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Ding Dong, the Twinkie is dead? Maybe, in Hostess' union spat

April 17, 2012|By Tiffany Hsu
  • A bankruptcy-related spat with its unions may cause Hostess to liquidate, threatening the future of its Twinkies brand.
A bankruptcy-related spat with its unions may cause Hostess to liquidate,… (PRNewsFoto / Interstate…)

Bankrupt Twinkie-maker Hostess  Brands Inc. is going toe-to-toe with its workers’ union in a clash that the company said may lead to its own liquidation.

A two-day trial began Tuesday in which Hostess will try to convince a federal bankruptcy judge in New York to allow it to reject its existing collective bargaining agreements with the Teamsters and bakers’ unions.

The Ho Hos, Ding Dongs and Wonder Bread maker filed for Chapter 11 protection in January, less than five years after emerging from its last bout of bankruptcy. Its “unsustainable and uncompetitive cost structure” -- which included high expenses related to labor, infrastructure and corporate overhead -- was largely to blame, the company said.

The unions have rejected the company’s final cost-cutting proposal, which would lower pension benefits for the organizations’ members, tighten work rules and outsource some delivery work. Hostess is hoping that the judge, who is expected to rule in mid-May, will allow the Texas company to implement its plans anyway.

But if Hostess’ request is granted, the unions have threatened to strike. The company said such an action would immediately force it to liquidate, causing its brands and its 18,500 jobs to disappear.

Hostess lost $341 million in its fiscal 2011, with an operating profit margin of negative 1%, compared to rates of nearly 16% at the combined Sara Lee-Grupo Bimbo entity.

“Hostess is not proposing these changes lightly,” the company wrote in a fact sheet distributed to employees. “But there is no getting around the fact that the Company has to make some fundamental changes in order to survive, compete and grow.”

On Sunday, the Teamsters counter-offered with what it said was a more equal application of pain across executives, stakeholders and employees. The union accused the company of “years of failed management initiatives,” including raises of up to 240% for executives prior to bankruptcy.

“The looting and the games being played by Hostess executives give me zero confidence that they want to join us in saving this company,” Ken Hall, the Teamsters’ general secretary-treasurer, said in a statement. “It doesn’t get more American than Twinkies, yet Twinkies will be no more unless the company gets serious.”

What on earth will county fairs deep-fry then?

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