WASHINGTON — The International Brotherhood of Teamsters has voted to accept modifications to their agreements with Kansas City-based Interstate Bakeries Corp.
The agreement, which covers more than 9,000 workers, follows months of negotiations between the union and the wholesale baker and paves the way for I.B.C. to emerge from bankruptcy.
"I.B.C. Teamsters were faced with a difficult decision and they voted loud and clear to preserve good American jobs at Interstate Brands Corp.," said Jim Hoffa, general president of The Teamsters. "The newly ratified agreement paves the way for the company to exit bankruptcy as a stand-alone entity, which is the best opportunity for our members to keep their jobs."
Richard Volpe, director of the Teamsters Bakery and Laundry Conference, said the agreement was "the best choice in order to provide I.B.C. with a sound financial footing."
"During negotiations our priority was to protect Teamster jobs, achieve value for our sacrifices and put the company in the best position to grow," Mr. Volpe said. "We have confidence in Ripplewood Holdings and believe that we can work together with the new management team at I.B.C. so that it may survive and rebuild."
I.B.C. and The Teamsters first agreed to end their standoff over a new union contract in early September. At that time, I.B.C. said national representatives of its two major labor unions, which, together, represent nearly 17,000 I.B.C. employees, agreed to important modifications to their labor agreements that are an essential component of the plan funding commitments.
Among the modifications, The Teamsters agreed that once I.B.C. exits bankruptcy hourly employees’ wages will be reduced by $10 per week. The weekly reduction will be lowered in increments, to $8 per week, then to $5 per week, and then eliminated altogether if the company reaches certain pre-set earnings levels. Another modification calls for base pay for commission employees to be reduced by $110 per week for the term of the modification agreement, with the weekly reduction lowered in increments, to $90 per week, then to $45 per week, then eliminated altogether if I.B.C. reaches pre-set earnings levels.
In exchange for the reductions, all employees will share in a Teamsters Equity Sharing Plan and receive 7% of I.B.C.’s total equity.
The Teamsters also agreed to allow I.B.C. to adopt a large format, direct-store delivery (D.S.D.) and/or "drop and go" delivery system for bread and/or cake but not earlier than Aug. 1, 2010. The modification also carries the stipulation that the system may only be implemented after a successful test in an area not represented by Teamsters.
The effective date of the modification agreement will be the first Sunday after I.B.C. exits bankruptcy, and the expiration date will be July 31, 2014.
A reorganization plan that would allow I.B.C. to emerge from bankruptcy protection was mailed to creditors earlier this month and must be voted on by Dec. 1. A confirmation hearing has been set for Dec. 5, and if the plan is approved, attorneys for I.B.C. said the company would emerge from bankruptcy by Dec. 15. I.B.C., which filed for Chapter 11 bankruptcy protection in September 2004, is expected to receive a $130 million investment from Ripplewood Holdings and a financing package of $469 million from a group of lenders including Silver Point Capital LP. The company also plans to cancel all existing shares and take the company private.