UPDATE - Hershey Foods Ponders Lawsuit over Computer-Linked Losses

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Title: Hershey Foods Ponders Lawsuit over Computer-Linked Losses Source: Knight Ridder/Tribune Business News Publication date: 2000-04-26

Apr. 26--Hershey Foods Corp. says it may try to recover some of the millions of dollars it lost as a result of computer-related distribution and order-tracking glitches last year.

At its annual stockholders meeting Tuesday, the nation's biggest candymaker addressed the computer problem after a shareholder asked if the company was considering litigation to recoup some of the losses, estimated at more than $120 million.

"We are thinking about that and considering what to do," said Kenneth L. Wolfe, chairman and chief executive officer.

He said the company on Monday completed a two-month investigation of the causes of the computer problems and handed the report to the board of directors, which is reviewing the matter.

After the meeting, Wolfe said Hershey Foods is still trying to tabulate losses attributed to installation of the $112 million combination of software programs, which were designed to help the company streamline orders and track them more accurately.

The tracking software, provided by SAP AG of Walldorf, Germany, and two other companies, appears to be working well now. But problems associated with the final stage of implementation last July resulted in delayed and incomplete shipments to retailers for the busy back-to-school and Halloween sales seasons.

Orders that normally took five days to fill were not delivered for 12 or more days during the peak of the crisis, forcing such big retailers as Wal-Mart and Kmart to stock their shelves with more candies made by Hershey's competitors.

Bill Wohl, director of public relations for SAP America in Newtown Square, said he is unaware of what the Hershey investigation found and refused to comment on speculation about litigation.

Hershey Foods has said the computer system was more complex and difficult for employees to master than anticipated.

"No doubt the learning curve was steep and regrettably costly," said Michael F. Pasquale, Hershey Food's executive vice president and chief operating officer.

Wolfe noted that the company did not use the "so-called big-bang approach" in starting to use the new computer system.

The system was installed in Canada in April 1998, Wolfe said, and installation of the U.S. system began in January 1999. He said difficulties first arose in July, when Hershey Foods went on line with the final phase.

Shareholders interviewed before and after the meeting agreed that the company has rebounded.

"It's a good, stable company, and I was certainly not panicked" when the stock tumbled last fall, said Sandy May, a Derry Twp. resident with 560 Hershey shares. "I think some heads will roll because of it."

Hershey stock, which closed Tuesday unchanged at $49.12[1/2] a share, traded at a 3 1/2 -year low of $37.75 on Jan. 28.

"I see them recovering," said shareholder Ernest Garbarino of Frackville, who attended the meeting with his wife, Tecla. They bought additional shares when the stock plunged last year and now hold 100 shares.

John and Joanne Hudock, who hold 1,500 shares and plan to buy more for their grandchildren, said they are confident in their investment. "The past year was a bit touchy," said John Hudock of Greensburg. "But if you look at any company, it's going to have its ups and downs."

"I see them recovering," his wife added.

(c) 2000, The Patriot-News, Harrisburg, Pa. Distributed by



-- (Dee360Degree@aol.com), April 28, 2000


the litigation-happy boys are now out in force, I see. I expect a lot more of this.

-- Uncle Fred (dogboy45@bigfoot.com), April 29, 2000.

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