Wage cuts in final Hostess offer; may sell Merita

[August 21, 2012]  NEW YORK (AP) -- Hostess Brands Inc.'s final contract offer to certain union members includes lowering wages and commissions by 8 percent in the first year of a five-year contract. The company is also considering the possible sale of its Merita brand.

In a letter sent to all Hostess workers Monday, President and CEO Gregory Rayburn says that the wage cut would apply to everyone at the Irving, Texas, company, including management.

The offer also includes raising wages by a little more than 3 percent in the second year of the contract and by another percentage point in the fifth year.

Rayburn says the final contract offer will allow Hostess to reduce operating costs and help attract the financing needed to exit Chapter 11 bankruptcy protection.

"As with all negotiations, none of the parties got everything they wanted. Some of the concessions are deep, but they are shared by everyone -- union members, non-union members and all management," he wrote.

The International Brotherhood of Teamsters had no further comment beyond what it said last week, when it told members that rejecting the offer could mean losing their jobs. The union represents nearly 8,000 Hostess workers.

In a separate letter, Rayburn says Hostess may sell some or all of its Merita bread and bakery operations. A final buyer has not been chosen, and it is unknown if a potential sale would include all or only some of Merita's five bakeries.

Hostess does plan to keep all the retail distribution outlets in the Merita markets, which include Jacksonville, Fla.; Knoxville, Tenn.; Rocky Mount, N.C.; and Birmingham, Ala.

Rayburn said in the letter that if Hostess does sell some or all of the bakeries it would be up to the new owner to decide which, if any, Merita employees it wants to hire.

Hostess filed for bankruptcy in January, citing rising competition as well as increasing pension and medical costs for its workers. The majority of the privately held company's 19,000 employees are unionized, meaning it has higher pension and medical benefit costs than competitors with nonunion workforces.

Hostess's bankruptcy filing came just three years after its predecessor, Interstate Bakeries, emerged from bankruptcy protection.

[Associated Press]

Copyright 2012 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.