Hostess lives another day to mediate with union
WHITE PLAINS, N.Y. — Twinkies will live to see another day.
Hostess Brands Inc. and its second largest union agreed on Monday to go into mediation to try to resolve their differences when a bankruptcy court judge noted that the parties hadn't gone through the critical step. That means the maker of the spongy cake with the cream filling won't go out of business yet.
The news comes after the maker of Ho Ho's, Ding Dongs and Wonder Bread last week moved to liquidate and sell off its assets in bankruptcy court. Hostess cited a crippling strike started on 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 expected to begin Tuesday, with the liquidation hearing set to resume on Wednesday. Jeff Freund, an attorney for the bakers union, said any guess as to how the talks will go would be “purely speculative.”
In an interview after the hearing, CEO Gregory Rayburn said that there is enormous financial pressure to come to an agreement with the union by the end of the day Tuesday.
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 when the company shuttered its 33 plants, meaning no sales are being generated.
“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 operate again.
Hostess, weighed down by debt, management turmoil, rising labor costs and the changing tastes of America, 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 go out of 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.
The company's announcement on Friday 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 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.
Show commenting policy
TribLive commenting policy
You are solely responsible for your comments and by using TribLive.com you agree to our Terms of Service.
We moderate comments. Our goal is to provide substantive commentary for a general readership. By screening submissions, we provide a space where readers can share intelligent and informed commentary that enhances the quality of our news and information.
While most comments will be posted if they are on-topic and not abusive, moderating decisions are subjective. We will make them as carefully and consistently as we can. Because of the volume of reader comments, we cannot review individual moderation decisions with readers.
We value thoughtful comments representing a range of views that make their point quickly and politely. We make an effort to protect discussions from repeated comments either by the same reader or different readers.
We follow the same standards for taste as the daily newspaper. A few things we won't tolerate: personal attacks, obscenity, vulgarity, profanity (including expletives and letters followed by dashes), commercial promotion, impersonations, incoherence, proselytizing and SHOUTING. Don't include URLs to Web sites.
We do not edit comments. They are either approved or deleted. We reserve the right to edit a comment that is quoted or excerpted in an article. In this case, we may fix spelling and punctuation.
We welcome strong opinions and criticism of our work, but we don't want comments to become bogged down with discussions of our policies and we will moderate accordingly.
We appreciate it when readers and people quoted in articles or blog posts point out errors of fact or emphasis and will investigate all assertions. But these suggestions should be sent via e-mail. To avoid distracting other readers, we won't publish comments that suggest a correction. Instead, corrections will be made in a blog post or in an article.
- Route 22 closed in Delmont after tractor-trailer crash at cloverleaf
- Downie, Ehrhoff lead list of likely Penguins leaving in free agency
- Starkey: Cervelli’s inspiration
- More witness intimidation charges are filed against Plum teacher
- Pirates hope 1st baseman Alvarez starts to regain power stroke
- Vandergrift man accused of sexual assault
- Supreme Court justices ream EPA for ignoring costs to meet air standards
- Presque Isle Downs cancels thoroughbred races due to running deer
- Murrysville native Bullock vying for health magazine’s ‘Next Fitness Star’
- 80 percent of drivers found exceeding speed limit in Mt. Lebanon, Bethel Park
- Penguins bringing back defenseman Cole with 3-year extension