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Hostess: Our chances of exiting Chapter 11 will ‘evaporate’ if union members strike

3 commentsBy Elaine WATSON , 25-Oct-2012
Last updated on 25-Oct-2012 at 14:44 GMT

Twinkies-maker Hostess Brands says it hopes it will be able to exit Chapter 11 in a few months, but has warned employees in the Bakery, Confectionery, Tobacco Workers and Grain Millers International Union (BCTGM) that strike action will force it to liquidate the company.

Hostess - which recently got approval from the bankruptcy court to force members of the BCTGM to accept a collective bargaining agreement they had overwhelmingly rejected - says union members have the right to strike, but that by doing so they will jeopardize the future of the company.

In a letter to employees, chief executive Gregory Rayburn said the likelihood of making it out of Chapter 11 would “evaporate” if the BCTGM-represented employees strike.

I am asking everyone to make the only rational choice

Gregory Rayburn joined Hostess in February, 2012 to oversee its reorganization under Chapter 11

If there is a strike, he said, “Plants, depots and retail stores will be closed almost immediately; except for a small team to close and prepare the facilities for sale, all employees will be terminated.

“Terminated employees will no longer receive paychecks or health and welfare benefits after their date of termination, and they may not be eligible immediately for unemployment benefits; some of our facilities may close forever; purchasers of our brands may well decide to make them in their own facilities; local markets will suddenly be flooded with former Hostess employees competing for jobs.”

He added: “I am asking everyone… to make the only rational choice: stay on the job and join your co-workers to try to save Hostess. If you want to leave, please do so without forcing your colleagues to lose their jobs. At this point, the choice is truly yours.”

The re-organization plan does not involve layoffs

A spokesman told FoodNavigator-USA that the disclosure statement filed with the re-organization plan earlier this month would be reviewed on November 29.

This included information on labor agreements, the treatment of claims and interests
and the business plan, he said.

The five-year collective bargaining agreement that has been approved by the Teamsters and other unions representing Hostess employees, is being phased in “on a rolling basis” over 40 days, he said.

While the company’s contribution to health plans and pension schemes will drop significantly under the deal, and wages will immediately drop 8% for everyone in year one, pay will rise again gradually over the next four years.

Meanwhile, union members also stand to get a 25% equity stake in the company, two seats on the board and one seat on the executive compensation committee if the firm emerges from Chapter 11, he said.

Asked about possible layoffs, he said: “The re-organization plan does not involve layoffs. What we have said is that we need to need to sell some assets and we have been clear from the start that the first choice will be to sell the Merita brand [which is produced from five bakeries in the south east].”

It would be up to the new owner to decide which Merita employees to retain, he said.

No white knight

Hostess filed for Chapter 11 bankruptcy protection in mid-January, citing pension and medical benefit obligations, restrictive work rules and tough trading conditions, and has been pursuing new collective bargaining agreements with union employees ever since.

While the Teamsters union, which represents several thousand Hostess’ employees, accepted the company’s latest collective bargaining offer, the BCTGM rejected it by a 92% margin, dismissing it as “outrageously unfair”.

But Hostess said it was not willing to put another offer on the table and filed a motion with the bankruptcy court in White Plains, New York, to impose the same changes ratified by the Teamsters on employees represented by the BCTGM.

One of the key elements of the trial was whether a third party had made an eleventh hour offer to acquire the entire company.

However, no 'white knight' had emerged, it said. "There are no viable bidders waiting to purchase the entire company.”

Texas-based Hostess Brands employs about 18,500 employees and operates 36 bakeries, 565 distribution centers and 570 bakery outlet stores in the US.

The BCTGM represents 6,600 Hostess employees and is Hostess's second largest union behind the Teamsters.

The union did not respond to requests for comment.

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3 comments (Comments are now closed)

Management AND Unions

Hard to even imagine this, but BOTH of the comments previously posted are correct.

For years Hostess Brands has been managed by a group who's biggest talent seems to be mismanagement. Every major decision made for the past 10 years has come back to bite us back hard. I am a route driver in the NYC area and can only tell you what I see. I see upper management making decisions and not allowing middle management any flexibility to take advantage of their particular markets. The running joke when one of these "brainstorms" comes down is "If it made sense, we'd all be confused". Most major market decisions seem to be geared towards the bigger chains, while the bulk of our business..... the independent markets and grocery stores, are largely ignored.

But even putting this aside for now, Upper management did the unthinkable last year. Last July (2011) Hostess Brands stopped all contributions to all pension plans claiming this was a temporary emergency measure to keep the company running. 6 months later the company filed for bankruptcy. Only then did it come out that upper management used this money to give the top 10 managers raises of up to 300%. As an employee of over 25 years coming close to retirement age, I feel totally betrayed and outraged. I feel there should be criminal charges involved here, but somehow as shady as this is, it's all legal. Greed in it's purest form, but perfectly legal.

Now to address union workers. The comment posted by Abe is very unfair to MOST union workers. As in any business, in any given group you will find different types of people. Some will go beyond what is considered to be their "job" for various reasons... including higher pay or because it's the right thing to do. Others will do just what is required and no more. My problem is with the next group. The ones who will do whatever they want and cause problems for all. To me it's amazing the union is obligated to protect even these workers, who to me are more like a cancer. With union protections, it almost takes an act of Congress to dismiss an employee unless they are caught red handed stealing. These are the workers I feel Abe saw at whatever workplace he worked at. They are usually the most noticeable employees.

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Posted by A concerned Employee
12 November 2012 | 03h05

Management

I'm so tired of everyone blaming unions for companies mismanaging the company. When we people understand the contract negotiation process? Everyone sits down and talks about what they want from the other side,In the end all parties sign the contract! Then the company has trouble with management or mismanagement i should say and everyone blames the union??? sorry people look at the facts, the union doesn't run the company!!! To top it off U have Judges who endorse restructuring plans and they haven't even seen the proposal??? this is what's wrong not Unions! Wake Up People! Unions are still necessary to protect workers from corrupt companies and Judges!

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Posted by Shawn M. Flannery
09 November 2012 | 20h49

Unions

Once upon a time unions were necessary. Times have changed; when a business suffers from the outrageous salaries, benefits, and protection granted to less than adequated employees its time to liquidate and close your doors rather than to allow the union to control your business. I've worked in union facilities and have to say the employees were the laziest, selfish, most negative group of people I ever encountered ever... Pull the plug let them try to replace their salaries. I can't be done.

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Posted by Abe Gley
26 October 2012 | 17h12

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