2. The union can still be used to save this situation for the workers, but it would be very hard
The union could still function as the organizing body of a bakery worker cooperative. They all know how to do their jobs (and could probably snag enough floor management that know how to make the logistics work), there is a bunch of bakery equipment coming up for liquidation sale prices, and there are suitable locations coming available right where the factories currently are. If they put their union's money and their own money together (all of them), they might just have enough to garner external support to buy up what they need to get started. They couldn't sell 'Twinkies', since the brand is being sold to someone else, but they could make similar stuff all they wanted (though hopefully, they would go back to putting banana creme inside...).
It sounds like a pipe dream, but it's not. Manufacturing cooperatives are harder to get started this way, due to the size of the capital investments needed, but there are a growing number of them.
Frankly, a little government investment (ie., some loan guarantees) could really help make this happen.