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Chocolatier CEO meets group bitter over layoffs

HERSHEY, Pa. — The chairman and chief executive of The Hershey Co. faced shareholders for the first time Tuesday since announcing hometown job cuts and a major overseas expansion, and insisted to a divided audience that he was doing the right thing for the company.

More than a thousand people attended the annual meeting of the nation's largest candy maker, and a few took the microphone during a question-and-answer session to vent anger over what they say is the opposite path from what founder Milton S. Hershey would have taken.

But Richard H. Lenny, the first Hershey Co. chief executive hired from outside the company, did not apologize or back down, and even received applause after he maintained that his responsibility is to keep the company competitive.

"Like it or not, that's the job," Lenny said. "We are making decisions that we believe are in the best interests of the company."

He also pointed to a March 30 union vote that overwhelmingly approved the elimination of as many as 650 jobs at two of the company's hometown factories, including its flagship plant on Chocolate Avenue. As part of the agreement, the company will extend buyout and early retirement offers, and keep the two plants open.

Lenny contended that the company took pains to extend benefits to affected workers, and scolded people in the audience who criticized him, but had never had to order layoffs.

"None of you knows how difficult it is," Lenny said.

At the heart of the job cuts in Hershey — 900 at three plants — is a shift in production to developing countries where the company hopes to capitalize on cheaper labor and materials, and sell more candy to booming populations of young people.

When the company announced the job cuts in February, lawn signs popped up that said "Save Mr. Hershey's Dream." On the road to the Giant Center arena, where the meeting was held Tuesday, Mike L. Cvetko held up signs that read: "Global boycott of Hershey products" and "Is it need or is it greed?"

Since the Feb. 15 announcement of the restructuring, the company's share price has risen almost 6 percent.

Few shareholders questioned the wisdom of the company's overseas ventures, but many wondered why it has to cut back in Hershey and whether the quality of candy produced elsewhere will slide.

Others expressed an underlying fear that the company one day will abandon the town that shares the name of its founder.

The Chocolate Avenue factory, where passersby can smell chocolate in the air, is "going to end up in a couple years being a museum and not a plant," Joyce Wolf, who works on the assembly line there, told Lenny.

Hershey is planning to build a new plant in Monterrey, Mexico, and has announced joint ventures to make its candy in India and China. Hershey also said it will close a plant in Smiths Falls, Ontario.

The company is considering what to do with its plant in Oakdale. A decision on that facility is expected any day.

Hershey's chief operating officer, David J. West, told the audience that the company had accumulated plants that were too inflexible or redundant, creating a system in which only about 60 percent of the capacity was in use.

Eliminating one-third of the existing production lines and shifting work to contractors, in the United States and in foreign countries, will help boost use to 85 percent in 2010, while saving $170 million to $190 million a year, West said.

Shareholder David Miner, 58, said Hershey's job cuts are a shame, but he didn't blame the company for outsourcing jobs as many other large businesses have done. Plus, he said, the area's economy is diverse enough to survive without the chocolate company.

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