Hostess says mediation with union fails

Hostess Brands Inc., maker of Twinkies and Ding Dongs, said late Tuesday that it failed to reach an agreement with its second-biggest union and will continue with a hearing today in which a bankruptcy court judge will decide whether the company can liquidate.

The talks had come as a surprise after Hostess declared last week it would move to wind down its business and start selling off its assets in bankruptcy court. After making its case to liquidate on Monday, however, the judge hearing the case noted the two sides hadn’t yet tried resolving their differences through mediation. The judge noted that 18,000 jobs were on the line and urged the company and union to try to resolve their differences.

Hostess shut down its three-dozen plants late last week after it said a strike by the union crippled its ability to maintain normal production. The Bakery, Confectionery, Tobacco Workers and Grain Millers International Union, which represents about 30 percent of the company’s workers, says the collapse was the result of years of mismanagement, however, and that workers have already given concessions over the years.

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.

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.

Even if Hostess goes out of business, its popular brands will likely find a second life after being sold. 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 alone brought in $68 million so far this year.

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