Zero Hedge 
Nov 21, 2012
Last week , when discussing the next steps for the company, and specifically the hope that mediation may resolve the epic animosity between management and workers, we stated that “What makes a mediation improbable is that the antagonism between the feuding sides has certainly hit a level of no return: “Several unions also objected to the company’s plans, saying they made “a mockery” of laws protecting collective bargaining agreements in bankruptcy. The Teamsters, which represents 7,900 Hostess workers, said the company’s plan would improperly cut the ability of remaining workers to use sick days and vacation.” Sure enough, moments ago we learned that mediation has now failed and the liquidation may proceed. And since in America nobody understands that proper sequence of events involved in a bankruptcy liquidation, where the valuable parts always end up being acquired by someone, in this case the Twinkie brand and recipe, let the pointless Ebay bidding wars over twinkies continue. As for what really happens next, if indeed Bimbo is prohibited from acquiring the assets in the Stalking Horse auction due to anti-trust limitations, then the buyer will almost certainly be a “financial”, i.e., another PE firm, whose coming means the end of any hopes and dreams of preserving union status at fresh start Hostess, or whatever the new firm will be named.
From the WSJ :
Hostess Brands Inc. said Tuesday night it would proceed with liquidation plans after mediation fails.
Earlier Tuesday, the head of the bakers union whose strike precipitated Hostess liquidation plans didn’t attend a last-ditch mediation session and wasn’t hopeful about its prospects, he said.
“I’m not too optimistic about this mediation,” Frank Hurt, president of the Bakery, Confectionery, Tobacco Workers and Grain Millers International Union, said when reached earlier Tuesday afternoon in Columbus, Ohio. He said he couldn’t get to New York, where the session was taking place; instead, he said, the union’s secretary-treasurer was attending.
The mediation came at a judge’s suggestion after the Twinkie maker said Friday that a week-long strike by the bakers left the company no choice but to seek a bankruptcy judge’s approval for liquidation.
The judge, Robert Drain, urged mediation, citing among other things the hope for saving some 18,500 jobs. The company filed for bankruptcy protection for the second time in January.
The judge indicated Monday that if mediation wasn’t successful, Hostess could return to court Wednesday to pursue its liquidation plan.
Doug Mansky, a Hostess driver in Detroit and a member of the International Brotherhood of Teamsters, was in the process of moving to a cheaper condominium on Tuesday, after his union had agreed to an 8% pay cut that he said would shave $200 a week from his income. After Judge Drain cleared Hostess to impose the same new labor terms on the bakers union, they went on strike.
“I hope things work out. I’m going to be 49 and trying to find a job in a market that’s terrible,” Mr. Mansky said.
Sadly, the reality of learning just how bad the labor market truly is, all smoke and mirrors of a recovery aside, will now have to be experienced by not only Mr. Manksy but 18,499 of his fellow co-workers, who may have been duped into hoping by their union that by holding out a hardline stance, they would gain something.
They have now lost everything. And not too unexpectedly, the workers are now turning on the Union!
[S]ome Hostess workers in another union awaiting the
mediation results criticized Mr. Hurt, the 20-year president of the
bakers union, who defended his decisions and actions during the
company’s bankruptcy process.
Scott Quenneville, a Hostess truck driver represented by the Teamsters, said he feels his colleagues were misled by Mr. Hurt into believing that a buyer would swoop in for the company. Mr. Hurt on Sunday said he thought there was a good chance a buyer would emerge who would give union members their jobs back.
“Frank misled a lot of people. He was not going to settle for anything less than closing the company down, because they didn’t want that 8% pay cut,” said Mr. Quenneville. “If you don’t want the job, leave the job. Why ruin 18,000 jobs?”
“I didn’t mislead anybody on anything,” Mr. Hurt said. He said he didn’t tell workers preparing to strike that a buyer for Hostess was definitely waiting in the wings.
Mr. Hurt said, “I don’t want anybody to think that anybody is guaranteeing anyone anything, but we did know that there were people taking a look at this company.”
This would be a truly fantastic drama, if people’s lives were not at stake. And no, not one former Hostess worker will retain their job at the new company: that much is certain.
As we said, if only people had a basic understanding of how bankruptcy truly worked, and what the real state of the economy was, then Hostess’ workers may have had a chance and some amicable comrpomise would have been possible.
Then again, if people in America actually understood economics and simple finance, then the “Ohio outcome “, and many others, would have likely been quite different.
Now we can only hope we were not correct about the ultimate outcome too: namely that the US government will effectively hijack the bankruptcy process, and in doing so “bailout” a junk food maker, just so 18k votes can be preserved at the expense of creditors and making yet another mockery of the bankruptcy process, and property rights in the US.
Then again, this is precisely what the Union was likely hoping for all along, because once the government starts bailing everyone out, just where does it draw the line?