warner Communications, Bell & Howell and more than 20 other American companies. These firms ensured that their products will remain on the South African market through licensing arrangements with their former subsidiaries.
No Kodak products will be shipped to South Africa after April 30, the company said, and the ban will be observed by all its subsidiaries and affiliates worldwide.
Kodak’s computer subsidiary, Atex Inc., whose equipment and programs are used by most major South African newspapers, said in a statement in Bedford, Mass., that it will also pull out by April 30.
‘Leaving--Period’
“We are leaving--period,” Kodak spokesman Ian Guthrie said by telephone from Rochester. “There will be no management buy-out, no licensing agreements, no agents appointed to import and distribute Kodak products, no lingering or hidden presence, nothing at all like that. . . .
“Kodak is leaving South Africa for the reason stated--we see no end to the system of apartheid there, and in those circumstances we do not want to remain in the country in any form. We looked long and hard at the situation there and the prospects for real change, and our assessment was such that leaving was our only prudent decision.”
Few political condemnations of President Pieter W. Botha’s limited, step-by-step reforms and the American policy of “constructive engagement” were as damning as the comments by the once-optimistic Kodak management. The South African government, taken aback by the harshness of the company’s criticism, had no immediate response on Wednesday.
Kodak will be the 70th U.S. company to withdraw from South Africa since January, 1985, and as many as a quarter of the 240 firms remaining are described by well-informed business sources as very close to decisions to pull out, perhaps in the next two to three months.
The firmness and totality of the Kodak decision recalled a similar withdrawal from South Africa nearly a decade ago by Polaroid, whose products are now virtually unknown here.
Leader in Promoting Reforms
Kodak had been a leader in U.S. business efforts to promote economic, social and, most recently, political changes that would end apartheid, South Africa’s system of racial separation and minority white rule. But Chandler said his company concluded that such efforts at “peaceful change” had little hope of succeeding.
“We had hoped that the pace of change to dismantle apartheid would permit us to forecast a time when we would not have to operate a business under the apartheid system,” Chandler said, recalling Kodak’s own extensive efforts to promote peaceful change here. “We have reluctantly concluded that our hopes were not justified and that we must now make the business decision to withdraw.”
No single development prompted the decision to leave, Guthrie, the company spokesman, said, nor was it the result of increasing but “still minimal” pressure from groups advocating U.S. disengagement with South Africa.
Rather, it was “the lack of real change, even the hope of such change,” he said, that led to the “cumulative decision” to withdraw, which was largely the “crystallization” of a management committee’s increasing pessimism over political and economic prospects here.
“The economics of the situation are a major factor in our decision to withdraw,” Chandler said in his statement. “Our South African business has been affected negatively by the weakness in the South African economy, and we have no doubt that the system of apartheid has played a major role in the economy’s under-performance.”
Timothy Smith, executive director of the Interfaith Center on Corporate Responsibility in New York, applauded Kodak’s decision. He pointed out that other companies that have decided to dismantle company operations in South Africa still intend to sell products there.
“Kodak is the largest company to totally cut its links with South Africa,” he said. “Its action becomes a model for other companies to follow.”
The Interfaith Center is a group that coordinates the efforts of various churches in the United States to pressure corporations to divest themselves of their South African holdings.
Smith said Kodak faced pressure from a growing number of state and local government pension funds that had placed Kodak securities on the “sell list” because of its South African holdings. He said also that the New York State Retirement Fund, a sizable Kodak shareholder, was sponsoring a shareholder resolution for Kodak’s annual meeting next April that would have required Kodak to divest itself of its South African operations. Similar shareholder resolutions have failed in the past.
Severance Pay
Kodak said its South African employees will receive “a generous separation package,” which will provide a year’s severance pay for the average worker plus four months’ medical and life insurance. The company will try to place as many of the workers as possible, Kodak spokesmen said, and will provide “re-employment counseling” for all.
Of Kodak’s 466 employees, 60% are blacks, Asians or mixed-race Coloreds, and the balance are whites. Most of the employees are highly skilled and should find jobs quickly, according to Kodak officials, but some will find competition for employment tough, particularly in areas where about 15% of white workers and perhaps 60% of blacks are unemployed. Kodak has only one American employee here, and he will probably be reassigned to the United States.
“By far the most difficult part of this decision,” Chandler said, “is that our loyal and dedicated South African employees will no longer be part of our company.”
Aid Projects to End
Another casualty of the pullout, Kodak officials acknowledged, will be the company’s multimillion-dollar effort to finance the improvement of black education and the upgrading of the ghetto townships where its nonwhite employees live. Some education programs have funds to run through next year or 1988, but most of its “social responsibility” projects, regarded as among the best efforts by American companies here, will end with Kodak’s withdrawal.
Kodak’s income from marketing, distribution and processing operations amounted to less than 1% of its $10.6 billion revenues worldwide last year, Guthrie said, and their closure should have no significant impact on profits. He declined to say whether the company has been losing money in South Africa.
Kodak said it would sell its South African assets, which consist mostly of buildings, office equipment and inventory. Guthrie refused to say how much the property is worth.
Times staff writer Denise Gellene in Los Angeles contributed to this story.
