Kraft needs to come clean on plans for Cadbury
So it seems that the strategy director of US conglomerate giant Kraft Foods vowed yesterday to invest in chocolate maker Cadbury and create more jobs in the business in the UK.
Michael Osanloo was quoted in the Sunday Telegraph saying that the US firm would respect the "history of Cadbury and the integrity of the brands" after its ÃÂ£11.5 billion bid for the chocolate maker was agreed.
Osanloo stated that "as far as Cadbury in the UK goes it is our hope, desire and our plan to invest in Cadbury... I would fully expect that once we can actually look at what is going on and have a more informed perspective that this should, down the road, increase manufacturing jobs in the UK".
"I genuinely believe that we can create a tremendous amount of savings in things like procurement, on how we source cocoa, dairy, sugar, packaging and advertising.
"I am very optimistic that the vast majority of our synergy savings will come from things that do not affect jobs."
He added that it was "unfortunate" that Cadbury had previously been cutting jobs at its two major plants in Britain, adding: "I would love to be able to figure out a way to do something other than what the current plan is."
Hmm nice words but no real detail. Kraft had previously said that it would keep open the Keynsham plant, which Cadbury was planning to close down and shift production to Poland. I'd rather hoped for more at this point than Kraft bosses saying they'd 'love' to 'figure' out how to keep it open.
Kraft have actually already had at least six months to 'figure out' what to do with Cadbury and have spent some several hundred million dollars on setting up the deal, including extensive research on the firm. They clearly have plans for Cadbury - what are they?
Its CEO said last week that they had identified 'additional synergies' which justified its raised bid for Cadbury, which also makes one wonder how savings will be made and new jobs created.
Once the deal goes through, Kraft need to come clean on what their plans for Cadbury are, in detail, and quickly.
So, as a 'starter for ten', some key questions include:
1. What level of 'synergy' savings will be made, where and when?
2. Will the Keynsham plant remain open, and if so, for how long and at what production level?
3. What employment levels will be maintained in the UK, and for how long?
4. What will happen to R&D and other high-level functions in the UK?
5. What plans does Kraft have for the Bournville plant in Birmingham?
6. Which brands will be retained and which will be finished off?
7. What will happen to head office operations at Uxbridge?
8. Will the pension fund deficit be topped up and will full pension rights be guaranteed for Cadbury workers?
9. How will Kraft expand Cadbury sales globally and if it does, what extra will actually be produced in the UK?
10. Will the huge debt taken on by Kraft be attached to Cadbury and how will this impact on corporation tax levels paid to HMRC?
I'm sure readers will have lots more questions...
The government will no doubt ask for assurances from Kraft. Previous efforts at 'assurances' were largely an escape valve to get the government off the hook. Sadly, governments never bother to monitor such assurances or to follow up and have no leverage when/if a foreign firm decides to change its mind.
So, if Brown and Mandelson are serious this time, they had better set up a proper monitoring unit to follow up on the so-called Kraft assurances. Somehow, I'll doubt that they'll do it.
Professor David Bailey works at Coventry University Business School.