Hostess, Teamsters Square Off In Bankruptcy Battle That May Kill Twinkies

Marking the peak of a heated labor dispute, Hostess Brands and the Teamsters union are squaring off in bankruptcy court Tuesday in a case that could decide the iconic company's future.

The union, which represents 7,500 Hostess workers, hasn't reached a contract agreement with the bankrupt maker of Twinkies, Ding Dongs and Wonder bread, saying the company is demanding too much in the way of concessions.

Hostess argues that its pension and labor costs are untenable. A ruling against Hostess in court would force the company back to the bargaining table with the Teamsters. A ruling in favor of Hostess would allow the company to escape its current labor contracts.

"And in that case, we will be on strike," Ken Hall, Teamsters vice president, told The Huffington Post. According to Hall, the union's Hostess workers voted overwhelmingly to authorize a strike. Though he wouldn't put a date on it, he said the strike could happen "very soon." The union recently acknowledged to the court that negotiations were "in crisis."

Hostess CEO Gregory F. Rayburn said in an emailed statement that a strike by either the Teamsters or the workforce's other major union, the Bakery, Confectionery, Tobacco Workers and Grain Millers International Union, would put the company under.

"Hostess will be forced to liquidate if there were a strike by either of its largest unions because its lenders would pull their financing," Rayburn said. "That’s why the company has tried to reach a consensual agreement with its unions that would lower the costs of its union pension and health plans while still providing employees with good, industry standard benefits."

The two sides failed to reach an agreement in advance of the hearing in bankruptcy court in New York, each arguing that the other's proposals were unreasonable. After an offer made by Hostess over the weekend calling for steep pension cuts, the Teamsters made a counter offer with more modest concessions that amount to $150 million annually, including the temporary suspension of pension payments, according to the union. Hostess maintains that the current employee pension plans are too costly and financially unstable.

In a letter to employees Monday, Hostess warned that a strike would cripple the company: "All Hostess Brands operations would shut down and liquidation would begin. The 18,500 jobs, plus the health insurance that comes with them, would be lost for good."

The union's hard stance suggests a degree of frustration among rank-and-file workers. Dow Jones reported earlier this month that Hostess' creditors were concerned that the company may have manipulated executive pay leading up to its Chapter 11 filing, possibly allowing Hostess managers to sidestep compensation requirements under bankruptcy law. The company has denied the creditors' implications.

Joseph Ortuso, a Hostess route salesman and Teamster based in New Jersey, said the news about executive pay was galling, given the talk of the need for shared sacrifice as the company struggles. "They're saying they can't afford to pay pensions when they’ve given [huge] increases to executives," Ortuso, 53, said.

According to Hostess, the raises put in place for executives last year were scrapped, and the company's top four executives have agreed to work for $1 until either the end of this year or when the company emerges from Chapter 11, whichever comes first. The company also says unionized employees have had more generous raises than non-unionized employees during the past three years.

"It is factually incorrect to claim that union employees are the only ones being asked to sacrifice," Rayburn said.

Hall, the Teamsters official, has been critical of Hostess management since the company came out of its last restructuring three years ago. He said the company needs to steer its branding and image toward healthier products to appeal to modern consumers.

"All the other companies have changed with consumers' desires," Hall said. "This company hasn’t. We want to make sure whatever our members are giving up will help make this company profitable."

The company maintains that it, too, would like to invest in branding, marketing and research and development, but can't under its current cost structure.

The bankruptcy judge is expected to make a decision on Hostess' union contracts in several weeks.

Comments

[JOSEPH SWADER]

12:29 AM on 11/17/2012

UNION'S SUCK

[NYCKitty]

01:14 PM on 11/19/2012

You work for $5 an hour and zero benefits and then let us know how badly unions suck.

[trafalgar50]

07:20 PM on 05/08/2012

Hostess should outsource their CEO to India. They will make better decisions over there.

[Jsens3]

07:40 AM on 05/08/2012

It would be good for the public if Hostess shuts down. Their Twinkies and Ding Dongs are egregiously unhealthy snacks that can only contribute to the obesity epidemic.

