BIDDEFORD — Hostess Brands CEO Greg Rayburn made a stop at the company’s Biddeford bakery Friday to take questions from and listen to the concerns of the approximately 410 employees who work there regarding a proposed five-year union contract.

His visit came the day before members of the Local 340 International Brotherhood of Teamsters union are scheduled to vote on whether to accept the contract that includes a number of concessions.

The Teamsters union and the Bakery, Confectionery, Tobacco Workers and Grain Millers International Union represent a large majority of Hostess workers and represent the largest number of the company’s employees in Biddeford.

Company executives said the concessions are necessary if Hostess is to emerge from bankruptcy, stay afloat and maintain production of Twinkles, Suzy Q’s and its other baked confections.

In January, Hostess Brands filed Chapter 11 bankruptcy for the second time. It is still in proceedings for its recent filing.

In 2004, the previous owner, Interstate Bakeries, had also filed for bankruptcy protection. It emerged in February 2009.

High rates of worker compensation is one of the reasons the company pegs for the necessity of seeking Chapter 11 protection.

However, local Teamsters representative Alan Churchill blames “more of a bad economy and mismanagement of the company” as the real culprits.

The company’s owners are investment firms, he said, “who don’t understand baking.”

The purpose of his visit, said Rayburn, was to answer any questions workers had regarding the proposed contract and to “let them vent.”

The session was productive, said Rayburn.

However, he added, workers are “frustrated and angry, and I don’t blame them.”

Concessions were agreed to by the company’s union workforce in  order to emerge from bankruptcy the first time, said Rayburn.

“They already gave at the office, and now they’re asked to give more,” he said.

If approved, these concessions will go even deeper than those made earlier, said Rayburn.

In an Aug. 20 letter to employees, the Hostess chief executive officer listed the major changes in the collective bargaining agreements being offered. One of the major concessions is a wage reduction of 8 percent in the first year of a five-year contract.

Wages would then increase by 4 percent toward the end of the contract, making up some of the initial loss.

Rayburn pointed out that these wage concessions would apply to all Hostess employees, including management.

Another concession included changes to employees’ health and other benefits.

According to Churchill, the company would reduce its contribution to workers’ health insurance by 17 percent.

Revised work rules designed to increase delivery efficiencies are another part of the contract.

In addition, the company would withdraw from and conditionally re-enter into all of the unions’ pension plans.

According to a filing with the U.S. Bankruptcy Court for the Southern District of New York, Hostess disclosed that its biggest unsecured creditor is the Bakery & Confectionery Union & Industry International Pension Fund, which it owes approximately $944.2 million.

For these concessions, two union representatives would be appointed to the company’s nine-member board of directors.

The unions would also get a 25 percent ownership of the company and assume about $100 million in debt.

In order to accept the proposal, approval by a simple majority of the 365 collective bargaining groups’ members, representing the company employees, is necessary, said Rayburn.

The Teamsters union and the Bakery, Confectionery, Tobacco Workers and Grain Millers International Union votes should be complete by Sept. 17, said Rayburn.

“It’s hard to handicap how this will go,” said Rayburn.

In addition to workers concessions, an infusion of cash from some of Hostess’ private investors and the sale of some assets would be needed to successfully emerge from bankruptcy, he said.

Hostess does not plan to sell the Biddeford plant, said Rayburn.

It is looking to sell its Merita Brand, he said.

The company could emerge from bankruptcy as early as the end of the year, said Rayburn.

If the vote is unfavorable the company would liquidate, he said, by selling company brands and closing plants.

While some companies that purchase the Hostess plants could reopen them, Rayburn said “the industry has been consolidating for years,” and there is already an over abundance of bakeries.

The Biddeford bakery is only producing at 50 percent of its capacity, he said.

The company has looked for a buyer for 1 1/2 years without success, added Rayburn.

Working to make Hostess viable has been “a challenge,” he said.

Rayburn said he hopes the company “has crafted a way for us to be around for another 70 years.”

The Biddeford Hostess plant produces Hostess CupCakes, Sno Balls, Suzy Qs and 100 Calorie Packs Nature’s Pride, Wonder Bread and regional products including Home Pride, JJ Nissan and Beefsteak.

Hostess, based in Irving, Texas, has about 19,000 employees and operates in 49 states. Annual sales are about $2 billion, according to the company’s website. Its products date back to the late 1800s.

— Staff Writer Dina Mendros can be contacted at 282-1535, Ext. 324 or [email protected]. Managing Editor Kristen Schulze Muszynski contributed to this story.



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