MPs open fire on Kraft over plans to shut Cadbury factory
Report on takeover says the US food giant was either incompetent or cynical
Wednesday 07 April 2010
Furious MPs yesterday attacked Kraft Foods for acting "irresponsibly and unwisely" during its takeover of Cadbury, before turning both barrels on the US group's chief executive, after she failed to show up to a hearing into the deal.
The Business, Innovation and Skills Committee yesterday released a 94-page report scrutinising Kraft's takeover of Cadbury, which said the process was "marred particularly by the controversy" over its closure of the Somerdale factory. The move had already prompted the company to apologise last month.
Cadbury had earmarked the 75-year-old plant for closure in October 2007, which would have prompted production of Curly Wurlies, Fudge and Mini-Egg to move to Poland. In its takeover proposal documents released in September, Kraft said it "would be in a position to continue to operate" the Keynsham facility. Just a week after sealing the takeover, Kraft performed a startling U-turn at the cost of 400 jobs. Following meetings with Cadbury management, Irene Rosenfeld, the chairman and chief executive of Kraft Foods, said "it became clear that it is unrealistic to reverse the closure programme". The move sparked outcry from the public and politicians.
The report said Kraft "has left itself open to the charge that either it was incompetent in its approach to the Somerdale factory or that it used a 'cynical ploy' to improve its public image during its takeover of Cadbury. "Its actions have undoubtedly damaged its UK reputation and has soured its relationship with Cadbury employees," it added.
The committee was angered during its hearings that Ms Rosenfeld failed to turn up. "Her attendance at our evidence session would have given an appropriate signal of Kraft's commitment to Cadbury in the UK," the report said.
Ms Rosenfeld sent Mark Firestone, Kraft executive vice-president for corporate and legal affairs, instead, but the MPs' report said they were "unimpressed" with his explanation over the closure.
This was the second hearing from the BIS Committee into the deal. Previously Christopher Bones from Henley Business School pointed out that it had reneged on similar promises in the past, including a promise to keep Terry's factory in York open when it bought the company in 1993.
The committee called on the Government to push Kraft to come clean over its plans for the future of Cadbury factories at Chirk, near Wrexham, and Marlbrook in Herefordshire. It also pointed out there had been no commitment over employment levels.
Kraft did give a number of assurances to the committee over the future of its UK operations. The US food giant said it was to manage Cadbury from within the UK and continue to make Dairy Milk in the country. Other pledges included no further compulsory redundancies for manufacturing employees and no additional plant closures in the UK for the next two years. The group must support Cadbury's pension arrangements, its Cocoa Partnership and use of Fairtrade. Kraft is also set to confirm funding arrangements for the Cadbury Foundation for the next three years.
Peter Luff, chairman of the committee, said: "Kraft will have to deliver, in full, on these undertakings if it is to repair the damage caused to its reputation by the woeful handling of the closure of the Somerdale factory." He called on the Government to make sure it complies with these undertakings.
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