Americans stocking up on Twinkies, Ding Dongs, HoHos and chocolate cupcakes might want to wait before stocking up like it's the apocalypse: Hostess might not go under.
Hostess is facing opposition from the Department of Justice over its plan to pay executives up to 75 percent of their annual salary as part of its bankruptcy process-a move that will leave 18,500 workers out of a job.
Before the bankruptcy proceedings can continue. Hostess has been forced into mediation with one of the unions representing its workers.
The Baker, Confectionary, Tobacco Workers and Grain Millers' International Union has been on strike at Hostess plants since Nov. 9 over what they say are exorbitant executive bonuses and a failure to modernize plant infrastructure or brand identity. Pay for over a dozen executives at the company increased by between 35 and 80 percent last year, just before filing for bankruptcy for the second time in less than a decade.
Hostess executives counter that they are unable to continue to support a unionized workforce and plan to cut pensions by 75 percent, and reduce health benefits by 17 percent.
The closed door negotiations take place today. Hostess executives and representatives of the BCTWGM union will attend, while Hostess creditors and representatives of the Teamsters' Union (which also has members at Hostess plants) are invited.
If negotiations fall through, bankruptcy proceedings will continue on Wednesday, though perhaps not in the same form.
Hostess has filed for Chapter 11 bankruptcy, the same kind of bankruptcy it underwent in 2004. But the company's plan to pay executive bonuses doesn't sit well with the Department of Justice, which has filed an objection with the judge in charge of the proceedings, requesting the process be converted to a Chapter 7 bankruptcy.
That switch would put a court-appointed trustee in charge of the liquidation, and make any executive bonuses subject to the trustee's judgment.
While a deal between executives and the union is possible, it is unlikely. There's plenty of bad blood remaining from the first bankruptcy, when pay and benefits were cut initially, but executives didn't suffer. It's doubtful that the union will agree to further cuts while executives actually get a bonus.