November 16, 2012 / 3:01 AM / in 6 years

UPDATE 1-Liquidation threat looms for Twinkies maker Hostess

(Adds expiry of return-to-work deadline, comment)

By Carey Gillam

LENEXA, Kan Nov 15 (Reuters) - A standoff between Hostess Brands Inc. and thousands of its bakery workers was heading for a showdown after the expiry of a return-to-work deadline, with both sides saying they will accept the demise of the historic maker of Twinkies and Wonder Bread.

The bankrupt company is on its last legs, according to management. The company had set a deadline of 5 p.m. EST (2200 GMT) on Thursday and said that unless enough employees returned to work by that time, the company would ask a bankruptcy court on Friday for permission to liquidate.

The deadline came and passed and company officials would only say that they planned to issue a statement early Friday. Labor representatives said they were braced for the worst.

“We haven’t heard a word,” said Conrad Boos, a labor representative for Missouri and Kansas. “We are expecting to hear something first thing in the morning. They are not willing to budge or negotiate on anything.”

Members of the Bakery, Confectionery, Tobacco Workers and Grain Millers International Union went on strike Nov. 9 to protest 8 percent pay cuts and other health care and pension concessions sought by the company, which has been struggling to emerge from an overload of debt.

The strike has severely hindered performance at about one-third of the company’s 36 bakeries, company officials said.

“The significance is tremendous,” said Lance Ignon, spokesman with Sitrick and Co., which is handling communications for Hostess.

The bitter dispute pits the 82-year-old company against the Bakery, Confectionery, Tobacco Workers and Grain Millers International Union, whose members constitute about one-third of Hostess’ nearly 18,000 employees.

While the company has said it must have significant labor concessions to continue to survive, the union has said the company must rescind wage and benefit reductions.

Union President Frank Hurt said Thursday that the crisis is a “result of nearly a decade of financial and operational mismanagement” and said management was trying to make union workers the scapegoats for a plan by “Wall Street investors” to sell off Hostess.

The union said the private equity and hedge funds that control Hostess did not live up to promises to modernize plants and trucks but grew the company’s debt while rewarding themselves financially.

Management has countered that onerous union contracts are a big part of the company’s financial woes.

Union members striking outside the Hostess bakery in Lenexa, Kansas on Thursday said wages and benefits had already been shaved substantially in the company’s years of financial struggles and further concessions were not feasible. They blame poor management for the company’s woes.

“We want to go back to work. But all I’ve done since I’ve been here is give,” said 35-year-old Dan Carlson, who mixes dough in the Lenexa plant for $17 an hour and has worked with Hostess for six years. “We can’t keep giving.”

Many union leaders and workers have been holding out hope that some other company would step in to buy Hostess and operate the bakeries, but Hostess has said that is not a possibility.

“There is a perception among some of our employees that a white knight is going to come in. There is no white knight,” said Ignon.

Hostess management said that the company would on Friday ask U.S. Bankruptcy Judge Robert Drain in White Plains, New York, who oversees its Chapter 11 reorganization, for permission to shut down and sell assets.

Hostess said if it wins permission to liquidate, it will begin to close all operations as soon as Nov. 20, two days before Thanksgiving, and fire all plant workers except those needed to prepare its facilities for sale.

Earlier this week, Hostess said the strike already forced it to permanently close three of its 36 bakeries, costing 627 jobs.

The Irving, Texas-based company filed for protection from creditors on Jan. 11, its second bankruptcy filing in less than three years. It operates 565 distribution centers and 570 bakery outlet stores, as well as the 33 bakeries. Hostess brands include Wonder, Nature’s Pride, Dolly Madison, Drake’s, Butternut, Home Pride and Merita.

Hostess has already reached agreement on pay and benefit cuts with the International Brotherhood of Teamsters, its largest union. The Teamsters have largely been honoring the bakery workers picket lines. But on Thursday the Teamsters called on the bakery workers union to take a “secret ballot” vote on a continued strike.

On the round-the-clock picket lines, strikers were worried, but also somewhat resigned that any resolution was unlikely to be in their favor.

“We’re all worried and scared,” said 47-year-old Steve Blakey who has worked at Hostess for 27 years and planned to retire in two years.

“I don’t want to lose my job. It’s Christmas time,” said 23-year-old Daniel Smith, who makes $11.64 an hour at the plant. “But if I have to take the cuts they’re talking about I can get more from unemployment.”

The case is In re: Hostess Brands Inc, U.S. Bankruptcy Court, Southern District of New York, No. 12-22052. (Editing by Andrew Hay and Richard Pullin)

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