Wednesday, April 16, 2014
BIDDEFORD – Barrels stuffed with burning logs crackled outside the Hostess Brands bakery in Biddeford on Monday night as workers who thought a bankruptcy court would let the company close learned that their jobs might yet be saved.
Striking workers Nam Phan, left, and Randy Goodwin picket outside a Hostess Brand plant Friday, in Biddeford.
Hostess Brands Inc. and officials from the bakery workers union agreed Monday to try to mediate their differences. The sides were scheduled to meet Tuesday in New York.
Meanwhile, more promising news developed Monday as private equity firm Sun Capital Partners disclosed to Fortune & Money -- a service of CNN -- that it is interested in buying the bankrupt bakery and reopening the company's shuttered plants.
Other companies have also expressed interest in buying Hostess, wire services have reported.
Workers at the Biddeford plant had planned to disband their picket line Tuesday but the news of a potential buyer or mediated agreement instilled new hope.
"That is the greatest news I have heard in a long while," said Michael Maginnis of Sanford, who has worked in the shipping department for 23 years. "Hopefully, we can get our old jobs back."
Hostess Brands employs 18,000 people, 500 of them in Maine, including 370 workers at its plant on Precourt Street in Biddeford. Others are employed in outlet stores around the state.
Among its more well-known products are Twinkies, Ho Ho's, Honey Buns, Ding Dongs and Wonder Bread.
In January, Hostess filed for bankruptcy, its second in a decade. In September, 92 percent of the bakery union rejected contract concessions that included an immediate 8 percent wage cut as well as cuts to benefits. The contract was approved by the Teamsters, Hostess' largest union.
The bakery union, which represents about 30 percent of Hostess' workers nationally, went on strike Nov. 9. Workers at two dozen bakeries, including Biddeford, have been on strike or honoring the walkout. Hostess has 36 bakeries nationally.
The company, weighed down by debt, management turmoil, rising labor costs and the changing tastes of Americans, decided Friday that it no longer could make it through a conventional Chapter 11 bankruptcy restructuring.
Instead, the Irving, Texas, company asked the court for permission to liquidate its assets and close. That led to closure of its 33 plants, including the Biddeford facility, on Friday.
But Monday, the Associated Press reported Hostess and members of the Bakery, Confectionary, Tobacco Workers, and Grain Millers International Union were persuaded by a bankruptcy judge to try mediation. The union represents about 30 percent of Hostess workers.
Judge Robert Drain, who heard the case in U.S. Bankruptcy Court in New York, was to mediate Tuesday's session.
"Many people, myself included, have serious questions as to the logic behind this strike," Drain told the Associated Press. "Not to have gone through that step leaves a huge question mark in this case."
The liquidation hearing is scheduled to resume Wednesday if the two sides cannot come to some agreement Tuesday, the Associated Press reported.
If that happens, workers at the Biddeford plant would be unemployed.
People on the picket line Monday night said that losing their jobs in this economy around the holiday season would be devastating to them and their families.
"I'm encouraged by the fact (the courts) are forcing the company to go back and try to work something out," said Dale Gagne, a maintenance worker from North Waterboro. "Every person on this line wants the company to keep running."
Gagne, who has been yelled at by passers-by and had a Honey Bun thrown at him, said he heard Monday that a box of Twinkies had sold for $10,000 on eBay.
Gagne said he likes the idea of new owners, as long as they commit to running a quality bakery.
Hostess CEO Gregory Rayburn told the Associated Press that there is enormous financial pressure to come to an agreement by the end of the day Tuesday.
Rayburn claimed it is costing the company about $1 million a day in payroll costs alone to pay for management charged with unwinding the company.
"We didn't think we had a runway, but the judge just created a 24-hour runway," said Rayburn, who added that even if a contract agreement is reached, it's unclear whether all Hostess plants will get up and running again.
Jerry Leighton of Biddeford, who has worked in the company's shipping department for more than 10 years, said he has doubts that a private equity firm such as Sun Capital would have the expertise to operate a bakery.
"I'm a little leery of them," Leighton said, as the driver of a passing car yelled: "We want Twinkies!"
Leighton said new owners would inherit a skilled and dedicated work force.
"Anybody who wants to come in here and take us over, we've got a great group of workers," Leighton said. "Just listen to the workers and we'll make a profit."
The company had said that it was saddled with costs related to its unionized work force. Rayburn said that Hostess was already operating on razor thin margins and that the strike was the final blow.
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 toward bankruptcy.
The company's announcement last week that it would move to liquidate prompted people across the country to rush to stores and stock up on their favorite Hostess treats.
Many businesses reported selling out of Twinkies within hours and the spongy cakes turned up for sale online for hundreds of dollars.
Although Hostess' sales have been declining in recent years, the company still does about $2.5 billion in business each year. Twinkies alone brought in $68 million so far this year.
Staff Writer Dennis Hoey can be contacted at 791-6365 or at: