British lawmakers still concerned about takeover of Cadbury by Kraft Foods -- more than a year after controversial deal; CEO Irene Rosenfeld criticized for refusing to appear before parliamentary hearings into the takeover
May 23, 2011
– British lawmakers said Monday they still have "significant concerns" about the takeover of chocolate maker Cadbury by Kraft Foods Inc. -- more than a year after the controversial deal.
The Business, Innovation and Skills Select Committee also strongly criticized Kraft's chief executive Irene Rosenfeld for refusing to appear before parliamentary hearings into the takeover.
The report -- titled "Is Kraft working for Cadbury?" -- said Kraft's attitude to the inquiry "steered close to a contempt" of the House of Commons.
It also chastised the U.S. food group for failing to accept criticism from Britain's takeover market regulator of its U-turn on promises to keep open a British factory.
Kraft's purchase of Cadbury for 11.5 billion pounds in February 2010 caused much consternation in Britain, where it is a much-loved brand, and kicked off a government review of foreign takeover rules.
Rosenfeld did not make her first visit to Cadbury's historic base in Bournville, England, to meet management and employees until October 2010.
She also refused requests from lawmakers to appear at hearings either in person or via video link to give assurances about future job levels at Cadbury, instead sending Executive Vice President Marc Firestone to face hostile questioning from lawmakers.
Both lawmakers and the public were further enraged when Kraft backtracked on its plans for Cadbury's Somerdale plant in western England. During the long and bitter takeover battle, Kraft said it would save the Somerdale plant and 400 associated jobs, a decision that would have reversed earlier plans by Cadbury to close the factory and move production to Poland.
However, shortly after Kraft completed the deal in February, it said the plant would close by 2011.
"That sorry episode overshadowed what could have been a positive discussion on the future of Cadbury under Kraft's ownership," the committee said in its report. "In its correspondence with the committee, Kraft in our view steered close to a contempt of the House. We trust that that will not be repeated."
The committee said it remained concerned on two fronts: Kraft's commitment to British Cadbury brands given strategic decisions are being made from Kraft's European headquarters in Zurich, and the company's apparent lack of consultation with union leaders about pay and conditions for workers.
"One year on from Kraft's predatory purchase of Cadbury the workers are still none the wiser about the company's commitments to its U.K. businesses," said Jennie Formby, national officer of the Unite union. "In fact, we now have less information about the company's current state and future intentions than before the takeover."
"Workers look at Kraft's horrendous multi-billion debt, consider its record in other countries where jobs have gone, plants have shut and wages have been cut, and rightly worry about what the future holds for them," Formby added.
However, the report said the committee was "encouraged" by Kraft's promise to continue investing in Cadbury, adding that lawmakers understood that no further jobs would be axed in Britain.
"Whilst Kraft did not extend its undertakings on jobs, the strong indication to us was that the extent of investment at Bournville and other sites would only make sense alongside retention of employment levels in the U.K.," the report said. "We trust that our interpretation is correct. If it is not, we shall expect any change in the position to be made public by Kraft at the earliest opportunity."
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