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Hershey cuts jobs builds plant in mexico { January 2007 } Original Source Link: (May no longer be active)
http://today.reuters.com/news/articleinvesting.aspx?view=CN&storyID=2007-02-15T162813Z_01_N15236446_RTRIDST_0_HERSHEY-UPDATE-2.XML&rpc=66&type=qcnahttp://today.reuters.com/news/articleinvesting.aspx?view=CN&storyID=2007-02-15T162813Z_01_N15236446_RTRIDST_0_HERSHEY-UPDATE-2.XML&rpc=66&type=qcna
UPDATE 2-Hershey to cut 1,500 jobs, build plant in Mexico
Thu Feb 15, 2007 11:28am ET146
(Adds details, analyst and union comments, byline, stock activity)
By Brad Dorfman
CHICAGO, Feb 15 (Reuters) - Hershey Co. (HSY.N: Quote, Profile , Research) will cut 1,500 jobs, or about 11 percent of its work force, and reduce the number of production lines it operates by more than a third as it spends up to $575 million to overhaul its manufacturing, the company said on Thursday.
The largest U.S. chocolate maker also said it would outsource production of some products and would build a cost-efficient manufacturing plant in Monterrey, Mexico.
Shares of Hershey, whose products range from Hershey's Kisses to Mauna Loa macadamia nuts, rose 2.7 percent on the news.
The moves come as the company looks to free up more money to spend on marketing as it tries to regain lost market share from archrival Mars Inc. The overhaul is expected to reduce annual costs by $170 million to $190 million by 2010, it said.
"Hershey needs to find the additional funds somewhere to support the additional advertising spending they need," said Mitchell Corwin, analyst at Morningstar.
When the overhaul is complete, production from North America and Canada will represent about 80 percent of the company's total, down from the current 90 percent, Hershey said. It declined to say where the jobs would be cut, and an official with the Chocolate Workers union said the union had not been told any specifics. The company's work force is over 13,000.
"From the union standpoint, we'll do whatever we think we can do to keep our union plants," said Dennis Bomberger, business manager for Chocolate Workers Local 464, which represents about 2,500 Hershey employees. But he said there might be little the union could do to protect the jobs.
"We're not the first company to move stuff out of the country," he said. "If there were a way to stop companies from doing it, I guess that would already have happened."
Hershey has been trying to increase sales by focusing on its traditional chocolate brands, while developing new lines like premium dark chocolate.
The company said it still expects sales to increase by 3 percent to 4 percent this year, with earnings from operations up 7 percent to 9 percent. The earnings forecast is below the company's long-term growth goal of 9 percent to 11 percent but is in line with the company's previous forecast.
Hershey said it expects the new plant in Mexico to be running by September and to account for about 10 percent of the company's overall production by 2010. A spokesman declined to say how many people would work at the plant.
Hershey shares were up $1.39 at $52.69 in morning trade on the New York Stock Exchange. The stock is up about 5.7 percent this year, compared with a 1.8 percent increase for the Standard & Poor's Packaged Foods index <.15GSPFOOD>.
© Reuters 2007. All Rights Reserved.
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