[Derek Desroches]

11:59 PM on 11/18/2012

your pathetic, bet your an alcohol drinking/ smoker...people like you is whats wrong with the world...telling everyone else whats wrong and what they should do and shouldn't...get a life loser....my grandchild is gonna grow up in a world where everything she does is controlled and never get to enjoy andything cause people like you want to stop everything including religion, fun foods....you live once enjoy it...or not in your case

[EverettHill1]

12:39 PM on 04/20/2012

Here's my insider view of the failed turnaround at Hostess: http://t.co/NGYmc79f

[psuntnylion]

10:05 PM on 05/06/2012

Mr Hill just hit the nail right on the head with his blog. I am an intelligent person and it did not take me long to ascertain the agenda of the current upper level management team ... to put their employees in a position that they could not accept so that the company could be liquidated and the brand name sold to the highest bidder.
I began working for the company just this past October as a route salesman, and I can tell you firsthand that we are forced to put products into stores that absolutely do not sell, and we have trouble getting the items that actually sell. Hostess treats their clientele as if they NEED Hostess, when the opposite is true. Equipment & technology is decades behind the times as well.
I promise that it is a fact that the company WANTS to sell! Either that, or this company is managed by the biggest bunch of morons in history. Those are the only two choices.

[Grrtime]

01:14 PM on 11/15/2012

"I am an intelligent person and it did not take me long to ascertain the agenda of the current upper level management team"

You are?

[epochme]

11:38 PM on 04/19/2012

That "Twinkies" can be sold as food, that's news.

[smmrselysummers]

11:11 AM on 04/19/2012

Would it really be so bad if they went bankrupt? Their snacks are pretty expensive anyway, never mind totally unhealthy in every way.

[Josh Derrick]

06:18 AM on 04/19/2012

Concede or lose your job and be the reason an American company goes under completely. I'm sure the Chinese will have "Twinkys" on US shelves soon thereafter.

[Michael Lindley]

01:54 AM on 04/19/2012

All failures fall at the doorstep of top management. Who eats Twinkies these days?

[Paul Goodson]

01:36 AM on 04/19/2012

Another great example of why we need nationwide healthcare. If this burden had been off the backs of Hostess, we wouldn't be discussing this. As for the Republican argument, if other lesser nations can do it -- then we can to. We may need to make other changes. Like basing Congress and Senate pay on performance much like ourselves. If we did, they would cost us mere pennies on the dollar. This is part of the reason American companies can't compete with China and importers. That, and the fact we can't afford to live on their sweat shop pay.

[French Toast]

01:09 PM on 04/19/2012

Healthcare isn't the reason this is being done. Management consist of corporate raiders. Despite that, nationwide healthcare would actually be healthy for business and a detriment to such raiders as they wouldn't be able to lord it over the heads of the workers as a bargaining chip.

[JDLA]

10:45 PM on 04/18/2012

When the teamsters go on strike and the company liquidates, that will show those managers who is really the boss.
Then they can all meet on the unemployment line.

[French Toast]

10:53 PM on 04/18/2012

When the new company comes in, they're not going to want to have to build a company from scratch. Hiring and training is a huge pain and even with experienced staff elsewhere, it would be untenable to just transplant people who have no idea about the place no matter how well they know another the parent company's prior plants.

The company is headed to liquidation or sale either way. They might as well expedite the process. The competitors and potential buyers are already unionized themselves.

[JDLA]

11:07 PM on 04/18/2012

What makes you think they will buy the existing facilities and operate them? Equipment will be sold off as will the the product trademarks and branding. The buyers then produce whatever brand is salvageable in their own plants.

[MyResponsibility]

10:15 PM on 04/18/2012

Since they emerged from bankruptcy in February 2009:
Sugar +78%
Soybean Oil +70%
Wheat +30%
Diesel +254%

Sure, they are in trouble because of poor management...nothing at all to do with commodity costs or anything like that.  

Union, you go ahead - negotiate your members jobs away. When they liquidate, the new buyer will do so without a contract in place, and no obligation whatsoever to recognize the Teamsters when they hire a new crew.  But, hey, at least you could say you won...for whatever that's worth.

[French Toast]

10:23 PM on 04/18/2012

lol I pwned your last argument so here you are with a new one. I love it.

Corporate raiding is what is going on here. And the rest is as I told you and many others. The competitors are unionized themselves and facing the same "difficulties" in regards to commodities. I hope that nickel per post is worth it, boyo.

[MyResponsibility]

10:40 PM on 04/18/2012

Who are these mysterious competitors, exactly?  The workforce includes unemployed individuals who are itching for a job that a union member is unwilling to do.  The reality is Hostess has 19,000 employees. All but 3,100 are unionized, meaning Hostess has higher pension and medical benefit costs than competitors with non-union work forces.  Not all of their competitors are unionized.

3800 posts in 2 years, $190 at $0.05/post. Right, I get paid for this.  If this helps you somehow live with your arguments, so be it, boyo.

