In a letter to Hostess staff dated August 20, CEO Gregory Rayburn said that the Teamsters’ decision to let members vote on its offer was a breakthrough in negotiations and, if implemented, it would allow the company to lower its operating costs and exit bankruptcy.
“As with all negotiations, none of the parties got everything they wanted,” Rayburn wrote. “Some of the concessions are deep, but they are shared by everyone – union members, non-union members and all management.”
Those concessions include an 8% pay cut in the first year of a five-year contract, followed by a three percentage point pay rise the following year, and a one percentage point rise in the final year, as well as withdrawal from and then conditional re-entry into all of the Teamsters’ multi-employer pension plans.
Teamsters’ general secretary-treasurer Ken Hall said in a union update: “We are not and cannot endorse the company’s final offer. But given that the likely consequence of rejecting it outright means the loss of your jobs, it is our duty to inform you, to the best of our ability, of what the offer means to you and your livelihoods and to let you vote on your future and the future of Hostess.”
The maker of Wonder Bread, Twinkies, and other snack cakes filed for Chapter 11 bankruptcy in January, citing pension and medical benefit obligations, restrictive work rules, a continuing difficult economic climate, and a more difficult competitive landscape.
It said at that time that it would seek to reach an agreement with unions over labor agreements, as employee costs had squeezed the company, in addition to higher ingredient prices, and a more competitive US bakery sector.
However, unions have blamed “ineffective executives” for the company’s problems.
The Teamsters Union is Hostess’ biggest, representing about 7,500 workers, and Rayburn said its agreement to vote on the company’s offer was an important first step, but added that company still needed to come to agreements with the Bakery, Confectionary, Tobacco Workers and Grain Millers International Union, among others, ratify agreements with union-represented employees, and gain Bankruptcy Court approval.
The Teamsters said it would mail ballots on the offer on August 27, with counting due to take place on September 14.