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Amid Controversy and Union Strike, Hostess Closes Plants and Plans to Liqudate Assets

Written by Bruce Feinstein, Esq. on . Posted in Bankruptcy Blog

How can a business effectively navigate a Chapter 11 bankruptcy when unions are involved?

After two bankruptcies and a series of failed talks with unions, Hostess Brands stopped production of its famous sweets and breads and will sell off its assets to the highest bidder. The American creator of classic junk food items such as the Twinkie, Sno Ball, and Ho Ho shut down its plants on Friday and plans to begin selling off its brands.

Hostess claims that all this occurred after labor contract talks fell through and union workers went on strike to protest proposed wage and benefit cuts. However, members of the Bakery, Confectionery, Tobacco Workers and Grain Millers (BCTGM) union tell a very different story.

The union believes that the company is posting false information regarding the strike and its effects on Hostess. When Hostess applied for Chapter 11 bankruptcy in January of 2012, it stated it was already planning to close several bakeries – at least nine – as part of its proposed reorganization. This means that the closings were planned before the strike went into effect and contract talks went sour.

BCTGM has released scathing statements regarding their stand on Hostess’s claims, stating that they are false and misleading to the public. BCTGM President Frank Hurt said that the company’s press releases and information regarding the strike and the planned liquidation “[are] a continuation of a disturbing pattern by the company of issuing public statements that are erroneous at best and disingenuous at worst.”

What’s more, union members also called out upper management for their gross misuse of money from earlier concessions that was meant to help the floundering baked goods company. Instead of using funds for new products or improvements, Hostess inflated the salaries of its then-CEO and many top executives. Increases from $500,000 to $900,000 were reported, as well as $375,000 to $656,256 for another member of upper management. These figures only fueled the fire on the picket lines, sending contract talks into a tailspin.

Hostess has endured many pitfalls throughout its 82-year history, but the concoction of massive debt, financial oversight, and increased labor costs may be the final blow. By closing its factories and getting ready to lay off most of its 18,500-person work force, the chances of negotiating a last-minute deal are slim. But the culturally significant brands that made Hostess an American icon may not be lost. Buyers may decide to keep brands like Wonder Bread and Twinkies alive due to their cultural cache and recognition. All that will become more clear once Hostess begins its liquidation process in court on Monday. The entire process may take up to a year, but several potential bidders have expressed interest.

This messy fallout shows us that while Chapter 11 bankruptcy can be a positive, helpful process for many businesses, there needs to be fair communication between workers and management, a desire to better the company, and a need to care for the needs of all members of staff. If you are considering filing for bankruptcy for yourself or your business, get the facts and the help you need: Call the Law Offices of Bruce Feinstein, Esq. today for a Free Consultation.

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[Source: Aflcio.org, NYTimes.com]

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