Posted on 02/25/2007 3:13:21 PM PST by Diana in Wisconsin
HERSHEY, PA — If Calvin Smith Jr. is going to lose his job, he’d like to know about it.
Smith and his fellow workers at The Hershey Co. already know the company plans to reduce its workforce by 1,500 jobs during the next three years and eliminate a third of its production lines. And when employees for a new plant to be built in Monterrey, Mexico, are factored in, the actual number of job losses at the company’s U.S. and Canadian plants could total 3,000.
But what Smith and his co-workers don’t know is when the ax will drop.
“Any human being with a soul has a fear of the unknown,” said Smith, who lives in Jonestown and serves as branch president of Local 464 of the Chocolate Workers of America. “We don’t know what our future is...We don’t want the great American chocolate factory to become the great Mexican chocolate factory.”
As workers left Hershey’s plant at 19 E. Chocolate Ave. on a recent workday, they expressed varying degrees of fear and resignation toward the future.
“It’s a sign of the times in America,” one man said.
“Since (Richard) Lenny’s taken over (as company president and CEO), all he does is cut jobs,” a woman said. “That’s not the answer.”
The bogeymen cometh
In Smith’s eyes, there is plenty of blame to spread around for what is happening. Among the bogeymen are the federal government, which has encouraged free trade through the North American Free Trade Agreement; the company’s management; and the Hershey Trust, which has a controlling interest in the company.
David Rudd, chairman of Lebanon Valley College’s Business Department, said Hershey’s decision was inevitable — and probably overdue.
“When you’ve got plants operating at 62 percent capacity (as Lenny reported Tuesday), that’s nonviable in any industry,” Rudd said. “Some of their plants are single-product. Companies just don’t do that. Flexible manufacturing has been the rage for 10 or 15 years.”
By combining plants, “you can have one plant at 92 percent,” he said, noting that most companies try to operate at 85 to 90 percent capacity.
Hershey runs 20 plants: three in Derry Township; three elsewhere in Pennsylvania (Lancaster, Hazleton and Reading); three in Canada; one in Mexico; one in Brazil; and the rest scattered from Connecticut to Hawaii.
Although Hershey’s employees are frustrated by the lack of clarity in the company’s Feb. 16 announcement to reduce its workforce, Rudd said the company was compassionate compared to some others.
When Otis Elevator decided to leave New Haven, Conn., to move its manufacturing to the Caribbean, it did so with no advance warning, he explained.
“Here, people get a chance to adjust,” Rudd said. “It’s more brutal to go to work one day and have someone say, ‘Here are your last two paychecks.’”
We’re No. 43
David N. Taylor, executive director of the Pennsylvania Manufacturers Association, said he’s having difficulty trying to analyze the Hershey situation.
“We don’t know exactly how all this is going to manifest itself,” he said.
Taylor points a finger at the “bizarre and antiquated” U.S. sugar subsidy, which inflates the price of sugar to “two or three times the price on the world market.”
By shifting production to Mexico, Hershey can buy sugar at the world price, which in turn can make its product pricing more competitive with its international competitors, Cadbury-Schweppes of Great Britain and Nestle of Switzerland.
Production costs in Mexico are about 10 percent of those in the United States and Canada, Lenny said. The goal is to increase Hershey’s product volume outside the States and Canada from its current 6 percent to about 20 percent in 2010.
Taylor said Pennsylvania’s overall business climate is “not good.”
While a national manufacturing recession began in 2000 and ended in July 2003, Pennsylvania’s slump has continued, with a net loss of more than 200,000 jobs since July 2000.
“Pennsylvania manufacturers need the state government to wise up,” Taylor said. “Fiscal discipline is the first and most necessary step.”
That means limiting government spending, which has increased 28 percent during Gov. Ed Rendell’s tenure, he said, adding that limits on lawsuit abuse are also needed.
Forbes magazine recently ranked Pennsylvania as the 43rd most business-friendly state.
