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The bankruptcy court judge overseeing Hostess Brands' financial matters said yesterday that the company could not liquidate and sell off its brands and infrastructure, because it had not gone through private mediation of its dispute with the striking Bakery, Confectionery, Tobacco Workers and Grain Millers International Union.

Hostess, the manufacturer of Twinkies, Wonder Bread and other brands, said last week that it wanted to liquidate because the strike had crippled its ability to produce and deliver product, and that it would not be able to survive its current bankruptcy filing (its second in less than a decade).

The liquidation meant that the company's 18,500 employees were immediately laid off.

According to the Sacramento Bee story, "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."

CEO Gregory Rayburn said that "Hostess was already operating on razor thin margins and that the strike was the final blow," the story says. "The bakers union said the company's demise was the result of mismanagement, not the strike. It pointed to the steep raises executives were given last year as the company was spiraling down toward bankruptcy."

The last-ditch mediation session is scheduled for today.
KC's View:
I'm sure there is plenty of blame to go around here. But...

I have to say that it is hard to feel much sympathy for management when one reads reports like the one from Reuters saying that "Hostess wants permission to pay senior management a bonus of up to 75 percent of their annual pay so they will stay on and help wind-down the business." In fact, the story says, "the U.S. Trustee, an agent of the U.S. Department of Justice who oversees bankruptcy cases, said in court documents it is opposed to the wind-down plan because Hostess plans improper bonuses to company insiders."

I am not reflexively either pro-management or pro-labor, and I have used this space plenty of times over the past 11 years to be critical of organized labor, and especially of national labor organizations that I often think give a higher priority to their own agendas, as opposed to the needs of their members.

But I am sick and tired of senior executives who feather their own nests even as companies enter a death spiral.

(BTW...I'm not calling the bankruptcy court judge a geezer. I just couldn't resist the reference to a Broadway tune...)