BBC BLOGS - West Country Cash
« Previous | Main | Next »

Kraft and Keynsham: Westminster summons the Americans.

Dave Harvey | 14:20 UK time, Monday, 15 March 2010

Get the latest from the Committee Room as they quiz Kraft Execs on my Twitter feed here.

Cadbury's Keynsham Chocolate Factory

Most people in Keynsham now think the Americans were lying all along. Their famous pledge to save the town's chocolate factory melted faster than a Curly Wurly left out in the sun, and locals don't buy the Kraft line that "we were surprised how far advanced plans for the closure programme were".

"That's just nonsense," scoffs Andy Nicholls, the Somerdale rep from Unite the Union. "The plans were all over the internet, we were only ever a publicity stunt."

But losing their reputation in a small town midway between Bath and Bristol probably doesn't bother Kraft execs in Northfield, Illinois too much.

On Tuesday, we find out if it bothers the Americans what Parliament thinks of them.

The Select Committee on Business was already investigating takeovers and mergers when the Chocolate Wars broke out. So when Kraft did their infamous U-Turn, the MPs summoned the American execs to explain themselves. At 11am, Kraft's Vice-President, Marc Firestone, will settle down in Committee Room 16 and face the music.

Roger Berry MPAs luck would have it, we have a West Country MP on this committee, Roger Berry. In fact his Kingswood constituency borders Keynsham, so he knows it well.

"On the face of it Kraft have engaged in some pretty sharp practice," Mr Berry tells me. "So we have a responsibility to probe very carefully."

Can't wait till 11am to hear what the Americans say to our MPs? Well, after chatting to everyone involved, here's my prediction of how the crucial bit of the meeting will go.

Berry: Why exactly did you decided to pledge to continue production at Somerdale?
Firestone: Well Sir, we always believed that our new company would be a net investor in UK manufacturing, as we still do. And we were sincere in our pledge that we would do all in our power to continue the Somerdale operation.
Berry: So when did you change your mind, and why?
Firestone: Gentlemen, you have to remember this was a hostile bid for most of its life. We had no access to any Cadbury documents. Only when the joint boards agreed the terms of the bid did we see how far advanced the plans to close Somerdale and transfer production to Poland were. And even then we were asking, can we reverse this? But we were told it was just too late. We are truly sorry to all those partners and associates in Somerdale who had hoped, as we did, that we would not be in this position.

Berry: Come on Mr Firestone, you borrowed upwards of £7bn for this deal, are you telling us your due diligence people couldn't see how far this closure programme was advanced? It was all over the internet, even the BBCs own blogger on this subject could see the train was already out of the station! [ok, my vanity got the better of my judgement there! But do read the piece, written on the day they finally abandoned Keynsham.]
Firestone: Sir, I can only tell you that without access to Cadbury documents were in no position to identify how far advanced that closure programme was. And our due diligence process does not give any credence to unsubstantiated rumours on the internet.

Chocolate wars

Ok, for our lawyers I should restate that this is entirely my imagination here. Though I have Roger Berry's list of questions from the horse's mouth, as it were. And Kraft, it seems, will just tough this one out.

Can anything be done for Keynsham? In a word, no. The deal is done, the factory is closing the jobs are going. But Mr Berry believes things can usefully be done to stop it happening again.

First, he wants the law changing to ban takeover-gamblers from voting in deals.
"30% of the shares changed hands during the takeover war," he tells me. "These were all hedge funds and short-term investors, who then all promptly voted for the takeover. They should be barred from voting if they came in after the bid was issued." He's not alone in this, Cadbury's own former Chairman, Roger Carr, made the same point in February. Though it's worth noting he never pointed this out before the deal was signed.

Second, Mr Berry wants takeover rules here to protect workers and local communities as well as investors. At present our rules only ensure that competitors are not harmed by large monopolies arising out of mergers, and that shareholders aren't sold a pup. In committee tomorrow, Jack Dromey, of Unite the Union, will call for a "Cadbury Law", allowing governments to block takeovers which are 'against the national interest'.

What we've learned from Kraft v Keynsham, as they will surely call the movie, is this. Right now, you can tell an entire town that you'll save their most famous factory if they back you, then within a week of getting the keys abandon them. And you won't have broken a single meaningful law. Mr Berry thinks that should change. Will his committee agree?

Comments

  • Comment number 1.

    This comment was removed because the moderators found it broke the house rules. Explain.

  • Comment number 2.

    I will be pleasantly surprised if MPs land a glove on the Kraft execs - after all, not a single meaningful law was broken.

    This says an awful lot about how British interests have failed to be protected by our government. Other countries protect their industries of value rather than allow them to be taken over by foreign interests uninterested in social responsibility at the expense of short term profit. Not ours.

