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Some local Dolly Madison employees are scheduled to vote today on a new contract proposal — the company’s “last, best, final offer” — that includes an initial 8 percent wage cut and, according to the head of the company, will determine whether parent company Hostess survives.
Chief Executive Officer Greg Rayburn of Hostess Brands Inc. said Thursday that the company’s many well-known brands — including Ho-Hos, Ding Dongs and Twinkies — are providing the company a great base for continued success. But he said the Texas-based company is being dragged down by high costs, especially related to wages and pensions.
Hostess is trying to emerge from bankruptcy for the second time in a decade. In court documents, the company listed assets between $500 million and $1 billion and its liabilities at more than $1 billion, according to the Associated Press.
Hostess is privately held and does not generally disclose sales and profit figures. But according to documents provided to union workers in Columbus, the company lost $330 million last year.
Rayburn said a union rejection of the proposal would mean an end of the company.
“We’ll shut down. We’ll sell off brands,” he said.
The company’s 18,500 employees, including about 250 in Columbus, will lose their jobs, he said.
“There’s no second chance after this,” Rayburn said.
Employees at the local plant are represented by unions including the International Brotherhood of Teamsters and Local 132 of the Bakery, Confectionery, Tobacco Workers and Grain Millers International, the two largest of more than a dozen unions representing Hostess employees.
Teamster members are voting on the proposal by mail by Sept. 14. Bakery union members in Columbus are expected to vote on the contract today at the union hall on Mapleton Street.
According to the 17-page contract proposal, compensation would be cut by 8 percent the first Sunday following ratification. That cut will be lowered to 5 percent in the second, third and fourth years, and to 4 percent in the final year, meaning employees by 2017 would earn about 4 percent less than today. Cuts would affect all employees, including management.
Hostess also would cut its pension plan contribution from about $100 million to about $25 million. Rayburn said the $100 million contribution into multi-employer pension plans is unsustainable, especially because it pays for pensions of people who never worked for Hostess. The pension plan includes companies that since have ceased to operate, meaning other companies in the plan have to make up for the shortfall.
Rayburn said union leaders have focused primarily on the wage cuts, but the proposal also includes cuts to management salaries, provides two union leaders a seat on the board of directors and gives the unions a 25 percent ownership in the company.
If the contract is approved, the company would pledge for six months to “seek to avoid closing any plant or facility” covered by the contract.
Local and national bakers union leaders could not be reached. The Teamsters said in a statement two weeks ago that the union is informing its members about the offer but is not taking a position.
“We recognize there is no desirable choice. This is one of the most difficult circumstances we’ve encountered,” the union statement said.
In the same statement, Teamsters General Secretary-Treasurer Ken Hall said the Teamsters and bakers unions “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.”
Rayburn said he understands that the proposal is tough to take, especially because of concessions the employees made in the last bankruptcy, which began in 2004 and emerged in 2009. However, he said some of the current issues should have been addressed during that bankruptcy and that the company simply cannot continue on its current path.
The proposal will set up the company for profitability in the long run, he said, so that it can be around for another 70 years.
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