Hostess Brands battles labor unions in bankruptcy court

Hostess Brands, which makes Twinkies, is asking a federal bankruptcy court to throw out union contracts for its workers, a move that would prompt union members to strike. Hostess Brands filed for bankruptcy protection earlier this year.

Paul Sakuma/AP/File
Hostess Twinkies on display at a grocery store in Santa Clara, Calif., in this January file photo. Hostess Brands is asking a bankruptcy judge to throw out existing agreements with labor unions, which could prompt workers to strike.

A union official representing workers at Hostess Brands Inc. said Monday that he isn't optimistic the two sides will come to an agreement over workers' contracts before the dispute lands in bankruptcy court.

Hostess has said it will ask the court this week to toss out its existing union contracts if its workers don't accept cost-cutting proposals in its "final" offer. The company filed for bankruptcy protection in January, citing rising competition and pension and medical costs.

Ken Hall, general secretary-treasurer of the Teamsters union, says his union's members will walk off the job if the court throws out the contracts. CEO Greg Rayburn says a strike will force the company to shut down and liquidate.

The unions sent Rayburn a counteroffer Sunday night.

"I don't think we'll hear back," Hall said.

A representative for Hostess, which makes Twinkies, Wonder Bread, Ding Dongs and other popular snacks, said in a statement that the changes proposed by the union would not be enough for the company to attract the financing it needs to exit Chapter 11. As part of its turnaround plan, Hostess wants to raise at least $400 million from current lenders or new investors or by selling its brands.

The privately held company's contract offer this weekend included reduced pension benefits, work rule changes to lower costs and outsourcing some delivery work.

The Teamsters said its counter offer includes $150 million in concessions a year, including the suspension of pension contributions until next summer. The reductions would be in addition to $110 million in concessions the union made about three years ago. The union also said it wants controls put in place to ensure the company doesn't "squander concessions."

The comment was in part a reference to the revelations this month that 11 Hostess executives were given pay hikes of up to 80 percent last summer. Last week, Hostess said eight of those executives had agreed to sharp salary cuts. Three others, including former CEO Brian Driscoll — have left the company.

Hostess's bankruptcy filing came just three years after its predecessor, Interstate Bakeries, emerged from bankruptcy proceedings.

Hostess, based in Irving, Texas, has 19,000 employees. All but 3,100 are unionized, meaning the company has higher pension and medical benefit costs than competitors with non-union workforces.

The Teamsters represent 7,500 Hostess workers. The union says it has been working closely with the Bakery, Confectionary, Tobacco Workers and Grain Millers International Union, which represents more than 6,000 Hostess workers. A lawyer for the bakery workers union could not immediately be reached.

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