Rochester’s Resilient Economy

Rochester’s economy has suffered the loss of many jobs at one of its best-known employers. While many predicted doom and gloom, Rochester has survived, even thrived, in the wake of these dramatic losses. In fact, many of you reading this don’t know that General Dynamics ever had a presence in Rochester at all.

I’ll bet you thought I was talking about Kodak! The General Dynamics name came to Rochester in 1955 through a merger with Rochester-based Stromberg-Carlson. By the 1970s the firm employed 5,000 and was a powerhouse of the local economy. Then came the announcement: General Dynamics was relocating to California and was closing down the local Stromberg Carlson facility.

We know a bit about the General Dynamics story because of the work of an enterprising reporter, Malcolm Gladwell. You may have heard the name—a couple of best-selling books, The Tipping Point and Blink, have given Gladwell a new career outside journalism. From 1987 to 1996, however, he was the NYC Bureau Chief for the Washington Post.

For some reason (I asked, but he doesn’t remember), Gladwell showed up in Rochester in 1996 and began asking around about the damage General Dynamics had left in its wake. By the time he filed his story, he had identified 17 companies that were somehow descended from General Dynamics. Interestingly, in 1996 these 17 companies employed 5,000 (perhaps that’s why he figured that it was time to write the story).

The Eastman Kodak Company employed over 60,000 in 1982. Now the community’s third largest employer (after the University of Rochester and Wegmans), about 9,200 are currently receiving payroll checks from the imaging firm.

Just like General Dynamics, however, Kodak has left a legacy in the form of many individual companies originally started in Kodak and spun out or started by individuals who left the company to seek their fortunes. The most recent example—and the divestiture responsible for much of the reduction in Kodak’s job count from 2006 to 2007—is the sale of Kodak’s health business to Toronto-based Onex Health Care Holdings. The new company is called Carestream Health. In 2004, Kodak sold its Remote Sensing Systems Division to ITT Industries, Inc, creating the ITT Space Systems Division with about 1,800 employees. Coincidentally, ITT Space just announced the sale of a very sophisticated remote sensing assembly to General Dynamics for use in its GeoEye-1 satellite.

What will be next? Historically, Rochester’s economy has done a remarkable job responding to the loss of jobs at Kodak. OK, we’ve had a slow decade so far, but this period of slight decline has corresponded with the steepest decline in Kodak’s core business. Losses in Kodak employment in previous decades included significant local outsourcing, thus partially reflecting a shift in employment instead of a complete loss.

The General Dynamics story tells us that we can be hopeful that ITT Space, Carestream and many other firms formed from former Kodak divisions and by former Kodak employees will continue to contribute to Rochester’s economy in the future. Let’s check back in 25 years and see what Kodak’s legacy has become.