    It feels like the UK is at the mercy of foreign interests. We can't pay the poorest in our country a decent wage for fear foreign capital will take flight and do business elsewhere, risking british jobs. We can't set taxes at the top end of the scale for the same reason - so while large corporations pay virtually no tax by exploiting loopholes, ordinary people without the same mobility have to pay up.

    Was it really any surprise Kraft would behave this way? What was to stop it?

  • Comment number 3.

    So sad. I hadn't fully understood how Kraft had u turned. I will stop buying their products. Oh. They're everywhere now. Oops, too late.

  • Comment number 4.

    Aren't we missing the point here ? It was Cadbury's who decided to close the plant and moved production to Poland, not Kraft. Kraft may have been a bit disingenous to say they thought they could save Keynsham after the takeover - or even a bit dishonest - BUT if the takeover had not gone through Cadbury's would certainly have gone ahead with the closure.

    Why are Kraft taking the flak when the decision to close Keynsham was made by Cadburys ???

  • Comment number 5.

    Looking at many of the other products Kraft has purchased, it appears that they are only interested in the 'name'. Production is soon shifted to a cheeper location (country). Even if the basic ingredients are the same, the taste is not! If you think about it, the US market will dwarf the UK sales; so even if no more sales are made in the UK, Kraft will still be in line for huge profits from the new markets they have access to. Will the same happen to the Cadbury range as happened to Terrys?

  • Comment number 6.

    Surely John Dunn misses the point - we knew the factory was going to close - Kraft lied that it wouldn't close it to sweeten a deal.

    I guess the real, and sad question, is why on earth did we expect an American company to keep its promises. Look round the world, so many of the problems we face are based on the fact that you would be hard pushed to find many countries where an Americans promise would be thought worth the breath that uttered them.

  • Comment number 7.

    they were not disingenuous,or any other made up American word,they told lies,pure and simple.it is now standard practice in any commercial environment,as is breaking the law and any thing else they can get away with,the entire point that is being missed here is,England is for sale and there isn't a thing any one can,or wants to do about it.what good does anybody think talking to politicians will do,they will stand by,wringing their hands and making all the right noises and then get back to the job in hand,looking for seats on the board of very similar companies,but only if the fee is hefty enough.sign here,you have taken delivery of a purple shaft!

  • Comment number 8.

    I started to avoid Kraft products weeks ago with the exception of Cadburys items, move production to another country and that’s it. I even sent an email to Kraft complaining about their deception to which I got a reply basically saying thank you for your interest in Kraft! But what is most despicable about this whole affair is that Kraft has borrowed British tax payer’s money to make British workers redundant, all while the British government stood idly by.

  • Comment number 9.

    Well my English colleagues its quite simple idenfify all things Kraft that you the UK consumer may purchase, and simply cease to do so! There are alternatives in the market for most of what one might consume! Quite frankly there is not much else one can do! These US Exec's don't fear any UK political rantings. Only when companies such as Kraft lose money then perhaps you might observe a ripple................

  • Comment number 10.

    I don't see a problem. Businesses change.

  • Comment number 11.

    The UK is such an easy target for this sort of thing.

    Most anywhere else has better legal protection of their businesses.


    I keep hearing the claim that this makes the UK "flexible", but only if you define "flexible" as "easy to mug" and/or "has great potential to be moved to eastern Europe/China".


    What makes it worse is how they financed the whole thing (with a UK state owned Bank).... as bad in a different way as the Teeside Corus/British Steel debacle currently making several 1000 jobless.

  • Comment number 12.

    Whatever Kraft does will be fine with this government.
    BA employees on the other hand are evil monsters.

    The modern labour party are really just 1970s Tories.

  • Comment number 13.

    "6. At 06:32am on 16 Mar 2010, PeteBristol wrote:

    Surely John Dunn misses the point - we knew the factory was going to close - Kraft lied that it wouldn't close it to sweeten a deal.

    I guess the real, and sad question, is why on earth did we expect an American company to keep its promises. Look round the world, so many of the problems we face are based on the fact that you would be hard pushed to find many countries where an Americans promise would be thought worth the breath that uttered them."
    ------------------------------------------------------------------------


    It's hardly fair to say that it is a US issue.

    Look at Corus in Teeside, ~2000 jobs going directly and maybe 10,000+ going indirectly.... and, of course, Corus is owned by an India parent company.



    Business is utterly amoral (no matter how hard their PR people try to convince you otherwise) the only thing that matters is the $/£.

    Without laws to stop them every company in the world would be employing 5 year olds in the workhouse again - the country is irrelevant.

    That's not to say business is "bad", just there has to be strong laws to keep them in check as nothing else will.

  • Comment number 14.

