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Hostess Blames Unions|for Its Bankruptcy

DALLAS (CN) - Hostess Brands, which filed for Chapter 11 two weeks ago, asked a judge to reduce its commitments to union employees, claiming the costs put the Twinkie-maker at a "profound competitive disadvantage."

Irving-based Hostess asked the Manhattan Bankruptcy Court to reject its collective bargaining agreements and modify retiree benefit obligations for its major unions, The International Brotherhood of Teamsters, and the Bakery, Confectionary, Tobacco and Grain Millers Union.

Hostess said when it filedfor bankruptcy that incremental change, including a bankruptcy filing 3 years ago, were insufficient and that its cost structure is "not competitive, primarily due to legacy pension and medical benefit obligations and restrictive work rules. Those issues, combined with the economic downturn and a more difficult competitive landscape, created a worsening liquidity situation that prompted the need for a reorganization."

Hostess seeks relief from what it calls "a number of significant financial commitments and arcane work rules imposed by collective bargaining agreements."

It says it is going through a "cash burn" of $2 million per week, that its competitive disadvantage is due almost exclusively to its collective bargaining agreement obligations, which have "never been meaningfully addressed."

Hostess, which also makes Wonder Bread, Ho-Hos and Ding Dongs, says that 15,000 of its 19,000 employees are unionized.

The Teamsters responded to Hostess' motion with a statement that Hostess was trying to "bully" its way to unnecessary changes.

"The company has struggled as it pursued misguided strategies under revolving management," the Teamsters said in its statement. "Meanwhile, Teamster Hostess members have sacrificed greatly over the past seven years. For Hostess to pin the blame on its employees is unconscionable and demonstrates how out of touch management is with its workforce."

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