The Fate of the Hostess Twinkie
Hostess Brands, manufacturer of the iconic Twinkie, is in a bit of a predicament. The company filed for Chapter 11 bankruptcy in 2004, emerging in 2009, after rounds of restructuring and concessions taken by union and non-union employees (Flahardy, 2012). In the face of the recent recession and increasing commodities pricing, the company has yet again filed for bankruptcy protection (By & Spector, 2012). In addition, the company has been engaged in collective bargaining with its two major unions, the Teamsters Union and the Bakery, Confectionery, Tobacco Workers and Grain Millers International Union (BCTGM), hoping for more concessions from employees to help it survive. Combined, these unions represent 92% of Hostess’s unionized employees (Feintzeig, 2012). Some 5,000 employees are BCTGM members and approximately 7,000 drivers and distribution workers belong to the Teamsters (Gaus, 2012).
The company put forth a plan that would freeze wages of the union worker, saving some estimated $6.1 million by 2015 (By & Spector, 2012). After acceptance of the contract, the company is asking for an eight percent pay cut and for all employees to take on a larger portion of their insurance costs (Kinney 2012). In return, the employees would retain their jobs, albeit at a lower salary, and they would gain a 25% equity stake in the company, $100 million of third lien debt upon the exit from bankruptcy and representation on the company’s board (Kinney, 2012).
The Company Perspective
According to Hostess, the company cannot survive without significant changing being made in its labor obligations (Feintzeig, 2012). An example of the redundancy they cite include work rules related to deliveries. Current work rules require bread and cakes to be delivered on separate trucks, even in the same territories or if going to the same stores (By & Spector, 2012). Because of redundancies like this, Hostess’s delivery, selling and administrative...