Snack cake maker and conic American brand Hostess will shut down immediately and fire 15,000 workers. Pink slips were handed out the day before Thanksgiving.
The company has been in forced mediation with one of the unions representing their workers, after Judge Robert Drain, who is in charge of the bankruptcy negotiations, decided the company hadn't exhausted all its options.
He changed his mind yesterday, after the talks fell through and executives and the union were unable to come to an agreement.
Hostess employs nearly 18,500 workers at over 30 plants across the country, as well as hundreds of distribution centers and bakery outlets. The remaining 3,500 workers will be kept on for a few months to help close locations; then they will be fired as well.
"This is a tragedy, and we're well aware of it," said Heather Lennox, a lawyer for Hostess."We are trying to be as sensitive as we can possibly be under the circumstances to the human cost."
The union has not made public comments about the decision yet.
Hostess will attempt to sell off its infrastructure and brands as quickly as possible, since they're currently losing value. Rivals like Little Debbie and Drake's, as well as up-and-coming bakeries looking to score a famous brand, are eyeing the sales.
''This is a once-in-a-lifetime opportunity to get iconic brands separate from their legacy operators,'' said Joshua Scherer of Perella Weinberg Partners.
Troubles for Hostess began when workers affiliated with the The Baker, Confectionery, Tobacco Workers and Grain Millers' International Union went on strike at Hostess plants on Nov. 9 over what they said 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 countered that they were 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 took place on Tuesday, mediated by Judge Drain. Hostess executives and representatives of the BCTWGM union attended, while Hostess creditors and representatives of the Teamsters' Union (which also has members at Hostess plants) were invited.
"Unfortunately, the last-minute mediation efforts by Judge Drain were not successful," said Ken Hall, general secretary-treasurer of the Teamsters union. "This is a tragic outcome."