News Column

Hostess Walkouts Threaten Company's Future

Nov 12, 2012

Diane Stafford


Hostess Brands said it is permanently closing three bakeries nationally in response to a bakery workers' strike and may decide to liquidate the entire bankrupt company.

The company reacted quickly to a walkout that began Friday at the Hostess bread plant in Lenexa and spread to two-thirds of its bread and cake plants nationally.

Employees struck in protest of a unilaterally imposed contract that the union called "horrendous."

More than 200 members of the the Bakery, Confectionery, Tobacco Workers and Grain Millers International Union in Lenexa began a walkout Friday at the end of their shifts, the local said.

The strike spread over the weekend to thousands of workers at about two-thirds of Hostess's 36 bakeries throughout the country.

The actions may pinch the supply of Hostess snack cakes and Wonder bread in some areas. Of greater impact is that company officials said Monday they will close bakeries in St. Louis, Cincinnati and Seattle that employ a total of 627 workers.

Hostess Brands chief executive Gregory F. Rayburn said the Irving, Texas-based company regrets the decision, "but we have repeatedly explained that we will close facilities that are no longer able to produce and deliver products because of a work stoppage -- and that we will close the entire company if widespread strikes cripple our business."

The bakery workers' union said the contract would cut wages and benefits by 27 percent to 32 percent, including the immediate 8 percent wage cut.

Hostess, which makes Twinkies, Wonder Bread and Ding Dongs, filed for Chapter 11 protection in January. That was its second bankruptcy petition; the first was in 2004. In reorganization, the company has closed 21 plants and eliminated thousands of jobs.

For many years, the company was headquartered in Kansas City and known as Interstate Bakeries. It relocated to Texas in 2009.

In the latest bankruptcy filing, Hostess listed assets of $982 million against liabilities totaling $1.43 billion.

The Teamsters Union, which represents truck drivers at the bakeries, told its members who encounter bakery picket lines to contact their local unions for instruction about whether to cross the bakery workers' lines to deliver Hostess products.

"Any decision for the Union to sanction or honor a picket line would have to be in compliance with local contracts," the national Teamsters organization said. Teamster officers at Local 955 in Kansas City were not available Monday for comment.

About 7,500 Teamsters work for Hostess Brands nationally. That union narrowly approved an 8 percent wage cut and a 17 percent cut in benefits in September.

A U.S. Bankruptcy Court in White Plains, N.Y., imposed those concessions on some members of the bakery workers' union, who voted down the contract.

The bakery union walkouts that began Friday and continued over the weekend came because the company was imposing a "horrendous" contract that would cut wages and benefits by 27 percent to 32 percent, including the immediate 8 percent wage cut, the union said.

Union officials said the company stopped contributing to the workers' pensions last year, and 92 percent of union members voted to reject the contract in September. A bankruptcy court judge allowed the company to force the union to accept the new collective bargaining agreement.

"Hostess Brands is making a mockery of the labor relations system that has been in place for nearly 100 years," said Frank Hurt, international president of the union.

Hostess said in a prepared statement that "a widespread strike will cause Hostess Brands to liquidate if we are unable to produce or deliver products. If that's the case, the company will move promptly to lay off most of its 18,300-member workforce and focus on selling its assets to the highest bidders."

The company statement said that "we know the concessions are tough, but it would make more sense for unhappy employees to simply leave the company voluntarily than to strike and cause the company to close down, forcing everyone to lose their jobs."

About 64 percent of the Hostess Brands workforce are nonunion or work for other unions than the bakery union, the company said. About 5,680 employees are represented by the bakery union.

The union responded that "striking members know that the Wall Street investors currently in control of the company have no intention of building a world class wholesale bread and cake company. They will simply take the money from the workers' severe concessions and sale of assets, pay themselves and then liquidate the company."

Mike Hummel, a union member who works at the Lenexa plant, said that because of the union's concessions his pay has plummeted from a peak of $48,000 to $34,000 last year and an expected $30,000 this year.

Hummel said workers think the company needs a better plan to improve their marketing and efficiency and that the concessions from workers don't come close to making up for its operating losses last year.

A turnaround won't work, Hummel said, if it's just "off the backs of their workers who make the least...They've just about made the job unworthy of saving. They're radically changing our lives. Why shouldn't we fight back?"

Rayburn, the Hostess CEO, said the bakery union is "sacrificing" workers.

"Te bakery industry already has far too much capacity, and there is a strong risk that many of our facilities may never operate as bakeries again once they are closed," Rayburn said.

The Lenexa plant had been running three shifts a day on its bread line and two shifts a day on its bun line. It had been sending about 40 transport truckloads a day from the plant to retail food stores in the bakery industry already has far too much capacity, and there is a strong risk that many of our facilities may never operate as bakeries again once they are closed.

Source: (c)2012 The Kansas City Star (Kansas City, Mo.). Distributed by MCT Information Services.

Story Tools Facebook Linkedin Twitter RSS Feed Email Alerts & Newsletters