Kraft Commits To UK Jobs, Says Sorry, Amid Parliament Grilling
17 March 2010 - 3:52AM
Dow Jones News
U.S. food giant Kraft Foods Inc (KFT) made a limited commitment
to U.K. jobs Tuesday and apologized for the broken pledges it made
during its takeover of British confectioner Cadbury during a severe
grilling by U.K. lawmakers.
Kraft's executive vice-president for corporate and legal affairs
Marc Firestone told a committee of parliamentarians that Kraft
would not close any more of the U.K. factories it bought as part of
its Cadbury acquisition last month for at least two years.
He also said there would be no more compulsory redundancies in
Cadbury's U.K. manufacturing base and pledged to keep open a
research center in Reading, Southern England. The research center
employs more than 200 staff.
Firestone went on to admit that pledges to keep Cadbury's
Somerdale plant in South West England open, only to subsequently
close it, had damaged Kraft's reputation in the U.K..
"We fully understand that the statement created uncertainty," he
said. "We are terribly sorry."
Firestone was speaking at an investigation by the U.K.
parliament's Business, Innovation & Skills committee into
Kraft's GBP11.9 billion takeover of Cadbury last month.
Firestone received a hostile reception from all members of the
cross-party committee, after trade union representatives accused
Kraft of lying to staff in order to secure a favorable reception
for its takeover bid.
Firestone's apology was met with scorn by Unite's deputy general
secretary Jack Dromey, who was also present at the meeting.
He said Firestone's comments marked the first time he'd heard
anyone from Kraft utter the words "sorry" or "guarantee." Indeed,
he said Tuesday marked the first time anyone from Unite had met a
senior Kraft executive.
Kraft said throughout its four-month pursuit of Cadbury that it
believed it could keep open Cadbury's Somerdale factory, thereby
protecting 400 jobs which Cadbury's management had pledged to
axe.
Kraft repeated the pledge on the day the deal was agreed, only
to announce a week later on Feb. 9 that the closure of the plant
would go ahead after all.
Dromey accused Kraft of using the Somerdale commitment as a
cynical tool to ease the reception of the bid with workers and
politicians.
"A proud workforce from a proud community had their hopes raised
and their hopes dashed," he said.
Firestone said the pledges had been made in good faith. Kraft
had planned to keep U.K. manufacturing at Somerdale and to use
Cadbury's new plant in Poland to expand Kraft's own capacity.
It was only in late January that Kraft discovered Cadbury had
spent tens of millions of pounds fitting the Polish factory to
manufacture Cadbury's U.K. products. It therefore decided to
proceed with the transfer of production and close the Somerdale
plant.
The committee accused Kraft of making the pledges based on guess
work, adding that anyone at Kraft making such an enormous mistake
would have been fired.
One committee member asked what Kraft thought the new factory in
Poland would be fitted with, if not Cadbury's machinery, adding the
suggestion, "tennis courts?"
Unite's Dromey was more dismissive, saying "Parliament has
exposed the truth ... Kraft lied."
Firestone acknowledged the incident had been damaging. "We have
worked very hard to build a reputation for honesty," said
Firestone. "You can build a reputation for a hundred years and lose
it in a second."
Firestone was always going to face a hostile reception, given
that the committee had requested the attendance of Kraft's chief
executive Irene Rosenfeld. Instead, she sent Firestone, the
company's executive for Corporate & Legal Affairs.
"We do have severe reservations that we have someone responsible
for Kraft's image rather than its decision making," said Peter
Luff, the Conservative M.P. and chairman of the committee.
Committee member Lindsey Doyle went further, accusing Rosenfeld
of showing "a total disregard for the House of Commons."
-By Michael Carolan, Dow Jones Newswires; 44-20-7842-9278;
michael.carolan@dowjones.com