BNA Daily Labor Report: Teamsters Broker Deal at Interstate Bakeries

August 27, 2008: The International Brotherhood of Teamsters Aug. 20 announced it has brokered a deal between investor Ripplewood Holdings LLC and creditors of Interstate Bakeries Corp. that will protect union jobs and save the bankrupt company from liquidation.

The proposed settlement among the banks, Ripplewood, and IBT would enable Interstate Bakeries to emerge as a standalone company after four years in bankruptcy, the union said. Although details of the negotiated agreement are not yet available, Teamsters released word of the deal that it said would keep many union-represented workers employed.

"This deal is important in IBC's recovery from bankruptcy as we work to protect our members' jobs," IBT President James Hoffa said Aug. 20 in a statement. The Teamsters represents some 9,500 of Interstate Bakeries' 25,000 employees.

Interstate Bakeries, maker of products that include Twinkies and Wonder bread, filed for bankruptcy protection under Chapter 11 Sept. 22, 2004, citing multiple problems including high labor costs (97 DLR A-7, 5/20/05). At that time, the company operated 53 bakeries in the United States and employed about 32,000 workers.

Union Concessions Sought

For the past year, Teamsters has been pursuing negotiations with outside investors that might assist IBC in emerging from bankruptcy (175 DLR A-11, 9/11/07). IBC has sought concessions from IBT and other unions representing its employees as part of its plan to emerge from bankruptcy.

Many of the IBT-represented employees work as bread truck drivers who deliver breads and sweet goods to local retail outlets. In labor negotiations covering those workers, a major issue has been an Interstate Bakeries effort to cut the sales commission income the drivers receive as part of their route assignments, the union said last year.

IBC has closed bakeries, distribution centers, and outlet stores in New England, the Mid-Atlantic area, and California, affecting workers represented by IBT and the Bakery, Confectionery, Tobacco Workers and Grain Millers. The two unions represent 90 percent of the company's union-represented workforce nationwide.

While acknowledging that the Ripplewood "settlement was not without sacrifices from all parties involved," Richard Volpe, director of the Teamsters Bakery Workers Conference, said Aug. 20 in a statement that "it will place the company on the best footing possible for its future success, and keep as many hardworking union men and women employed as possible."

IBT said that details of the plan with Ripplewood Holdings will be forthcoming in the next several weeks.

IBC Not Party to Negotiations

IBC spokeswoman Maya Pogoda told BNA Aug. 26 that Interstate Bakeries was not part of the negotiations, which were solely between the secured lender and the union, and that the company had no information about the deal. Nevertheless, she said that "the company is encouraged to hear those reports" of the settlement.

A previous IBT-brokered reorganization proposal submitted to IBC last year "never materialized," Pogoda said. Under that arrangement, the Teamsters had said that investment partners including Yucaipa Cos. would take control of IBC as a way to protect jobs and break a stalemate with the company's managers over proposed union concessions (242 DLR A-10, 12/18/07).

IBC protested at the time that the proposal was insufficient to meet the terms for a qualified bid approved by the U.S. Bankruptcy Court for the Western District of Missouri, the court overseeing IBC's reorganization. The proposal eventually was withdrawn.

A Ripplewood Holdings representative could not be reached for comment.

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