Just two weeks after the Hostess bankruptcy announcement big fingers are being pointed, ones that could stand to significantly influence the outcome of the case. Claiming a “profound competitive disadvantage”, Hostess is blaming its commitments to unions employees as the reason for the Chapter 11 filing.
Defaulting On Obligations
Hostess Brands Inc. has formally requested that the bankruptcy court reject all of its previously held bargaining agreements and modify retiree benefit obligations. Holding contractual obligations with several large unions, Hostess is citing these liabilities as the main reason why their previous filing failed three short years ago. Back in court to resolve their financial troubles once again, the company is now taking a controversial approach to debt reorganization.
It is estimated that union contracts cost Hostess millions of dollars each week, making it nearly impossible to maintain a competitive advantage in the market. With close to three-quarters of its employees being unionized, pension and medical benefit obligations have become financially unmanageable. While the company is hoping for court leniency, unions are speaking out about the unfair nature of the company’s request saying “for Hostess to pin the blame on its employees is unconscionable and demonstrates how out of touch management is with its workforce.”