Hostess asks court to reject union obligations

by Eric Schroeder
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NEW YORK — Hostess Brands, Inc. this week filed a motion in the U.S. Bankruptcy Court for the Southern District of New York asking Judge Robert D. Drain to reject 296 collective bargaining agreements with its union employees, saying it is the only way the company will be able to emerge as a viable company.

“Hostess simply cannot emerge as a viable competitor unless they are relieved of a number of significant financial commitments and arcane work rules imposed by their collective bargaining agreements,” the company noted in the Jan. 25 filing. “To that end, the debtors have made a series of proposals to the (International Brotherhood of Teamsters) and the (Bakery, Confectionery, Tobacco and Grain Workers International Union), seeking labor modifications that are essential to a successful restructuring. Negotiations are ongoing, but to date the parties have been unable to reach agreements.”

In the filing, Hostess indicated it is “fighting for survival” and “losing hundreds of millions of dollars each year.”

The company said its struggles to cope with the challenges are attributed “almost exclusively to an inflated cost structure that has put them at a profound competitive disadvantage. And that is because the biggest component of the debtors’ cost — their obligations under collective bargaining agreements that cover their nearly 15,000 active union employees — has never been meaningfully addressed.” Hostess added there have not been any significant modifications to union pension plan obligations or to the provisions in the collective bargaining agreements.

Responding to Hostess’ filing, the International Brotherhood of Teamsters warned the Irving, Texas-based company “not to misuse the bankruptcy process in an attempt to bully its way to unnecessary operations changes.”

“We are prepared to negotiate in good faith to reach a consensual agreement, as I have said repeatedly,” said Dennis Raymond, chairman of the Teamsters Bakery and Laundry Conference. “But any agreement will be conditioned upon sacrifices by all stakeholders and an overall restructuring to make sure Hostess management doesn’t lead the company into this situation a third time. And if Hostess management thinks it can bully its way to unnecessary changes, they are sadly mistaken.”

Ken Hall, vice-president of the I.B.T., added Hostess’ filing was not unexpected, but it still was disappointing.

“The company has struggled as it pursued misguided strategies under revolving management,” he said. “Meanwhile, Teamster Hostess members have sacrificed greatly over the past seven years. For Hostess to pin the blame on its employees is unconscionable and demonstrates how out of touch management is with its workforce. We will work hard to get a deal. But if a deal proves impossible because executives refuse to listen to reason, we will work equally hard to defend against the motions filed by the company to reject its collective bargaining agreements.”

Hostess has a bankruptcy court hearing scheduled for Jan. 30.

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