    I sometimes wonder if Cadbury's founders aren't watching from their clouds and wondering "is this the legacy that we left?" We keep being told that we must embrace change and recognise progress. I fail to see how losing employment and selling out indigenous industry are those things. Cadbury's employees have been sold down the river and the rest of us are following in paddle-less canoes!

  • Comment number 15.

    The United Kingdom is no longer united and Great Britain is no longer great.

    Successive governments have allowed this to happen by watching over and encouraging a piecemeal demolition of our manufacturing base and by sleeping for years through the onset of financial collapse.

    We're now owned lock stock and barrel by foreign investors - but only for as long as it suits them. Then we go broke.

  • Comment number 16.

    Brown's Britain:

    Everything has a price but nothing is valued

  • Comment number 17.

    This row has nothing to do with the plant closing and everything to do with childish anti-american feeling. I counted at least four uses of the phrase "The Americans" in this article. There was no great storm when Cadbury's decided to close the plant, but now that there's a convenient American scapegoat, everyone's up in arms. People need to grow up and stop romanticising everything British.

  • Comment number 18.

    Why are people surprised by the actions of such a LARGE AMERICAN company? Kraft wanted the 'CADBURY' flag and played every trick it could to achieve it's goal!
    It's a mystery to me why the UK laws allow foriegn countries to have over forty nine percent voting power of UK companies....we leave ourselves wide open to the very incident that is disgusting so many people..and i'm one disgusted UK resident!

  • Comment number 19.

    Is this not merely a bitter pill otherwise known as the 'down' side of a pure market force economy? This behaviour (tacitly or otherwise) is permitted in the present climate. Kraft will certainly reference this today. And evade being held to account.

    Regardless, memories are short. Thatcher started putting up the For Sale signs. That practice has not changed. The last and only decent thing this government should have done (and perhaps a small chance it still can?) is to bring Cadbury back into the UK fold - even if it means nationalisation.

    Why is there a sentiment that we no longer proud of all things British? I for one do not want my children to grow up in a Britain which makes nothing for itself any more, and controlled by the rest of the world (a-la Kraft et-al). We import plenty, and seemingly used to do something else as well which made us very prosperous... What was it that made this nation great once?!?

  • Comment number 20.

    It was pretty obvious what Kraft were going to do - I can´t imagine why the government sought not to intervene. Now the UK taxpayer is going to have to pay for more unemployment, resulting social and health problems, then local regeneration. All the while us taxpayers will begin to target those "feckless" unemployed who were pushed out by Kraft and let´s face it the present government. That doesn´t seem fair!

    However, this is not the only industry. So before we all cry too much over spilt milk - perhaps we could all turn out attention to Staffordshire Potteries that are almost extinct now. Stop purchasing cheap Asian mades and make sure that Made in England is prominently displayed. Consumers do have the power to say - NO! After all why would I want to spend a whole heap of money on English Porcelain made in Indonesia for example. The point is that it is English - same goes for chocolate. As for the demise of M & S clothes just don´t get me onto that one - clothing well you just can´t purchase anything that´s not literally a rag. Even designer brands - it´s upmarket prices but low quality all the time. Blankets the same - where the hell are Witney Blankets when you want them? So next time you go shopping - look at the label - the decision is yours. Want an economy not want an economy?

  • Comment number 21.

    This mucky business with Kraft taking over Cadbury's shows just how far 'market morality' has crashed.

    The whole idea with takeovers was that you would have one company who was performing poorly taken over by another company performing well in order to increase overall performance.

    Now the pedigree of the companies matters not (Kraft was very mediocre but could borrow and Cadbury's was a good company), it's all about short-term margin and those suffering as a result of exported jobs considered 'collateral damage'.

    The definition of a pyschopath is:

    - Glibness/superficial charm
    - Grandiose sense of self-worth
    - Pathological lying
    - Cunning/manipulative
    - Lack of remorse or guilt
    - Emotionally shallow
    - Callous/lack of empathy
    - Failure to accept responsibility for own actions

    I think this goes far to describe the behaviour of banks and corporate entities.


  • Comment number 22.

    This comment was removed because the moderators found it broke the house rules. Explain.

  • Comment number 23.

    New labour took up the mantle of global neo liberal economics with the zealotary of the converted. For minsters like Mandelson to act surprised and shocked at Kraft’s closures is either rank naivety or brainwashed evangelical priest who has woken up from his delusional breakdown to ask; ‘what the hell have I done.’

  • Comment number 24.

    This comment was removed because the moderators found it broke the house rules. Explain.

  • Comment number 25.

