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Hostess financial woes due to 'ineffective executives', says union leader

By Caroline Scott-Thomas , 13-Jan-2012

A major bakery workers union has hit out against Hostess Brands for its assertion that pensions obligations were a principal reason for its Chapter 11 bankruptcy filing, blaming 'ineffective executives' instead.

The maker of Twinkies and Wonder Bread said on Wednesday that it had filed for Chapter 11 bankruptcy protection to allow it to restructure. It said it would seek to reach a consensual agreement with unions over labor agreements, as employee costs, such as pension and medical benefit obligations and restrictive work rules, had squeezed the company, in addition to higher ingredient prices and a more competitive US bakery sector.

However, the Bakery, Confectionery, Tobacco Workers and Grain Millers International Union (BCTGM), which says it represents more than 5,000 workers at Hostess Brands, claims it has been working with Hostess for months to reach an agreement that would address the company’s financial difficulties.

“Throughout this process, the company has never provided the union with a legitimate proposal that could be taken to the membership for consideration,” the BCTGM said in a statement.

‘Deeply offensive’

The union’s international president Frank Hurt said: “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 this company for the past decade.”

Hostess Brands employs about 19,000 people and owes more than $1bn to creditors.

“The company’s current cost structure is not competitive,” Hostess said in its Wednesday statement, and added that it intends to develop a new business plan including “competitive employee benefit plans”.

The company’s president and CEO Brian Driscoll said in the company’s statement earlier this week: "We have engaged in good-faith bargaining with our labor partners for many months. We remain hopeful that we can reach an agreement that will allow us to amend our labor contracts so that we can emerge from Chapter 11 as a highly competitive company that provides secure jobs for our employees."

Hostess Brands last filed for Chapter 11 bankruptcy protection in February 2009, but measures carried out then proved insufficient, the company said, as increased consolidation and competition in the industry put other bakery companies at an advantage.

“We are very concerned for the jobs and well being of our members employed at Hostess,” BCTGM leader Hurt said. “We had hoped that the company would emerge from the last restructuring stronger and more competitive. Our members sacrificed a great deal to try and save the company the last time.”

The way the company’s pension obligations were portrayed to the media was misleading, Hurt claimed. He said that Hostess’ cited figure of nearly $1bn for pensions referred only to its withdrawal liability if the company were to leave the fund.

“Pension benefits that retirees receive each month are paid by the Fund and not the individual companies,” the BCTGM said.

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