Troubled Twinkie maker Hostess Brands and the unions representing its striking workers agreed to start mediation hearings on Tuesday at the urging of a bankruptcy court judge.
Management at the Twinkies and Wonder Bread manufacturer sought permission to liquidate the company on Monday, but was urged by the judge to mediate in private. Mediation will begin on Tuesday. If talks collapse, lawyers for Hostess will be back in court to seek approval to shut down the 82-year-old company.
Hostess filed for bankruptcy for the second time in January and had been negotiating cuts with its unions. Those talks fell apart last week as the company’s management blamed the union, and the Bakery, Confectionery, Tobacco Makers and Grain Millers (BCTGM) union in turn blamed mismanagement. The union also balked at a fresh round of pay cuts it said would cut wages by 27-32%.
Judge Robert Drain of the US bankruptcy court asked attorneys to mediate.
“To me, not to have gone through that step leaves a huge question mark over this case, which I think – I may be wrong – but I think will only be answered in litigation. And that’s no one’s desired outcome,” the judge said.
Alongside labour disputes, Hostess, which is based in Irving, Texas, has struggled for years with massive debts, management turmoil, rising commodity costs and America’s changing tastes.
After the maker of Twinkies, Ding Dongs and Ho Ho’s filed for bankruptcy in January, it brought on CEO Greg Rayburn as a restructuring expert to work on renegotiating contract with labour unions.
In a filing with the court, BCTGM said it had agreed to “significant labor concessions” with the company when Hostess first filed for bankruptcy in 2004. The company had pledged to reinvest the money saved into the business, according to BCTGM, but instead emerged from bankruptcy with $773m in secured debt, over $100m more than when the case was filed. Six management teams in the last eight years have compounded Hostess’ woes, according to the union.
Last week, Rayburn rejected calls for renegotiating contracts with BTGCM. Hostess management had reached agreement with other unions, including the Teamsters.
[Image via Christian Cable, Creative Commons licensed]