“Virginia was number one, and North Carolina was number three,” Taylor said. “Those are our competitors. ... We should be asking, ‘When will it be smart for businesses to decide to operate and expand in Pennsylvania?’”
Only rumors
All of the analysis is small comfort to the men and women whose families could be affected by the company’s downsizing.
“The only thing I know is what has been in the paper,” said Bruce Hummel, the business agent for Local 464, which represents 2,500 workers in Hershey and Reading. “We’re hearing rumors. We’re hearing the plant in Canada (Smiths Falls, Ontario) is going to shut down. I really don’t know.”
The reason for the workers’ lack of information is simple, Hummel said. Hershey’s administration “is out for the stockholders.”
The lowest-paid union-scale plant job pays $15.20 an hour, he said. An average wage is $18.78 an hour.
“We have high-paid jobs thanks to the negotiations of the union,” he said. “Reese (nonunion) workers are getting union-scaled wages to keep the union out.”
Although the main plant at 19 E. Chocolate Ave. is the oldest of the company’s 20 plants, it “is held to high standards and produces a quality product,” Hummel said.
Half of Hershey’s 13,000 employees work at the companies’ six Pennsylvania plants (Hershey, West Hershey, Reese, Lancaster, Hazleton and Reading), company spokesman Kirk Saville said.
But, according to one union spokesman, the problem is even closer to home.
“I believe half (of our members), at least half, live in Lebanon County,” said Melvin Myers, president of Local 464 and an employee at the West Hershey plant.
Myers, who lives in Campbelltown, started working at the main plant on East Chocolate Avenue 38 years ago, right after his discharge from the Marine Corps.
“Hershey has not been telling us a lot,” he said. “They have been downsizing some departments a little at a time.”
Battle of attrition
Myers could have retired in November, but he decided to keep working because he has another year left in his term. He plans to run for re-election next year.
“If I win I will stay,” he said. “If I lose, I’ll retire. My joy comes from the union work I do.”
Attrition could play a limited role in force reduction, Hummel explained. Between 40 and 50 workers usually retire each year.
LVC’s Rudd said the line employees won’t be the only ones affected in the event of layoffs.
“It could also be painful for managers,” he said. “As a manager, you know changes are coming way before the other people do. You’re carrying that around in your heart. It’s sort of like cut-down day in the NFL. There’s pain for people in the middle, the middle managers. And some of them are next in line to go.”
Hummel remembered the last great trauma for the company’s employees, when the Wrigley Co. attempted to buy Hershey in 2002.
“Back then we thought the trucks were heading to Chicago,” he said. “Now I guess they’re heading to Mexico.”
And if the bulk of the job cuts come in Dauphin County, Hummel said, “It could be devastating to central Pennsylvania.”
Even so, Rudd said, the region’s economy is “still quite robust.” There is more diversity here than in many places, with agriculture, health care, government, education and transportation among the strong components.
“There are not that many monster employers,” he said. “It’s much more diverse here than in other areas.”
Anxiety and fear
While that is encouraging news, it doesn’t mitigate the immediate wave of fear going through Hershey’s employee ranks.
“We have a lot of people afraid,” said Myers, whose wife, Joyce, has worked for 24 years at 19 E. Chocolate Ave. “They don’t know what to expect. We don’t know how to encourage them or console them. You’re anxious to find something out, but you’re kind of afraid.”
Although Myers understands market forces are at work, “it’s just shocking,” he said. “I never, never thought we would see this day.”
For Smith, this is the second time he is looking at a possible job loss.
“I grew up in Lebanon,” he said. “I worked at Textile Printing on 25th Street for years.”
When that company closed, it led to his career at Hershey, “the best thing that ever happened to me,” Smith said. “Hershey had better benefits and better pay.”
Smith’s wife, Kristi, also works for the company, so they are looking at the potential loss of two jobs.
“There are a lot of families there,” Smith said. “We consider all of the people family up there. We treat them like family. It’s a nice place to work, and I hope we can continue to work there. There are a lot of dedicated people.”
Join the club...I loose mine to Reynosa Mexico in April...
