Hostess Brands labor dispute could lead to liquidation


Ailing Twinkies maker Hostess Brands Inc. is going toe-to-toe with its workers’ unions in a courtroom clash that the company said may lead to its liquidation.

Hostess is trying to persuade a federal bankruptcy judge in New York to allow it to reject existing collective bargaining agreements with the Teamsters and bakers’ unions.

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

The court proceeding on the collective bargaining issue began Tuesday and is expected to last two days.

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 company to implement its plans anyway.

But the unions have threatened to strike if Hostess’ request is granted. 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 that ended July 2.

“Hostess is not proposing these changes lightly,” the company wrote in a note 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 as high as 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.”