Hostess and its employees had a history of contentious relations. The company had long complained that the costs of maintaining a unionized workforce prevented it from growing; in January, it filed for Chapter 11 bankruptcy protection for the second time in less than a decade. A new contract that the company was seeking to impose would have slashed its pension costs from $100 million to $25 million annually, cut wages, and reduced health benefits by 17 percent.
The union says the company has suffered from eight years of failed management that refused to modernize its facilities or invest in product development or advertising and marketing, plunging the company deeper in debt. Bakery union leaders also say the company was losing money by maintaining executive bonuses, including elevating the salaries of at least a dozen executives by between 35 and 80 percent last year, and by enriching owners of a private equity firm and hedge funds.
Tuesday’s mediation session is intended as a last-ditch attempt to reboot the company and save jobs, but it may be the case of too little, too late. Hostess has said that the bakery union has refused to negotiate with the same spirit of other labor organizations, such as the Teamsters, which agreed to wage cuts in exchange for about 25 percent of the company’s stock.
On Monday, Hostess attorney Heather Lennox told Judge Drain that last week’s strike permanently crippled the company. “At this point … our customers know we’re going out of business. It would be very hard for us to recover from this damage … even if there were to be an agreement in the near term,” Ms. Lennox said.
Bakery union attorney Jeffrey Freund said the union has been “crystal clear” about its terms, which it reiterated “again and again and again and again.”