Mexican chocolate? You have got to be kidding...
Coca Cola is made in Mexico....I will hand it to the people south of the border.....Chocolate was made first by the Incas or Mayans or whatever was down there a couple of hundred years ago....before the European Spanish killed them all...
Well, my mother and my ex are still valiantly doing their best to keep all the Hershey chocolate people all over the world working overtime.
They're just going to New Orleans. You know, to keep it a "chocolate city"!!!!!
> The US sugar policy is borderline criminal.
The one amendment that gets passed with every piece of legislation is the law of unintended consequences.
Unintended consequences of Big Government intrusion on the Free Market BUMP.
I have not finished the article, but I am not holding my breath to find the other side of the coin,
“We are about to lose our high-paid jobs thanks to the negotiations of the union,” he said. “Reese (nonunion) workers are getting union-scaled wages [and are also about to lose their jobs for the same reason.]”
Isn't it amazing what selective amnesia can do to the outraged unemployed?
Of course, under the "me first" union philosophy, they have also lost sight of the reality that they are losing their jobs in part because...
"...Taylor points a finger at the “bizarre and antiquated” U.S. sugar subsidy, which inflates the price of sugar to “two or three times the price on the world market.”
... of subsidies to another segment of the presumable free [and probably unionized] market...
Yea, the unintended consequence is that all of our candy manufactueres are forced to go off shore.
The intended consequence was that a handful of well-connected sugar farmers make out like bandits, while every consumer in US pays overpays for sugar (billions in the aggregate).
They both stink.
The loss of manufacturing jobs is the price paid to keep the sugar beet farms going.
The farmers have a better lobby.
I don't like this. Maytag. Fannie May. Now Hershey's. And many more I can't remember who all has gone to Mexico. Maybe I will boycott. I have no idea how old my Maytag washer and dryer are, high capacity, top-loading washer, brought them home when my aunt died in 1989. Like new then, small leak in washer otherwise ok, think the dial/timer is getting out of sync. Fannie May I can no longer afford although I see one of the new supermarkets less than one mile away carries some. I used to love to stop by the placein the mall they had and get a little bag of my favs, trinidads, fruit and rum, apricot something w/white chocolate and toasted coconut, orange peel, several others. Hershey's about all I buy of that are the powdered cocoa, like it the best, and sometimes regular chocolate bars for s'mores, kisses for peanut blossom cookies. We have a Nestle's plant here in town, wonder what they make? I can make my own chocolate-covered orange peel, but it is a lot of work, tastes the same, found several versions that sound fairly easy of a recipe for truffles, so I can make trinidads . . .
" The US sugar policy is borderline criminal."
All farm subsidies should be eliminated. All they do is distort economic activity.
The line in the article about the rate of pay was highlighted. Is this meant to imply that the union scale pay is high? I frankly don't think that $15.20 an hour--a little over $30K per year--is at all an unreasonable rate of pay for an adult. It does not buy a very fancy lifestyle in that area of PA.
I think the sugar subsidy had something to do with propping up the U.S. sugar industry after we broke ties with Cuba. If the program is going to have these kind of consequences maybe it should be scrapped.
The rate of pay isn't high, but still substantially more than Mexico. Of course, Mexico lost a ton of jobs to China, where the pay is even lower.
The bottomline is very simple: If American workers don't want to compete with Chinese and Mexican wages, then the solution is in trade policy.
That will come as quite a surprise to the larger body of Mexicans, who are directly descended from the same people.
Of course there is a grain of (misleading) truth in this: ...before the European Spanish killed them all...
Only the rulers of the Aztecs were allowed to use chocolatl and most of them did die at the time the ruling class was defeated by the Spaniards, or dismembered by their subject in the uprising immediately thereafter.
The common man, the indian, was forbidden to use chocolatl under penalty of death...
But your politically correct version is heads and shoulders above the truth in the war against the nasty Europeans and their culture. How advanced could they be? They never thought to rip out living human hearts, or practice cannibalism...
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