Hostess Ask Unions to Make ‘Deep’ Concessions amid Bankruptcy

Hostess Brands Inc. has sent a letter to members of the company’s largest union, asking them to consider a new contract, which calls for wage and commission cuts, and would allow the company to emerge from Chapter 11 bankruptcy.  The five-year contract asks all employees including management to accept an 8 percent wage cut in the first year. If accepted the contract would only allow for a 3 percent pay raise in the second year and another percentage point in the fifth year.

CEO Gregory Rayburn says the pay cuts will allow Hostess to reduce their operating costs and help them attract financing while they restructure through Chapter 11. This is actually the second time Hostess has gone through Chapter 11 debt-reorganization process, often referred to as Chapter 22.

In the letter, Rayburn said, “As with all negotiations, none of the parties got everything they wanted. Some of the concessions are deep, but they are shared by everyone – union members, non-union members and all management.”

The International Brotherhood of Teamsters, which represents 8,000 union members, had no comment about the offer beyond what they said last week, when they stated rejecting the offer could cost the employees their jobs.

Hostess is also considering selling Merita bread and bakery services to help it get through the bankruptcy process.

Regardless of whether a business or individual declare bankruptcy, the filer must make sacrifices. With the sage advice of a bankruptcy attorney those required sacrifices can be negated, and the filer can emerge from bankruptcy in a timely fashion with an improved financial situation.