Global snack foods powerhouse Mondelez International, Inc. has announced a much-awaited decision to put new production lines for its North American biscuits business in Salinas, Mexico.
As part of the modernization plan, the company will invest $130 million to install four state-of-the-art manufacturing lines at the Salinas plant, which opened last year.
The move is the culmination of the company’s negotiations which began in April with union representatives from its Chicago plant. Mondelez also undertook a site selection process wherein it considered both its Salinas and Chicago plants for the $130 million modernization plan, and found that locating the new production lines in Salinas would give them $46 million in cost savings.
The decision to leave nine older production lines in Chicago as they are and focus on the newer plant in Salinas is a big win for Mexico, but not so much for Chicago economic development. The company expects their decision will impact 600 jobs at their Chicago facility.
Olivier Bouret, Mondelez International’s Vice President, North America Integrated Supply Chain, Biscuits, said in a release that the Chicago plant has been and will continue to be an important part of the company’s North American biscuit footprint, and added that they’re committed to treating all impacted employees fairly through this difficult time.
Officials of the Bakery, Confectionery, Tobacco Workers and Grain Millers International Union (BCTGM), which represents approximately 4,000 Mondelez workers across North America, took a very different view. The historic Mondelez facility is the largest of their U.S. bakeries, and has 16 lines and 1,000 union members producing iconic brands such as Oreo, Chips Ahoy, Nutter Butter, Honey Maid, and Ritz and Wheat Thins.
BCTGM said in a release that in the negotiations, the company had demanded that the union and its Chicago workforce would have to accept the $46 million in wage and benefits cuts to make up for the project cost difference between Salinas and Chicago. That works out to a $46,000 reduction in wages and benefits per worker, per year.
Furthermore, the Chicago facility would also need to let go of 255 workers, leaving the remaining 745 workers to achieve the $46 million in annual savings the company required to make an investment for modernizing the Chicago plant.
BCTGM International Strategic Campaign Coordinator Ron Baker explained that the company wanted the Chicago Bakery workers to pay not only for the full cost of putting new ovens in the Chicago facility, but also for the wages of the entire workforce in Salinas, Mexico in perpetuity.
BCTGM International Vice President Jethro Head added that the announcement by Mondelez selecting Salinas instead of Chicago is not a surprise and validates exactly what the BCTGM said when they met with the company’s representatives in May – that the company had already decided that it was going to put the new production lines in Mexico.
Deerfield, IL-based Mondelēz International, Inc. (NASDAQ:MDLZ) generated $30 billion in revenue last year. Mondelez was spun out of the former Kraft Foods Inc. in 2012, and houses billion-dollar brands such as Oreo, Cadbury, Cadbury Dairy Milk and Milka chocolate.