Hostess Brands on the Brink

“When Hostess filed with the bankruptcy court, the company disclosed that its biggest unsecured creditor is the Bakery & Confectionary Union & Industry International Pension Fund… Thus, Hostess workers likely face not only a loss of their jobs, but their pensions as well, if the company goes under.”

Few things are sadder than the triumph of ideology over reality. Yet it appears that the bakers union at Hostess Brands, an iconic company best known for such products as Wonder Bread and Twinkies, prefers running the company completely into the ground, rather than accept the necessary cuts in employees’ pay, health and pension plans that would keep it afloat. On Monday, another dose of reality was added to the mix: Chief Executive Gregory Rayburn announced that Hostess would be shutting down plants in Seattle, St. Louis and Cincinnati — permanently. Six-hundred twenty-seven jobs will be lost permanently. “Our customers will not be affected because we will continue to serve them from other Hostess Brands bakeries,” said Rayburn in a press release. “We deeply regret this decision, but…we will close the entire company if widespread strikes cripple our business.”

The unions apparently can’t read the writing on the wall. Hostess filed for Chapter 11 bankruptcy in January 2012 for the second time since 2004. The company cited the high cost of pensions and outstanding debt as the reasons for that filing. In October, the company filed a plan with the federal bankruptcy court in New York. It called for an 8 percent cut to employees’ wages, a reduction in health benefits, and a freeze in pension plan payments for over two years. In return, unionized employees would get a 25 percent equity stake in the company, two seats on its board of directors, and an interest-bearing note worth $100 million. The 8 percent wage cut was part of a five-year deal that included a 3 percent wage increase in the next three years and a 1 percent raise in the final year.


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