[Master Clean]

10:01 AM on 04/19/2012

The commodity costs have indeed gone up, but remember that the cost for the union employees have gone down since the concessions that were given in the last bankruptcy (by 110 million yr) But the salaries for the corporate executes went up 80%. If they were so concerned about keeping the company afloat, then why did they put that money where it was need instead of their own pockets? Now they want the union to give more, for what? Just remember that no matter what happens, they are walking away with millions! The union has agreed to give %150 mil in additional concessions, but Hostess said that's not good enough. Why should the unions agree to give up even more, when they know the execs will abuse it and prob fold anyway and walk away with our husbands hard earned dollars!!

[MyResponsibility]

10:15 AM on 04/19/2012

The Executive pay is indeed an issue, and is being investigated.  All of those raises have been rolled back already, and a few have already left the company, including its CEO.  None of them will be walking away with millions.  Why should they agree to give up more? It's a choice they must make - Hostess cannot get new financing without the concessions.  Without new financing, they will be forced into liquidation.  Once forced into liquidation, the union pay will go from whatever it is today to zero, and all of their health insurance will be cancelled.  Any buyer at liquidation will do so without the union as part of the acquisition.  As a union member, would you choose zero wage, zero insurance or somewhere in between that and what it is now?

[JustMyOppinion]

09:50 PM on 04/18/2012

The union argument will always exist. The reality is that a company should be managed to see profits while paying middle class workers middle class wages. I bet if one looked closer they will find arogance contributing to the lack of product development a key factor.

It's 2012, who wants a Ding Dong. Ill be happy a pay a buck or two/three more for a well crafted treat since I only allow myself one every week or so.

[climbing panda]

07:28 PM on 04/18/2012

so no company is better than "too much in concessions?"

this mindset is what has always bothered me about unions. that and the fact that it is always the younger workers who get screwed.

[MyResponsibility]

07:12 PM on 04/18/2012

The Teamsters are playing chicken with their member's futures. The Obama administration won't jump into this to bail the union out like the UAW. The bankruptcy trustee will be a tougher nemesis than management.

[French Toast]

09:07 PM on 04/18/2012

No they're not. Under the current corporate raiding management there is no future anyway. The quicker this company get's liquidated, the better. Let a company interested in the long term take care of Hostess.

[MyResponsibility]

10:00 PM on 04/18/2012

Better for whom? Under liquidation the 3000+ union members will be without a job, their pension will suck balls, and any buyer for its operational assets will do so without the union. woohoo! This is a union win? Its a tragedy for thousands of people.

[wonderman1]

06:04 PM on 04/18/2012

I am not in the union but I work as a floor supervisor at a plant and have not seen a raise since before the first bankrupcy, this is year 6 and counting. Because of this, my union employees that work for me make a lot more than I do. Not to mention working over 50 hours every week. It breaks my will to work for a company that doesn't care about any of their "blue collar" employess. I loved this company when I first came here 15 years ago and now it just seems like the top executives are just worried about themselves and are ready to let this iconic brand go to the highest bidder.

[Master Clean]

09:47 AM on 04/19/2012

My husband started working as a route sales driver 3 years ago (union position). He has not had a raise either. The other drivers have not had a raise since the last bankrupcy either. They gave up a portion of their base pay as well as other concessions. My husband works 65-70 hrs week and does not make nearly enough as someone would think considering how much time he puts in. We feel your pain! Executives want all the employees to work for near minimum wage, hustling the product so THEY can give themselves huge bonuses to bring home to their families!! It has been a PROVEN FACT that over the years the employees have to give up a portion of their pay to make the company "viable", but the execs make SUBSTANTIALLY more each year.

[Billie Kinzer Rapczynski]

12:45 PM on 05/06/2012

As another wife of a route sales driver, I agree with you 100%. My husband is still struggling to make the same bring home pay now that he was making 20+ years ago. His route has gotten longer, company doesn't care how many hours a day he has to spend on the road, and company often doesn't provide the right products ordered or forces him to take products to his stores that he KNOWS won't sell. Company invests in computerized ordering/tracking devices that don't have enough information to make correct judgments about ordering. It is called demographics! My husband knows what sells in his stores and his customers, but can't order as he sees fit. Then he gets in trouble if his stale percentage goes up. Basics need to be covered, like allowing the route SALES driver to control what he puts on the market. Less product waste, lower stale count, higher sales. Sounds like a way to start to increase the profit. And don't get me started on how old the trucks and other equipment are. My husband is driving a 1982 truck, and it is one of the better ones in his depot. A couple of motor mounts are broken and he can't close one window, but hey, the windshield wipers work. Only one mechanic to serve two counties. That's what's going on at Hostess/Wonder. I WONDER if Mr. Rayburn would work under those conditions?