In Kraft-Heinz Deal, Will Chicago or Pittsburgh Lose More Jobs?

By James R. Hagerty

PITTSBURGH--H.J. Heinz Co. and Kraft Foods Group said their merger will create a new company "co-headquartered in Pittsburgh and the Chicago area." That fuzzy concept will leave people in both places nervous.

In Pittsburgh--where the Heinz name is stamped on a music hall, a history museum, a college, a chapel and the Steelers' football stadium--the ketchup company has been shrinking its local employment for decades. After 3G Capital Partners LP of Brazil took over Heinz in 2013, the new owners eliminated about 350 office jobs in Pittsburgh, leaving around 800 employees here today, mostly in a glass-walled tower named after another local company, paint maker PPG Industries Inc.

3G executives on Tuesday wouldn't discuss whether they plan any layoffs, but the deal is likely to lead to a tussle for jobs between Pittsburgh and the Chicago suburb of Northfield, Ill., where Kraft is located. Kraft had some 2,300 employees in Northfield as of last April, according to the local government's annual report.

Chicago has the advantages of a more central location and far better airport connections. Greater Chicago is already home to a number of other major food and agriculture companies, including McDonald's Corp. and Kraft's corporate cousin Mondelez International Inc. Grain-trading giant Archer Daniels Midland Co. last year moved its headquarters to Chicago from a more remote part of Illinois to give top executives a more cosmopolitan and accessible hub.

Chicago's two airports, O'Hare International and Midway, together serve 216 cities with more than 1,400 flights a day. That includes nonstop service to much of Europe, Asia, the Middle East and Brazil, where 3G Capital has its headquarters. Pittsburgh International Airport, whose traffic has dwindled in recent years after it lost its role as a regional hub, serves 35 cities with about 150 flights a day, according to flight-data firm Innovata, including just one international destination: Toronto.

Pittsburgh has the edge on housing costs, which affect the salaries needed to keep and retain employees. The median home price in the Pittsburgh metro area is $125,000, compared with $183,000 in the Chicago area, according to Zillow Group Inc.

Executives of the two companies said that certain functions will move to Chicago and others to Pittsburgh. Responsibility for various segments and brands are to remain in their current cities.

Headquarters sometimes shift gradually from one city to another. In 1999, Alcoa Inc. began leasing space for some of its top executives on Park Avenue in New York. Initially, Alcoa representatives insisted that the headquarters would remain in Pittsburgh, though the CEO and some other officers would spend much of their time in Manhattan. In 2006, the company quietly amended its bylaws, designating New York as the head office.

European Aeronautic Defence & Space Co., the former parent company of plane maker Airbus, for years had dual headquarters in Munich and Paris, appeasing political masters in Germany and France. In 2012, the parent company announced plans to scrap those two head offices and shift the headquarters to Toulouse, France.

Other geographical compromises persist. Unilever Group was created by the 1930 merger of a Dutch food maker and British soap maker. The maker of Dove soap and Lipton tea still has two head offices, one in London and one in Rotterdam, and a complicated structure involving separate shares for Unilever PLC and Unilever NV.

After Wednesday's announcement, local politicians in Pittsburgh and Illinois were scrambling for information.

Pittsburgh Mayor Bill Peduto pronounced himself "cautiously optimistic" about the merger. He saw the potential for the combined company to need even more employees in Pittsburgh and said government-funded financial incentives could be available if a major expansion is in prospect. Mr. Peduto conceded that Chicago has far better airline connections. Air service is "not one of our top draws but not a reason to choose to go elsewhere," he said.

Illinois State Sen. Daniel Biss, whose district includes Northfield, said he received an email at 3:40 a.m. on Wednesday from Kraft informing him of the merger plan but didn't yet know the implications for employment. He was skeptical about the wisdom of offering taxpayer-funded incentives to keep headquarters jobs: "We've tried to move away from that practice in Illinois."

Pittsburgh is accustomed to losing corporate headquarters through mergers or management reorganizations. Among those lost over the past three decades are Alcoa, Westinghouse Electric, Mellon Bank and Gulf Oil--though the current incarnations of all those companies but Gulf remain big employers in Pittsburgh.

Heinz Field, the football stadium near the point where the Allegheny and Monongahela rivers flow into the Ohio River, will keep its current name, the companies said. One consolation for Kraft: The stadium's seats already are a bright yellow matching the food maker's Velveeta cheese loaf.

Write to James R. Hagerty at bob.hagerty@wsj.com

Access Investor Kit for Alcoa, Inc.

Visit http://www.companyspotlight.com/partner?cp_code=P479&isin=US0138171014

Access Investor Kit for Berkshire Hathaway, Inc.

Visit http://www.companyspotlight.com/partner?cp_code=P479&isin=US0846701086

Access Investor Kit for Berkshire Hathaway, Inc.

Visit http://www.companyspotlight.com/partner?cp_code=P479&isin=US0846707026

Access Investor Kit for McDonald's Corp.

Visit http://www.companyspotlight.com/partner?cp_code=P479&isin=US5801351017

Access Investor Kit for Mondelez International, Inc.

Visit http://www.companyspotlight.com/partner?cp_code=P479&isin=US6092071058

Access Investor Kit for PPG Industries, Inc.