'Kraft will cut jobs': Is Mary Buffett right?

Everyone in the world seems to have an opinion on whether Kraft will sack people once they get the keys to Cadbury's. Here's another one, from an American analyst.

Strong stuff: "Jobs will have to go," she says. There's more from her, and others stateside, on Inside Out West which you can watch on the iPlayer now.

And Mary Buffett is as well-placed as any. A respected analyst, a Kraft shareholder herself, oh - and there's the father-in-law, Warren. As well as being the world's richest man, Warren Buffett is also Kraft's biggest shareholder. He - and Mary it seems - are worried about the £7bn debt that the US food giant has racked up to buy the crown jewels of British chocolate. Question is, are they right?

Here's the case. At £11.5bn, Cadbury's is already a large firm. Unlikely, then, there can be any "economies of scale". The firm is modern and efficient already, so the chances of Kraft's wizards coming in and finding brilliant new efficiencies are equally slim. So, say the doom-mongers, the only way the Americans can make money is by cutting costs. And that means jobs. Of the 5,500 Cadbury workers in the UK, 5,000 work at either Keynsham or Bournville, in factories, making chocolate. Head office savings are, forgive me, barely a Wispa.
Search the blogs, and you'll find plenty of echoes of this line. Not least on this blog. Here's three. 'Culverin' put it like this two weeks ago.

- If the corporation has borrowed 7 billion to buy you, they become far more untrustworthy.

Back in October, 'dontmakeawave' suggested:

Kraft will expand the Cadbury brands but will seek to produce at the cheapest cost to maximise volume and profit. This doesn't just mean production in places like Poland but it also means the cost and mix of ingredients. I used to love one of Terry's main products and bought it for thirty years. But soon after the Kraft takeover I believe the taste changed, and have never bought it since.

And there are plenty more.

But before you hang the yanks, hear the case for the defence.

In a word, their case rests on trust.

Irene Rosenfeld, the Kraft CEO, personally added that famous line in page three of the initial offer document:

"...we believe we would be in a position to continue to operate the Somerdale facility,which is currently planned to be closed ..."

A Wall St Journal reporter told me last week that Ms Rosenfeld was wooing shareholders by repeating this personal assurance. Cutting manufacturing jobs, she says, is not Kraft's style. Just yesterday, she gave the Telegraph this pledge:

"We have made a commitment that we believe we will be a net positive for manufacturing jobs [for Cadbury] and I am still hopeful that we will be able to accomplish that."

As one analyst put it to me last week, a lawyer could wiggle out of all those words. But it would be a PR disaster, and the end of Irene Rosenfeld's personal reputation.

But there is a way Kraft can make good money without breaking their word.

How? India. My mother-in-law, who played hockey on the Fry fields in Keynsham, is on holiday in Goa at the moment. But there's no escape from the chocolate war, she laughs on an email, attaching this piece from the Economic Times of India.

It's worth a read. But the fact that leapt out at me was this. Kraft have been trying for a decade to get "into India". Cadburys have 1.2 million outlets already. From Wednesday, those shops can now sell Ritz crackers and Toblerones alongside the Dairy Milks and Creme Eggs. Kraft's offer document promises that the deal will boost growth from 4%+ to 5%+ and with another million shops selling their wares in India, you can see why.

Like a good sweet shop, there's an opinion for everyone in this deal. Weasel words from corporate lawyers? Swoop by an American Food Giant? or maybe Global corporate saves local factory? Take your pick. But there is one opinion I would like to remove from the Selection Box. And that is the much bemoaned "Death of a British Icon". Cadbury floated on the stock market in 1962. From that day, 'foreigners' have owned shares. At present, the top shareholder is Franklin Mutual Advisers, based in New Jersey. The Chief Executive studied law at Harvard University, Massachussets, USA.

How British was this icon anyway?