Last Updated:October 24 @ 08:39 am

Hostess says talks to stave off shutdown fail

By AP Staff

(AP) - Hostess Brands Inc. lived to die another day.

The maker of Twinkies and Ding Dongs said late Tuesday that it failed to reach an agreement with its second biggest union. As a result, Hostess plans to continue with a hearing on Wednesday in which a bankruptcy court judge will decide if the company can shutter its operations.

The renewed talks between Hostess and The Bakery, Confectionery, Tobacco Workers and Grain Millers International Union came after the company declared last week that it would move to wind down its business and start selling off its assets in bankruptcy court. The company cited a crippling strike that was started on Nov. 9 by the union, which represents 30 percent of Hostess workers.

After making its case to liquidate on Monday, the bankruptcy judge hearing the case noted that the two sides hadn't yet tried resolving their differences through private mediation. The judge noted that 18,000 jobs were on the line and urged the company and union to try to resolve their differences. Both sides agreed to hold mediation proceedings on Tuesday.

In a statement late Tuesday, Hostess said it would not comment on the breakdown in talks other than to say that mediation "was unsuccessful."

Hostess shut down its three dozen plants late last week after it said the strike by the bakers union hurt its ability to maintain normal production. The bakers union says the company's demise was the result of years of mismanagement, however, and that workers have already given steep concessions over the years.

Hostess, weighed down by management turmoil, rising labor costs and the changing tastes of Americans, is making its second trip through Chapter 11 bankruptcy restructuring. The company, based in Irving, Texas, had brought on CEO Gregory Rayburn as a restructuring expert in part to renegotiate its contract with labor unions.

The company reached an agreement with its biggest union, the International Brotherhood of Teamsters, on a contract that dramatically reduced pension contributions, as well as slashing wages and health benefits. But the company said the bakers union stopped returning its calls about a month ago. The Teamsters urged the smaller union to hold a secret ballot on whether members wanted to continue striking. 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 meanwhile 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 a rush on Hostess treats across the country, with many businesses selling out of Twinkies within hours.

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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4 Comments

  1. capricorn1Comment by capricorn1
    November 21, 2012 @ 7:42 am

    union people who decided to strike or QUIT i say NO UNEMPLOYMENT FOR YOU!

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  2. cgretiredComment by cgretired
    November 21, 2012 @ 9:58 am

    It’s Bush’s fault.

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  3. cfhardersonComment by cfharderson
    November 21, 2012 @ 11:13 am

    I suspect that the Hostess company (actually this is a privately owned company) could not find a “white knight” to come and save it or another company that wanted to buy all of the 30-some plants with a union workforce.

    This way they can easily sell off the more modern bakeries without the union workers. They can also sell off the patents and the copyrights separately for additional profit. That only leaves the antiquated plants to close and sell off for scrap.

    In a situation like this, what happens to the funded retirement funds ?

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    • JudyComment by Judy
      November 21, 2012 @ 1:49 pm

      Their pensions will be cut by 1/3 to 1/2 and paid by the government agency called the Pension Benefit Guarantee Corporation (PBGC). See the following website for an article on this. http://www.openmarket.org/2012/11/20/the-hostess-bankruptcy-and-the-threat-of-a-pbgc-bailout/

      Companies pay a certain amount each month to the PBGC to ensure that if they fail their employees still get pensions. The PBGC has been underfunded for several years because they have not been charging companies enough per employee so guess what! We the taxpayers will be funding their pensions with more deficit spending. Unions are a no win for taxpayers in any venue.

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