Mondelez International is pumping US$130m into a factory in Mexico in a bid to "modernise" its North America supply chain but the move will impact 600 jobs in the US.
The investment into the "lines of the future" in Mondelez's plant in Salinas, which opened last year, will see nine older "inefficient" manufacturing lines replaced at its Chicago biscuit plant.
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The investment will be completed by the middle of next year.
"This new investment is part of our ongoing supply chain reinvention plan, as we implement several initiatives around the world to transform our global manufacturing processes to accelerate growth, reduce costs and improve productivity," said Daniel Myers, executive vice president for integrated supply chain at Mondelez. "These investments will enable a significant percentage of our global power brands to be produced on advantaged assets and are key contributors to our overall margin improvement."
The company said the announcement follows discussions that began with employees and representatives from the Chicago plant in early April as it considered whether to make the investment in Chicago or Salinas. It said at the time it was seeking US$46m in annual savings as a result of the move.
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"The Chicago plant has been and will continue to be an important part of the company's North American biscuit footprint, producing a variety of beloved consumer products," said Olivier Bouret, vice president for Mondelez's integrated biscuits supply chain in North America. "While the new investment will affect approximately 600 positions in Chicago, we're committed to treating all impacted employees fairly through this difficult time."
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By GlobalDataThe Bakery, Confectionery, Tobacco Workers and Grain Millers International Union, which represents 1,000 workers at the Chicago plant, criticised Mondelez's move.
BCTGM international vice president, Jethro Head, said in a statement: "The announcement by Mondelez is not a surprise and validates exactly what the BCTGM said when we met with its representatives in May − that the company had already decided that it was going to put the new production lines in Mexico.
"We knew this because they came to the table with no legitimate, comprehensive proposal for us to review and no detailed production and financial data for us to analyse, all of which is essential for our Union and members to make a responsible and well-informed assessment and decision."
BCTGM's international strategic campaign coordinator, Ron Baker, added that in order for the union members to generate $46m annual savings, Mondelez would have to save $46,000 per worker, per year. This amounts to approximately $22 per hour in wage and benefit cuts.
"When we did the basic math on their demand, it was clear to the union and our Chicago members that the company knew full well that the magnitude of the financial sacrifice being asked of the workers was not only unacceptable, but would not even be feasible. The demand for $46m in annual savings would continue in perpetuity and require our members to work for almost nothing."
