Tim Newman, Campaigns Director, International Labor Rights Forum
The businesses world is buzzing over the news that Kraft has made a hostile takeover bid for Cadbury. For weeks, there has been plenty of back and forth between the two companies in the media and Kraft finally placed its $16.3 billion bid for Cadbury before shareholders today. Cadbury continued to object to the proposal and stated that Kraft was undervaluing the company. Kraft now has 28 days to outline the offer and then has an additional 60 days to line up enough shareholders to approve the deal.
One of the major shareholders who will definitely play a role in whether or not the takeover is successful will be Warren Buffett, who is Kraft's largest shareholder. Since Buffett is not exactly a friend of workers and Kraft is not a model for industrial relations, workers should be concerned about the impact of the changes at Cadbury.
Kraft has shut down factories leading to thousands of layoffs in recent years while the CEO saw a 50% increase in total compensation in the last year. Recently, Cadbury has been under fire in England for closing a factory in Keynsham which has drawn the ire of trade unions. Kraft has stated that it wants to re-open the factory, but it's unclear how Kraft plans to cut production costs while re-opening the plant and keeping unionized jobs in England. According to this article in the Guardian, workers have reason to be skeptical about the plan:
Unite, which has been campaigning against the Somerdale plant closure, remains intensely sceptical about Kraft's tentative jobs pledge. "Kraft has a history when they have taken over companies and warm words have ended in significant closures and job losses," Formby says. Kraft's Terry's factory in York was closed in 2005, with chocolate orange production shifting to eastern Europe, making the firm's new-found support for UK manufacturing somewhat surprising. Unite says Kraft's disclosure of plans for Somerdale is a highly selective exception in its overall factory rationalisation plans.
Indeed, it is hard not to interpret such a limited pledge as just a clever bid tactic, designed to defuse union opposition. Without offering any other detail, the US firm has indicated it expects to find $625m of cost savings from a link-up with Cadbury. Some analysts put the figure as high as $1bn, with factory closures a strong contributor. "We are very concerned about members elsewhere – for example, Ireland," Formby says.
There are also concerns about how Kraft would effect Cadbury's labor standards in their sourcing policies -- for example, in terms of the cocoa they use. Cadbury has recently made a major commitment to achieve Fair Trade certification for the popular Dairy Milk Bar in the UK, Canada, New Zealand and Australia. On the other hand, Kraft works with Rainforest Alliance to certify some of its cocoa and Rainforest Alliance is considered by many to be weaker in its protection of workers. If Kraft's ownership slowed down or reversed Cadbury's movement toward Fair Trade, it would be to the detriment of farmers, workers and the children who often work on cocoa farms in West Africa.
In the coming days, I hope that Kraft will provide more specific and honest information about its business plan and how it could affect workers throughout both companies' supply chains. Shareholders, unions and worker rights supporters should also watch these proceedings carefully and ask tough questions.