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Hostess, union to give mediation one last try. Can Twinkies be saved? (+video)

A judge asks Twinkies maker Hostess and union lawyers to participate in mediation Tuesday to resolve their differences. If they fail, bankruptcy motions will resume Wednesday and 18,000 jobs will be lost.

By Staff writer / November 19, 2012

Twinkies baked goods are displayed for sale at the Hostess Brands' bakery in Denver, Colo., Friday, Nov. 16. Twinkies maker Hostess and union lawyers will go into mediation to try and resolve their differences, meaning the company won't go out of business just yet.

Brennan Linsley/AP

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Chicago

As Hostess Brands tried to convince a New York bankruptcy judge to help the company shut down its business Monday – a move expected to put 18,000 employees out of work – the maker of Twinkies and other iconic American snacks was asked to participate in one final mediation session with the union to prevent it from shutting its doors for good.

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Judge Robert Drain of the US Bankruptcy Court in White Plains, N.Y., asked attorneys representing Hostess and the Baker, Confectionary, Tobacco Workers and Grain Millers’ International Union to participate in mediation Tuesday.

If the talks prove unsuccessful, Judge Drain said, the bankruptcy motions will resume Wednesday.

“To me not to have gone through [mediation] leaves a huge question mark over this case, which I think – I may be wrong – but I think will only be answered in litigation. And that’s no one’s desired outcome,” he said.

The mediation session Tuesday will be confidential, but Drain said representatives from the International Brotherhood of Teamsters and representatives from Hostess’s creditors could attend.

Hostess arrived in bankruptcy court after saying that a week-long strike by the bakery union, which began Nov. 9, gave them no choice but to liquidate assets. At stake are 36 bakeries, 242 distribution depots, 216 retail outlets, and 311 other facilities. Three days into the strike, the company, based in Irving, Tex., permanently closed three plants in St. Louis, Cincinnati, and Seattle.

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.

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