WHITE PLAINS, N.Y. (AP) — Twinkies will live to see another day.
Hostess Brands Inc. and its second largest union agreed on Monday to go into mediation to try to resolve their differences after a bankruptcy court judge noted that the parties hadn't gone through the critical step. That means the maker of the spongy cake with the mysterious cream filling won't go out of business yet.
The news comes after the maker of Ho Ho's, Ding Dongs and Wonder Bread last week moved to liquidate and sell off its assets in bankruptcy court. Hostess cited a crippling strike started on Nov. 9 by the Bakery, Confectionery, Tobacco Workers and Grain Millers International Union, which represents about 30 percent of Hostess workers.
"Many people, myself included, have serious questions as to the logic behind this strike," said Judge Robert Drain, who heard the case in the U.S. Bankruptcy Court in the Southern District of New York in White Plains, N.Y. "Not to have gone through that step leaves a huge question mark in this case."
The mediation talks are expected to begin Tuesday, with the liquidation hearing set to resume on Wednesday. Jeff Freund, an attorney for the bakers union, said any guess as to how the talks will go would be "purely speculative."
In an interview following the hearing, CEO Gregory Rayburn said that there is enormous financial pressure to come to an agreement with the union by the end of the day Tuesday.
He noted that it's costing Hostess about $1 million a day in payroll costs alone to stay alive, with the money mostly going toward management to unwind the company. About 18,000 workers were sent home Friday after the company shuttered its 33 plants, meaning no sales are being generated.
"We didn't think we had a runway, but the judge just created a 24-hour runway," said Rayburn, who added that even if a contract agreement is reached, it's unclear whether all Hostess plants will operate again.
Hostess, weighed down by debt, management turmoil, rising labor costs and the changing tastes of America, decided on Friday that it no longer could make it through a conventional Chapter 11 bankruptcy restructuring. Instead, the company, which is based in Irving, Texas, asked the court for permission to sell its assets and go out of business.
The company, which is in its second bankruptcy in less than a decade, had said that it was saddled with costs related to its unionized workforce. It brought on 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 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.
Rayburn said that Hostess was already operating on razor thin margins and that the strike was the final blow. The bakers union said the company's demise was the result of mismanagement, not the strike.
The company's announcement on Friday that it would move to liquidate prompted people across the country to rush to stores and stock up on their favorite Hostess treats. Many businesses reported selling out of Twinkies within hours and the spongy yellow cakes turned up for sale online for hundreds of dollars.
Even if Hostess goes out of business, its popular brands will likely find a second life after being snapped up by buyers. 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 along brought in $68 million so far this year.
Today is Thursday, Dec. 12, the 346th day of 2013. There are 19 days left in the year. 1863 -- 150 years ago: Two boys who haul coal from Coal Valley to Davenport were arrested yesterday for running their teams through the city street at a furious rate. 1888 -- 125 years ago: E.H. Barker dislocated his left wrist and suffered a compound fracture of the right wrist when he fell from the roof of his icehouse. 1913 -- 100 years ago: Lou Harris was elected county superintendent of schools to fill the unexpired term of the late S.J. Ferguson. 1938 -- 75 years ago: The U.S. Supreme Court ruled today that a state must give equality in educational privileges to white and Negro law students. 1963 -- 50 years ago: About 300 employees of the Augustana Book Concern, staff members of the Board of Publication of the Lutheran Church in America, as well as friends of the community and out-of-town guests honored Dr. Birger Swenson at the annual Christmas dinner of the Augustana Book Concern last night in Westerlin Hall on the Augustana College campus. 1988 -- 25 years ago: The Christmas shopping season began early this year and continues to bring out shoppers in record numbers, according to Quad-Cities retailers interviewed today.