IBM REDUX: Why CoMo/Boone County giveaway to billionaire-owned Oscar Mayer plant may backfire

Job cuts, plant closings, cost cutting at the new Heinz Kraft

COLUMBIA, Mo 7/16/15 (Beat Byte) -- If the history of IBM, the Dinner Train, and the Tiger Hotel are any guides, local governments' giant handout to two of the world's richest men could backfire.   

For Warren Buffett -- the world's third richest man -- and Jorge Lemann -- the world's 26th richest man -- Boone County, Columbia City Hall, Columbia Public Schools, and the Boone County Library Board are abating annual property taxes on $114 million in real estate and equipment at an Oscar Mayer plant the two men own in Columbia.

The decade-long tax abatement may rank as the most perverse in local history.  

Lemann is notorious for cutting costs.   He and Buffett wasted no time with Oscar Mayer parent Kraft Foods, which they purchased in March to merge with ketchup maker HJ Heinz.  

Instead of growing jobs,  the billionaire partners have ordered at least 150 jobs cut from the Oscar Mayer plant, 30% of the workforce total. 

Local government leaders should have seen the cuts coming.   But they've been mum, working overtime to approve the gargantuan giveaway, reportedly to subsidize plant upgrades.   

News of job cuts -- and plant closures -- at the merged Heinz-Kraft hasn't let up for months.   Expect "widespread layoffs, lower budgets, new levels of austerity," Forbes reported in March. 
 
"Thousands of employees of Kraft Foods Group will be working for a new boss whose first job includes determining how many of them he will fire," the Chicago Business Times reported last month.

"The next logical step at Kraft" is job cuts, Bloomberg reported.   "Brazilian billionaire Jorge Paulo Lemann eliminated more than 7,000 positions in 20 months after taking over Heinz with Buffett.   The cuts extended from the management ranks to the factory floor."   

Nationwide, Kraft hasn't just cut jobs; it's closed entire plants.   Oscar Mayer shuttered its bacon factory in Kirksville, Mo last year.   Kraft plants in Bentonville, Arkansas;  Waupaca, Wisconsin;  and Woburn, Massachusetts have also recently closed.

News has also surfaced that Buffett and Lemann may sell Oscar Mayer, leaving the taxpayer-subsidized plant upgrades up in the air.  As IBM has already proved, nothing is certain in the world of government giveaways.  

Through his Brazil-based 3G Capital, Lemann earlier purchased Anheuser-Busch and InBev to form the world's largest beer company; fast food chain Burger King; Tim Horton's of Canada; and Heinz Foods, now known as Heinz Kraft.   

Cost cutting at these Lemann-owned companies earned him a comparison to fictional Wall Street "greed is good" tycoon Gordon Gekko from -- of all places -- a global bank.  

"Deutsche Bank snarkily compared and transposed Warren Buffet and Gordon Gekko in connection with their planned merger of Heinz and Kraft," Forbes reported.   "Deutsche Bank pointed out that after its February 2013 acquisition of Heinz, Heinz closed factories and laid off employees and predicts the same for Kraft."