Hostess says liquidation possible as labor fight continues
By James O'Toole @jtotooleNovember 12, 2012: 6:17 PM ET
NEW YORK (CNNMoney)
Twinkie-maker Hostess Brands said Monday that it could go into liquidation if its bakers continue striking in protest against a new contract imposed in bankruptcy court.
The company announced Monday that it was closing bakeries in Seattle, St. Louis and Cincinnati in response to the strike, cutting 627 jobs in total. The bakers' strike, which began last week, continued Monday at around 24 of Hostess' 36 plants, and Hostess CEO Greg Rayburn said the firm could close more bakeries or even move into liquidation if workers don't return to their jobs soon.
"This is a situation that needs to be resolved in days and not weeks, so it's really going to hinge on whether the bakers who are striking decide to come back to work," Rayburn said.
The bakers' union represents roughly 5,600 of the 18,500 workers at Hostess, according to Rayburn. He did not have an estimate for the number of workers on strike, but claimed that some had crossed picket lines to keep certain plants operational.
In September, one of its major unions, the International Brotherhood of Teamsters, voted narrowly to accept a new contract with reduced wages and benefits. The bakers' union rejected the deal, however, prompting Hostess management to secure permission from the bankruptcy court to force the new contract on workers.
The Teamsters said Sunday that the bakers' union had not informed them about the strike in advance, adding that they did not know the extent of the action. A spokesman declined additional comment on Monday.
"If Hostess emerges from bankruptcy under its present plan, it will still have too much debt, too high costs and not enough access to cash to stay in business for the long term," the union says in a fact sheet on its website. A union representative did not respond to requests for comment Monday.
Despite these complaints, Rayburn said Hostess would not engage in further negotiations.
The new contract cuts salaries across the company by 8% in the first year of the five-year agreement. Salaries then bump up 3% in the next three years and 1% in the final year.
Hostess has also reduced its pension obligations and its contribution to the employees' health care plan. In exchange, the company offered concessions including a 25% equity stake for workers and the inclusion of two union representatives on an eight-member board of directors.