Hostess announced Tuesday night that mediation with its bakers unionhas failed and that the 82-year-old company will proceed withliquidation plans.
In an update on its talks with the striking Bakery, Confectionary, Tobacco and Grain Millers Union,the company behind Twinkies and Wonder Bread said it would have nofurther comment before a bankruptcy hearing scheduled for 11 a.m. ETWednesday in White Plains, N.Y.
The union, which represents about30% of the company's 18,500 workers, walked out Nov. 9. Hostess closedits 33 plants on Friday and sent workers home as it seeks court approvalto wind downits iconic brands and sell its assets.
BankruptcyJudge Robert Drain urged Hostess and the union to mediate. "Not to havegone through that step leaves a huge question mark in this case," hesaid Monday.
Here's how the Associated Press sums up Hostess' predicament:
Hostess,weighed down by debt, management turmoil, rising labor costs and thechanging tastes of Americans, decided on Friday that it no longer couldmake it through a conventional Chapter 11 bankruptcy restructuring.Instead, the company, which is based in Irving, Texas, asked the courtfor permission to sell its assets and wind down its business.
Thecompany, which is in its second bankruptcy in less than a decade, hadsaid that it was saddled with costs related to its unionized workforce.It brought on Rayburn as a restructuring expert in part to renegotiateits contract with labor unions.
Hostess, whichhad been contributing $100 million a year in pension costs for workers,offered workers a new contract that would've slashed that to $25 milliona year, in addition to wage cuts and a 17 percent reduction in healthbenefits. The baker's union rejected the offer and decided to strike.
Bythat time, Hostess had reached a contract agreement with its largestunion, the International Brotherhood of Teamsters, which urged thebakers union to hold a secret ballot on whether to continue striking.Although many workers in the bakers union decided to cross picket linesthis week, Hostess said it wasn't enough to keep operations at normallevels.
Hostess CEO Gregory Rayburn said that the strikewas the death knell because the company was operating on razor-thinprofit margins. But the bakers union blamed mismanagement, including big debt and big raises executives got last year, as the company headed for its second bankruptcy filing.
No comment yet from the union.
Earlierin the day, union President Frank Hurt, who did not attend the talks,said from his Columbus, Ohio, home he was "not too optimistic about thismediation," the Wall Street Journal says.
WallStreet bankers have said that rivals, including Flowers Foods andMexico's Grupo Bimbo, were "very likely to be interested in parts, butnot all of, the brands," Reuters writes. Private-equity firms -- including Sun Capital Partners and Metropoulos & Co. -- are also interested.