HARRISBURG, Pa. — Hershey will cut as many as 250 jobs at its hometown Reese's candy factory as part of a wider move to reduce domestic labor costs by switching production to contractors and a new plant in Mexico, the candy company said Tuesday.
A spokesman for the nation's largest candymaker said the company expects to make most of the job cuts through early retirements and buyouts. The process is expected to be complete by 2010.
The plant's 900 workers make Reese's products and KitKat, which is owned by Swiss food giant Nestle SA and made under contract by Hershey in the United States.
Hershey's three hometown manufacturing plants employ about 3,000 people. Between Tuesday's announcement about the Reese's factory and a vote last week by unionized workers at the other two plants, the company is poised to cut as many as 900 jobs, or nearly a third of its work force, in Hershey.
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Hershey has a plant in Oakdale, where more than 600 workers make Hershey's Kisses, Reese's Peanut Butter Cups and Hershey Miniatures. No job cuts have been announced at the plant. John Souza, principal officer of Teamsters Local 386 in Modesto, said recently said that Hershey is not expected to release more information about the future of the Oakdale facility until after Easter.
The restructuring plan for Hershey, announced Feb. 15, is geared to save as much as $190million a year. Under the restructuring, Hershey plans to cut 1,500 jobs and open a new plant in Monterrey, Mexico. The proportion of Hershey's manufacturing in the United States and Canada will shrink from its current 94 percent, to 80 percent by 2010, the company has said.
In the past two months, the company also has announced agreements with Indian and South Korean candy manufacturers to make and distribute its products in Asia.
At a Feb. 20 analyst conference in New York, Hershey's chief executive, Richard H. Lenny, said the company is missing out on cheaper labor markets. Labor costs in Mexico are 90 percent lower than the United States, and the cost is 95percent lower in Asia, he said.
In addition, raw materials are 10 percent cheaper outside the United States, Lenny said.
"Hershey will have a more globally dispersed and appropriate network with Mexico and Asian production," Lenny said.
Last month, Hershey announced the closing of its Smiths Falls plant in eastern Ontario, Canada, affecting more than 500 employees In last week's vote, more than 2,000 unionized workers agreed to allow more than a quarter of their work force to be slashed in exchange for keeping the two hometown plants open.