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Liquidation deadline looms for Twinkies maker Hostess

By Carey Gillam

LENEXA, Kan (Reuters) - A standoff between Hostess Brands Inc. and thousands of its bakery workers was heading for a showdown Thursday as both sides declared they would not bend and were set to accept the demise of the historic maker of Twinkies and Wonder Bread.

The bankrupt company is on its last legs, according to management, and will ask a bankruptcy court on Friday for permission to liquidate unless workers at Hostess plants across the country return to work by 5 p.m. EST (2200 GMT) on Thursday.

Members of the Bakery, Confectionery, Tobacco Workers and Grain Millers International Union went on strike November 9 to protest 8 percent pay cuts and other health care and pension concessions sought by the company.

The strike has severely hindered performance at about one-third of the company's 36 bakeries, company officials said.

"The significance is tremendous," said Lance Ignon, spokesman with Sitrick and Co., which is handling communications for Hostess. "If we don't have enough people go back to work today to ensure we can go back to full operations."

The bitter dispute pits the 82-year-old company against the Bakery, Confectionery, Tobacco Workers and Grain Millers International Union, whose members constitute about one-third of Hostess' nearly 18,000 employees.

While the company has said it must have significant labor concessions to continue to survive, the union has said the company must rescind the wage and benefit reductions.

Union President Frank Hurt said Thursday that the crisis is a "result of nearly a decade of financial and operational mismanagement" and said management was trying to make union workers the scapegoats for a plan by "Wall Street investors" to sell off Hostess.

The union said the private equity and hedge funds that control Hostess did not live up to promises to modernize plants and trucks but grew the company's debt while rewarding themselves financially.

Union members striking outside the Hostess bakery in Lenexa, Kansas on Thursday said wages and benefits had already been shaved substantially in the company's years of financial struggles and further concessions were not feasible. They blame poor management for the company's woes.

"We want to go back to work. But all I've done since I've been here is give," said 35-year-old Dan Carlson, who mixes dough in the Lenexa plant for $17 an hour and has worked with Hostess for six years. "We can't keep giving."

Many union leaders and workers have been holding out hope that some other company would step in to buy Hostess and operate the bakeries, but Hostess has said that is not a possibility.

"There is a perception among some of our employees that a white knight is going to come in. There is no white knight," said Ignon.

Hostess management said that if enough striking workers did not return to work by 5 p.m. EST (2200 GMT) the next day, the company would on Friday ask U.S. Bankruptcy Judge Robert Drain in White Plains, New York, who oversees its Chapter 11 reorganization, for permission to shut down and sell assets.

Hostess said if it wins permission to liquidate, it will begin to close all operations as soon as November 20, two days before Thanksgiving, and fire all plant workers except those needed to prepare its facilities for sale.

Earlier this week, Hostess said the strike forced it to permanently close three of its 36 bakeries, costing 627 jobs.

The Irving, Texas-based company filed for protection from creditors on January 11, its second bankruptcy filing in less than three years. It operates 565 distribution centers and 570 bakery outlet stores, as well as the 33 bakeries. Hostess brands include Wonder, Nature's Pride, Dolly Madison, Drake's, Butternut, Home Pride and Merita. The company has roughly 17,780 employees.

Hostess has already reached agreement on pay and benefit cuts with the International Brotherhood of Teamsters, its largest union. The Teamsters have largely been honoring the bakery workers picket lines. But on Thursday the Teamsters called on the bakery workers union to take a "secret ballot" vote on a continued strike.

Ignon said that the deadline was "not hard and fast," and that board members would need to discuss the decision to liquidate following the expiration of the deadline.

Back on the picket line in Kansas, where workers huddled against a cold wind across the street from the Hostess plant, hopes for resolution were fading.

"We're all worried and scared," said 47-year-old Steve Blakey who has worked at Hostess for 27 years and planned to retire in two years.

"I don't want to lose my job. It's Christmas time," said 23-year-old Daniel Smith, who makes $11.64 an hour at the plant. "But if I have to take the cuts they're talking about I can get more from unemployment."

The case is In re: Hostess Brands Inc, U.S. Bankruptcy Court, Southern District of New York, No. 12-22052.

(Editing by Andrew Hay)

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