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"Sustainable Growth" Plan at Kraft Brings 6,000 Job Cuts Worldwide

Posted to the IUF website 10-Feb-2004

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When a transnational company announces a new strategy for growth it generally involves drastic restructuring, the closing or sale of factories and the loss of jobs.

Kraft's announcement on 27 January of its "plan for sustainable growth" was no exception. "Growth" would be accompanied over the next three years by a cost restructuring program that would include the sale or closing of 20 factories and a reduction of some 6,000 jobs, 6 percent of Kraft's global work force.

Two small cheese factories in the USA (in Canton, NY and Farmdale, Ohio) were identified for closing, but a third site ambiguously located in "Central Europe" was also mentioned.

In Hungary, the IUF-affiliated federation of food workers' unions EDOSZ suspected that this referred to Kraft's coffee and confectionery manufacturing facility in Budapest. Based on local news reports, EDOSZ and the factory works council had already demanded to open discussions with the company over the future of the factory and its workers.

On 28 January Kraft confirmed that it intended to close the Budapest plant by May 2004 at the cost of over 300 jobs. Production would be transferred to Austria and Slovakia. Kraft's failure to consult the union in advance of its decision and the scant three-month period between the closing announcement and the planned date of its implementation makes a mockery of its claim to be an "Employer of Choice."

EDOSZ, with the support of EFFAT, the Kraft European Works Council and the IUF, is demanding that the company negotiate over a plan to save the workplace and its jobs, and to develop a comprehensive social plan for all employees that might be displaced.

Meanwhile Kraft employees elsewhere must live with the uncertainty that their jobs might be the next to go. The first wave will also include some 500 jobs at Kraft corporate headquarters in the USA. The BCTGM is expressing concern that two or three of the former Nabisco plants it represents in the USA might be included in the corporate hit list.

In November 2003 local management at the Kraft factory in Herentals, Belgium, made a presentation to the factory council that demonstrated how its production could be economically shifted to Poland following its accession to the EU. The three unions representing the 340 employees reacted on 8 December with an open letter to Kraft's European management demanding assurances for the future of the Herentals site.

These are but a few examples. The next of the 17 factories to be announced could be almost anywhere. Kraft is a global company, second only to Nestlé in size among the food transnationals. Its operations span the globe, with major markets outside of North America and Europe in Latin America and Australia.

Previously Kraft Foods International and Kraft North America were separate divisions under two different CEOs. In December 2003 they were merged under a single CEO, Roger Deromedi. On 8 January Deromedi announced a vast revamping of its entire global organizational structure to make Kraft a unified "One Company." The announcement of the new "plan for sustainable growth" put the capstone on this global Kraft structure.

The accelerated pace of Kraft's transformation into a more unified global entity is dictated by financial considerations. When Philip Morris (now Altria) decided to spin off 16% of Kraft through an IPO In June 2001, it essentially promised its shareholders 3-4% annual volume growth and 14-16% earnings growth over the next three years. But growth stagnated in 2003, largely because of lagging sales of its American product lines (Oreo cookies, frozen pizzas). The price of Kraft stock declined 17% in 2003. Several key Kraft North America executives abruptly left the company; co-CEO Betsy Holden was placed under Deromedi, and the autonomous North American structure dissolved in the present reshuffle.

Kraft's global restructuring initiative attempts to revive Altria's promises of profitable growth by channeling resources from production to brand name marketing. This is much like what major rivals Nestlé, Danone and Unilever are already doing at the global level. These companies also describe their corporate restructuring programs as growth initiatives.

The challenge for unions representing Kraft employees is large and growing. Unlike Nestlé, Unilever, and Danone where there is some history of global union cooperation and organization through the IUF, Kraft unions have not met internationally to exchange information and develop strategy. The leadership of the Kraft European Works Council and its coordinating union NGG have sought in recent years to establish relationships with Kraft unions in North America. The present situation at Kraft makes it imperative to establish a global trade union presence within Kraft. The IUF is making it one of its priorities.