HARRISBURG, Pa. (AP) - The Hershey Co., the leading U.S. candy maker, said Monday that it will shut down a plant in Reading and cut 260 jobs as part of a wider move to cut labor and materials costs.

The closing is the company's second plant-closing announcement in a little over two months after Hershey said it would take dramatic steps to reduce its North American manufacturing and expand in faster-growing markets in the developing world.

''Our network operates at less than half of capacity and we must make significant changes to remain competitive,'' Hershey spokesman Kirk Saville said.

Saville said the company would work out severance agreements with the unionized workers and close the plant in 2008.

In February, Hershey announced that it plans to eliminate 1,500 jobs and one-third of its existing production lines over the next three years.

It plans to build a new plant in Monterrey, Mexico, and shift more manufacturing to contractors in the U.S., and has struck agreements with Indian and South Korean companies to make and distribute its products in Asia.

The proportion of Hershey's manufacturing in the U.S. and Canada will shrink, from 94 percent now to 80 percent by 2010, the company has said.

In recent weeks, Hershey has said it will cut up to 900 of the 3,000 workers from three plants in its hometown and close a plant in Smiths Falls, Ontario, affecting more than 500 workers.

Last week, Hershey's chief operating officer, David J. West, told shareholders at the company's annual meeting that Hershey, over time, has accumulated a fleet of plants that are too inflexible or redundant as the company seeks to change its product platforms.

Hershey originally purchased the Reading plant from the Dietrich Corp. in 1987 and brought aboard the Luden's cough drop brand and the 5th Avenue chocolate bar.

The plant also makes York Peppermint Patties, Reese's crispy crunch bars and Jolly Rancher products. The plant is about 40 miles east of the company headquarters in the town named for the chocolate magnate, Milton S. Hershey.