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Judge asks Hostess to mediate with union

Tuesday, November 20, 2012

A Hostess Twinkies sign is shown at the Utah Hostess plant in Ogden, Utah, Thursday, Nov. 15, 2012.
(AP Photo/Rick Bowmer)
WHITE PLAINS, N.Y. -- Twinkies will live to see another day.

Hostess Brands Inc. and its second largest union agreed Monday to try to resolve their differences after a bankruptcy court judge noted that the parties hadn't gone through the critical step of private mediation. That means the maker of the spongy cake with the mysterious cream filling won't go out of business, yet.

The news comes after the maker of Ho Ho's and Wonder Bread moved to liquidate and sell off its assets in bankruptcy court last week. Hostess cited a crippling strike started Nov. 9 by the Bakery, Confectionery, Tobacco Workers and Grain Millers International Union, which represents about 30 percent of Hostess workers.

"Many people, myself included, have serious questions as to the logic behind this strike," said Judge Robert Drain, who heard the case in the U.S. Bankruptcy Court in the Southern District of New York in White Plains, N.Y. "Not to have gone through that step leaves a huge question mark in this case."

The mediation talks are set to take place today, with the liquidation hearing set to resume Wednesday if an agreement isn't reached.

Hostess CEO Gregory Rayburn said that there is enormous financial pressure to come to an agreement with the union by the end of the day today.

He noted that it's costing Hostess about $1 million a day in payroll costs alone to stay alive, with the money mostly going toward management to unwind the company.

About 18,000 workers were sent home Friday after the company shuttered its 33 plants, meaning no sales are being generated.

In an interview following the hearing,

Jeff Freund, an attorney for the bakers union, said any guess as to how the talks will go would be "purely speculative."

"We didn't think we had a runway, but the judge just created a 24-hour runway," said Rayburn, who added that even if a contract agreement is reached, it's unclear whether all Hostess plants will get up and running again.

Hostess, weighed down by debt, management turmoil, rising labor costs and the changing tastes of Americans, decided on Friday that it no longer could make it through a conventional Chapter 11 bankruptcy restructuring. Instead, the company, which is based in Irving, Texas, asked the court for permission to sell its assets and wind down its business.

The company, which is in its second bankruptcy in less than a decade, had said that it was saddled with costs related to its unionized workforce. It brought on Rayburn as a restructuring expert in part to renegotiate its contract with labor unions.

Hostess, which had been contributing $100 million a year in pension costs for workers, offered workers a new contract that would've slashed that to $25 million a year, in addition to wage cuts and a 17 percent reduction in health benefits. The baker's union rejected the offer and decided to strike.

By that time, Hostess had reached a contract agreement with its largest union, the International Brotherhood of Teamsters, which urged the bakers union to hold a secret ballot on whether to continue striking. Although many workers in the bakers union decided to cross picket lines this week, Hostess said it wasn't enough to keep operations at normal levels.

Rayburn said that Hostess was already operating on razor thin margins and that the strike was the final blow. The bakers union said the company's demise was the result of mismanagement, not the strike. It pointed to the steep raises executives were given last year as the company was spiraling down toward bankruptcy.

The company's announcement last week that it would move to liquidate prompted people across the country to rush to stores and stock up on their favorite Hostess treats. Many businesses reported selling out of Twinkies within hours and the spongy cakes turned up for sale online for hundreds of dollars.

Even if Hostess goes out of business, its popular brands will likely find a second life after being snapped up by buyers. The company says several potential buyers have expressed interest in the brands. Although Hostess' sales have been declining in recent years, the company still does about $2.5 billion in business each year. Twinkies along brought in $68 million so far this year.

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Maybe Comrade Obama should bail them out with taxpayer money and give them to the unions. Change the cream filling from white to red and Twinkies can be the national food.

-- Posted by thewonder on Mon, Nov 19, 2012, at 6:05 PM

I suppose manamgement will get another large raise and bonus while the workers will take pay cuts and lose their penisons. Company greed it what it is all about, the people who punch the clock need to get together and take a stand.

-- Posted by bagman75 on Mon, Nov 19, 2012, at 8:47 PM

Why don't the people all across the nation go on strike against the government, they all get big raises and have the largest union in the country.

-- Posted by grandpa3 on Tue, Nov 20, 2012, at 6:55 AM

They should work for $0.65/hr. like good Americans. And quit griping.

-- Posted by Lippy Radeck on Tue, Nov 20, 2012, at 8:05 AM

If people would tell the government we are going to stay at home till you get this mess fixed you have created, we are not going back to work. See how long it takes when they don't have our money to do as they please with. And put Social Security back in a social security account were it belongs not general funds were they can steal out of, this money belongs to the people that payed into not the government.

-- Posted by ssinteriors on Tue, Nov 20, 2012, at 9:06 AM

The article fails to mention that the CEO awarded himself an increase in salary from $750,000 per year to 2.5 million per year and the other executives all received huge bonuses, as well. This was done as a blatent "money grab" to keep the money out of the hands of their creditors during their impending bankruptcy. Corporate greed at its finest.

-- Posted by cznola on Tue, Nov 20, 2012, at 9:37 AM

The executives of Hostess are just another example of "failure bonuses" they grant themselves. They drive a company into bankrupsy and secure multi-million dollar bonuses for themselves for doing so. In a similar vein, Solyndra is another example of a company taking millions of goverment stimulus dollars, giving it to executives as "failure bonuses" and bankrupting the company. Sadly, Solyndra, and other green energy companies, has done this on taxpayer money. There's enough corporate graft to go around, I'm afraid. Hostess executives are just the latest. Where is their honesty and integrity?!

-- Posted by lynwood on Tue, Nov 20, 2012, at 10:23 AM

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