April 23, 2012
By: John Clark
A dispute between union officials and the management of Hostess Brands Inc. over employee compensation is likely to be settled in front of a bankruptcy trustee, according to a recent report from the South Bend Tribune.
Sources indicate that a union leader who represents employees of the pastry manufacturer recently expressed pessimism that the two sides would be able to come to an agreement without the aid of a bankruptcy court.
In January of this year, Hostess filed for bankruptcy protection after increased competition and altered American eating habits took a big chunk out of the company’s revenues and left it wallowing in debt.
One of the primary concerns for the iconic brand is its own internal costs, which must be reduced if the company is to survive, according to Hostess officials. One of the most painful cost-cutting measures will be a reduction in employee pensions and medical benefits.
However, the union representing the company’s workers says that the employees will go on strike if the bankruptcy court determines that Hostess can throw out its current labor contracts.
Many companies try to reduce their labor costs in bankruptcy court, and some succeed, but they must usually be able to prove that such measures are absolutely necessary for the company’s survival.
In response to the threat to strike, the CEO of Hostess, Greg Rayburn, claims that the company would have to close its doors and sell off all its assets if its workers walked off the job.
The stakes are high for this labor dispute because the Texas-based company has more than 19,000 employees, 16,000 of whom are members of the union. Hostess officials say that union workers have higher pension and medical costs than workers at competing companies who are not unionized.
Of course, reducing its obligations to its employees is not the only method of debt relief Hostess is pursuing. The company is also looking to raise at least $400 million by selling some of its iconic brands, like Twinkies, Wonder Bread, and Ding Dongs, to new investors.
If the company is unable to resolve its debt crisis, Americans may soon have to turn to other brands to satisfy their sugar cravings.
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