Hostess Back to Liquidation

Union mediation doesn’t last long, doesn’t resolve issues

IRVING, Texas -- Hostess announced Tuesday night that mediation with its bakers union failed and that the 82-year-old company will proceed with liquidation plans, according to numerous reports.

Hostess joined the striking Bakery, Confectionary, Tobacco and Grain Millers Union at the negotiation table on Tuesday at a bankruptcy judge’s directive, only to walk away hours later without a settlement.

The union, which represents about 30% of the company's 18,500 workers, walked out Nov. 9. Hostess closed its 33 plants on Friday and sent workers home as it seeks court approval to wind down its iconic brands and sell its assets.

Bankruptcy Judge Robert Drain urged Hostess and the union to mediate. "Not to have gone through that step leaves a huge question mark in this case," he said Monday, according to a report in USA Today.

Hostess, which is in its second bankruptcy in less than a decade, said it was saddled with costs related to its unionized workforce, according to an Associated Press report. It brought on CEO Gregory 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% reduction in health benefits. The baker's union rejected the offer and decided to strike.

In an interview (See embedded video.) with Bloomberg news, Hostess CEO Greg Rayburn predicted the company will see strategic buyers pick up the various Hostess brands, including Twinkies, Ho Hos and Wonder Bread, among others.