Hostess Brands Returns To Bankruptcy Court, Twinkies Fate Uncertain

Hostess Brands Returns To Bankruptcy Court, Twinkies Fate Uncertain

On Tuesday, Hostess Brands Inc., the maker of the beloved Twinkies and Ding Dong snacks, said it did not reach an agreement with its second largest union, and now, on Wednesday, a hearing will continue in bankruptcy court.

A judge will determine the fate of the company by deciding if it will shut down its operations.

Hostess Brands Returns To Bankruptcy Court, Twinkies Fate Uncertain

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This latest action comes after talks between Hostess Brands and The Bakery, Confectionery, Tobacco Workers, and Grain Millers International Union fell apart when the company announced last week that it would move toward closing its business and begin selling off assets in bankruptcy court.

A Nov. 9 union strike, representing 30 percent of Hostess Brands workers, got the ball rolling and led the company to really unravel.

Last week, Hostess Brands closed its three dozen plants, due to the striking bakers union affecting normal production. The union has said the company’s downfall came after years of mismanagement. Over the years, they believe workers have endured deep concessions.

On Monday, Hostess Brands went before a bankruptcy judge, after the two sides couldn’t reach an agreement with a private mediator. According to AP, the judge cited that 18,000 jobs were in jeopardy and suggested the company and union to try to repair their differences.

This led to Tuesday’s failed mediation, and late in the day, Hostess said it wouldn’t discuss the failed talks other than to comment mediation “was unsuccessful.”

For Hostess Brands, this isn’t its first Chapter 11 rodeo. It is visit number two and it comes after the company has faced management problems, increasing labor costs, and a change in Americans’ tastes.

One effort to repair things was the hiring of restructuring expert CEO Gregory Rayburn to help renegotiate its labor unions contract.

On a positive note, Hostess Brands did make an agreement with the International Brotherhood of Teamsters–its largest union–for a contract that included reductions in pension contributions, wages, and health benefits.

But as for reaching an agreement with its bakers union, communications stopped between the two about one month ago. The Teamsters had suggested the smaller union cast a secret ballot on whether or not members wanted to keep striking, reported AP. This week, many of the bakers union workers crossed picket lines, but it was seen as too little, too late.

With the company conducting business in extremely tight margins, Rayburn said for Hostess, the strike was the nail in the coffin, while bakers union members couldn’t help but note hefty 2011 raises to executives, as the company was on the road to bankruptcy.

In recent news for the company that sent a chill to Hostess fans, last week’s announcement by the company that it would liquidate its holdings, has announced the death of the Twinkie. With the thought of no more Twinkies and Ding Dongs, businesses sold out of the high-shelf life products in a matter of hours.

A new generation of kids will never enjoy this lunch and after school treat like their parents did.

But don’t panic yet, should Hostess Brands close its doors, its beloved brands could find another lease on life, as buyers could grab them. The company has said there’s numerous possible buyers interested, including private equity firm Sun Capital Partners, even as sales have dropped over recent years.

It still does $2.5 billion annually, with Twinkies contributing $68 million to-date in 2012.

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