    The rot had already set in at Cadburys before the Kraft take-over. I was born and brought up in the Bournville area.I was born in the area before the second world war and I worked on nights as a student there in the late fifties. It was more than just a factory, it was a social experiment, with the factory at the heart of a model housing estate, which, amazingly, still exists. The Cadbury family, whilst being good at business were also concerned for the welfare of their workers. There was a synergy there which enhanced the success of the business. The only successful business with a similar but more democratically evolved ethic today is the John Lewis Partnership. We do need some radical thinking about the way business and manufacturing evolves in our country. Above all we should be focussing on the interests of our communities in the development of business and manufacturing, otherwise what is the point of the City in our economy?

  • Comment number 26.

    The day Kraft put their bid in for a Cadbury takeover I predicted the inevitable outcome to a friend.
    The false shock that those in Government are displaying about the outcome can only imply that: 1. Members of the Government are Just Plain Stupid. 2. Members of the Government are hopelessly naive 3. Members of the Government are duplicitous liars.
    Whichever way you look at it, it really doesn't bode well for the possibility of yet another Labour Government.
    But more importantly, how on earth are we going to protect what’s left of our manufacturing base. Look at what has gone into foreign hand other than Cadburys. There's Rolls Royce, Jaguar, MG, British Steel, Coal Imported from elsewhere, Water Services owned by the French and others.
    These are just some of the names I can bring readily to mind, but we all know there are dozens if not hundred more.
    Companies talk about Corporate Loyalty and yet every time they move manufacturing elsewhere, they singularly display a lack of loyalty to those who have helped them to get to where they are today and all those who have bought their products over the decades.
    It's simply not acceptable any more to hide behind the Globalisation/Multinational Flag which is now getting quite threadbare and it is thoroughly unacceptable to talk about the interests of the Shareholders, who are by and large, faceless, Hedge Fund Operators and who have no conscience, collective or otherwise.
    I think a prospective Government who promises to end the wholesale rape and pillage of UK PLC would be onto a winning ticket. Perhaps somebody ought to tip them the wink.

  • Comment number 27.

    AS USUAL - blame ANYONE but themselves. Cadbury sold out their major stake years ago - no one complained. They DECIDED TO CLOSE THE PLANT -not the Americans.

    Still, Lord Mandelson will save u ,as will the Court of Public Opinion ,and as for Corus being shut - please do not bring it up - it is owned by one of Liebours biggest donors - Mr Mittal - so do NOT mention it please - have u heard Clown, Mandelson et al going on about this???????? but hey, all bad things start in America ,according to this useless shower called an Govt.

  • Comment number 28.

    As a person that consciously decided, some years ago to stop buying this type of over-proccessed food. It is of little surprise that Kraft is doing, what it does best. In the early seventies, I worked for Schweppes. Seeing first- hand how mass production works, was also a prod in the direction of this. If I want it, I make it myself. Most of it is not difficult to make. Surprisingly, you do not not need to spend hours in the kitchen, doing so. I do buy ready made condiments, ketchup, mustard etc. Though I've made them all and with surprisingly good results. So, as I climb down from my ivory tower ;-] I would like to point out, that, if it is advertised on t.v. or in magazines. Then it is probably unnecessary. I cannot remember the last time I saw an advert for potatoes or broccoli, plain oil or mustard seed. The amount charged at retail level is in far excess of the real cost of the ingredients. So, I would encourage those for whom "Kraft" is anathema to boycott their products. There is always an alternative, even if it is a chocolate bar. I'm sorry for the people who have lost their jobs over this, truly. It is a further sign of how the Corporate takeover, is a global issue.

  • Comment number 29.

    It was naive of the Cadbury board to believe the promises of Kraft and go on to recommend the aquisition to the shareholders. The Americans are ruthless in business and only interested in what they can get out of a deal. It will all end in tears and Bournville will end up like Terry's of York

  • Comment number 30.

    'Culverin' please explain what it is you mean by 'market morality' and the 'idea behind takeovers', your reasoning that well performing firms should take over less well perfoming firms is illogical, why can't a firm with low growth take over a smaller higher performing company to boost overall performance?

    You still haven't explained how this is 'all connected' to the Washington Consensus.

  • Comment number 31.

    Exporting UK jobs will destroy the UK.
    The British public should boycott Kraft products.
    We have lost the production of HP sauce (Kraft again?)and Dyson is also made in Poland.
    I am boycotting all firms that export UK jobs, otherwise there will be no workers left to keep my pension coming each month. We need more Manufacturing otherwise in 20 years time this country will be finished.

 

BBC © 2014 The BBC is not responsible for the content of external sites. Read more.

This page is best viewed in an up-to-date web browser with style sheets (CSS) enabled. While you will be able to view the content of this page in your current browser, you will not be able to get the full visual experience. Please consider upgrading your browser software or enabling style sheets (CSS) if you are able to do so.