Town sees nothing sweet in chocolate plant closing

OAKDALE, CALIF. —  On a warm May weekend in this Central Valley town, the irony was as thick as melting fudge.

As usual, the annual Chocolate Festival was drawing hordes of fun-seekers. However, they were streaming in by the thousands just two weeks after Hershey Co. -- Oakdale’s biggest employer and the nation’s biggest candy company -- announced its plan to close its sprawling plant, eliminate all 575 jobs and open a new factory in Monterrey, Mexico.

On one side of busy Yosemite Avenue, the festival drew children to games where they slathered their heads in syrup as their parents patiently stood in line to buy bookend-size chunks of toffee.

Across the street, to frequent, approving honks from motorists, protesters waved signs denouncing the company whose philanthropic, long-dead founder is still reverently referred to by some local employees as Mr. Hershey. One man wore a T-shirt that said on the front: “Where did ‘the great American candy bar’ go?” Asked for the answer, he whirled around to display the back: “Mexico!”

For Hershey workers in Oakdale, globalization is no longer just an abstraction. Like legions of other Americans, they suddenly face questions as immediate as how to make a living and as far-reaching as whether their 20th century manufacturing skills will count for much anywhere else. Production at the plant is to be phased out by the end of the year.

When she heard the news, Mabel McNaught, a school custodian, wondered how her family would recover. Her husband, Philip, 50, is a forklift driver at the plant, and she figures that finding another job nearby with similar pay and benefits won’t be easy.

“I was devastated,” she said. “I just started crying.”

The sign she held as traffic snaked past the protest was cautionary: “Who’s next?”

The 113-year-old company has described the plant shutdown as part of a “global supply-chain transformation.” Some 3,000 of Hershey’s 13,000 workers will lose their jobs, including as many as 900 in the company’s hometown of Hershey, Pa., where the streetlights are shaped like Kisses. By 2010, Hershey says, the moves will save shareholders as much as $190 million annually.

“The financials are compelling,” Chief Executive Richard H. Lenny told a meeting of market analysts in February, saying labor costs in Mexico are 10% of those in the United States. Asked about the negative publicity that would come with the plant closures, he said the decisions were “gut-wrenchingly difficult -- but in the best interests of the business.”

In a picturesque region dotted with dairy farms and almond groves, Hershey has been an Oakdale fixture since 1965. Over the years, the plant on the edge of town has churned out nut-studded chocolate bars and uncounted millions of chocolate Kisses.

Until 2001, thousands of tourists were shuttled to the low-slung factory to gaze upon immense, gently rocking vats of liquid chocolate and conveyor belts laden with Kisses. Hershey said the tours were discontinued because of security concerns after 9/11, but skeptics contended that the company simply wanted to save money.

At times, the community of 18,000 -- the self-proclaimed Cowboy Capital of the World -- is infused with the scent of chocolate, although it competes with the aroma of tomato sauce from the ConAgra processing plant down the road.

“Ah, if fumes could fill the belly,” said 58-year-old Larry Hendrix, a lifelong Oakdale resident, dropping in at Oakdale Shoe Repair, where his friend Javier Melgoza uses vintage equipment to repair finely tooled cowboy boots.

Like many residents, the shoemaker, who once bartered his services for candy, questioned the company’s motives.

“It has to come down to greed,” Melgoza said. “I mean, Hershey’s has it made, coast to coast, right?”

Not quite, according to industry observers. Earlier this month, the company lowered its projected 2007 earnings, citing high dairy prices. And, like other domestic candy companies, Hershey complains about government agricultural supports keeping the price of sugar at least double the level in foreign markets.

“The candy business has been laboring under this burden for a number of years,” said Ray Jones, a director at Dechert-Hampe, a marketing consultant specializing in candy and confections.

In addition, Hershey has old plants that are tough to overhaul -- “inefficient legacy infrastructure,” in the words of Lenny, the chief executive. And it sees lucrative markets in places like China, where it has introduced green tea-flavored Kisses, and in Mexico, where it plans to feature “locally relevant nut flavors” in its Reese’s Peanut Butter Cups.

None of that is good news for Oakdale, Jones said. “Do you invest in revamping U.S. plants when you’re faced with higher sugar prices, higher labor costs and a more global business? It’s not a new story, but whenever it repeats itself, it’s tragic.”

Tom Baker, a 34-year employee who signed on at Hershey when he was 20, agreed.

“Now you’re a commodity,” he said. “Milton Hershey’s ideal was stability for families, but there’s none of that anymore. There’s no more moral connection between business and working-class America.”

Building what he viewed as a utopian company town, Hershey kept his employees working even during the Depression. Current Hershey workers point proudly to his school for orphans -- now educating 1,200 needy children and, through company profits, possessing an endowment larger than some Ivy League universities’.

“It used to be kind of cool to work for Hershey’s,” said John Wood, a former maintenance supervisor who found another job several months ago. “But not over the last few years.”

In Oakdale, union officials described the workers’ severance package -- up to 65 weeks of pay and benefits -- as generous. Even so, anger toward the company runs high.

In Modesto, 12 miles to the southwest, some readers of the Modesto Bee have urged a chocolate boycott. In a letter to the editor, one man said his wish for Hershey’s chief executive was that “the ghost of Milton Hershey haunts you forever!”

And in Hershey, Pa., the granddaughter of H.B. Reese, creator of the Peanut Butter Cup, vowed that no Hershey’s product, including the one named for her grandfather, would pass her lips again.

“Mr. Hershey was a warm, wonderful man who wanted his business to stay in America,” Rosie Rippon-Prete said in an interview.

But for all his genuine community spirit, Milton Hershey also was known as a tough businessman, said a biographer. In fact, Hershey came close to selling off his company in 1929 and was thwarted only by the stock market crash.

In today’s market, even the great philanthropist may have been willing to shift some production overseas, said Michael D’Antonio, author of “Hershey: Milton S. Hershey’s Extraordinary Life of Wealth, Empire and Utopian Dreams.”

“My guess is that the company waited until it couldn’t pursue any other option,” he said. “If it were possible to stay and remain competitive and thriving, they would.”

In Oakdale, the shutdown will cost restaurants some lunch trade, bankers some mortgage business and Central Valley dairies a huge customer.

Unemployed Hershey workers may find jobs, but few at wages comparable to their average of $16.81 an hour, officials said. Unemployment hovers at more than 9% in the Central Valley, compared with 4.8% statewide. Some local residents even endure a three-hour commute to jobs in the Bay Area.

For all that, Baker, the displaced Hershey employee, says he has no animosity toward Lenny, the first executive from outside the company picked for the top job.

“It’s a corporation,” Baker said. “When you get bit by a dog and you know that he bites, you don’t hate the dog.”

*

steve.chawkins@latimes.com