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Working In These Times

Tuesday, Jan 31, 2012, 4:08 pm

Hostess, Bankrupt Maker of Twinkies and Wonder Bread, Pushes Major Concessions on Unions

BY Bruce Vail

A Wonder Bread truck in 2004, shortly after Hostess—then named Interstate Bakeries—filed for bankruptcy.   (Justin Sullivan/Getty Images)

In a move unnoticed by almost everyone, this month the corporate owner of Twinkies and Wonder Bread moved decisively to put the labor rights of thousands of its workers on trial.

A federal judge has scheduled a trial for March 5 to decide whether the managers of Hostess Brands have the right to unilaterally cancel labor contracts for some 15,000 union members working for the company, according to documents filed with the U.S. Bankruptcy Court for the Southern District of New York.

The primary targets in the trial are the Teamsters members who drive the Hostess trucks, and the bakery workers who produce the breads, cakes and snacks that have made the company famous. Currently, Hostess operates 36 industrial bakeries and hundreds of outlet stores in locations spread across 49 states.

In a statement to In These Times, Hostess spokesman Erik Halvorson all but admitted that scheduling the trial was a pressure tactic to force the unions into concessions now. The company is “committed to reaching a consensual agreement with its unions,” he said, and its courtroom maneuvers “are specifically designed to encourage good-faith negotiations so that we can reach that goal – and that’s what we continue to pursue.”

Hostess filed for bankruptcy on January 11, and it was immediately obvious that unions were in the crosshairs. Company officials blamed high labor costs for the company’s troubles, and union pension funds were listed in four of the five top spots as Hostess’ biggest unsecured creditors.

Targeting the pension funds clearly infuriates Frank Hurt, president of the Bakery, Confectionery, Tobacco Workers and Grain Millers union (BCTGM).

“I find it deeply offensive and highly disingenuous for the company to claim that its financial woes are the result of its union contracts and pension and health benefits obligations. We contend that the company is in dire financial shape because of a string of failed business decisions made by a series of ineffective executives who have been running the company for the past decade,” the union leader declared.

Hurt’s anger was justified. As revealed in the extensive bankruptcy court documents, Hostess wants to abandon the pension plans that support the income of thousands of retirees. The company even anticipated the bankruptcy by ceasing payments to some union pension plans back in August of last year, according to a declaration from Hostess labor relations boss Jeffrey Parlato.

Also angry was Ken Hall, one the country’s top Teamsters leaders.

“For Hostess to pin the blame on its employees is unconscionable and demonstrates how out of touch management is with its workers,” Hall said in a January 26 press release.

Hall’s remarks were prompted, at least in part, by Parlato’s January 25 statement to the bankruptcy court. In it, Parlato provided some details of work rule changes being demanded by Hostess. One series of changes (in addition to abandoning the pension plans) would cut income to unionized truck drivers by $302 million over three years.

All told, labor concessions being demanded by Hostess would be worth $659 million over three years, according to Parlato. That includes a wage and salary freeze on union members that would last to 2015.

As provocative as Hostess’ actions have been this year, it’s déjà vu all over again for the union bakers and truck drivers.

Under its former name Interstate Bakeries, the company filed for Chapter 11 bankruptcy back in 2004. At that time too, the company blamed the unions for most of its problems.

After years of painful downsizings and tense labor negotiations, the company emerged from bankruptcy in 2009. During the intervening period it had closed a dozen bakeries, shuttered numerous distribution centers and retail outlets and trimmed distribution routes—eliminating some 17,000 jobs in the process.

One difference between 2004 and 2012 is the venue for the courthouse proceedings. Headquartered at that time in Kansas City, Interstate took its 2004 case to a federal court in Missouri. With Hostess headquarters since relocated to Irving, Texas, the company instead chose to file in New York.

There the case has been assigned to Judge Robert D. Drain, who has notable experience in the use of bankruptcy courts to coerce concessions from labor unions.

Between 2005 and 2009 Drain presided over the infamous Delphi auto parts bankruptcy, in which the United Auto Workers saw its Delphi membership decimated.

More recently, he has been overseeing the case of the A&P supermarket chain. Just six weeks ago, about 30,000 grocery clerks and store employees represented by the United Food & Commercial Workers union were forced into broad concessions under circumstances just like those faced by the Hostess workers.

Bruce Vail is a Baltimore-based freelance writer with decades of experience covering labor and business stories for newspapers, magazines and new media. He was a reporter for Bloomberg BNA's Daily Labor Report, covering collective bargaining issues in a wide range of industries, and a maritime industry reporter and editor for the Journal of Commerce, serving both in the newspaper's New York City headquarters and in the Washington, D.C. bureau.

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