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Hostess moves to liquidate after crippling strike

Outlets in mid-Missouri also will close
Friday, November 16, 2012 | 10:29 a.m. CST

Hostess Brands Inc. says it's going out of business after striking workers across the country crippled its ability to make its Twinkies, Ding Dongs and other snacks.

The company had warned employees that it would file a motion with the U.S. Bankruptcy Court Friday seeking permission to shutter its operations and sell its brands if plants hadn't resumed normal operations by a Thursday evening deadline. The deadline passed without a deal.

The closing would mean the loss of about 18,500 jobs. Outlets in Columbia and Boonville also are scheduled to close.

"I don't know if they thought that was a bluff," CEO Gregory Rayburn said on CNBC Friday. He said the financial impact of the strike makes it "too late" to save the company even if workers have a change of heart. That's because the clients such as retailers decide to stop carrying products when supplies aren't adequate.

Rayburn said he's hopeful that the company will find buyers for its roster of about 30 brands, which include Ho Hos, Dolly Madison, Drake's and Nature's Pride snacks. The company books about $2.5 billion in sales a year.

Hostess, based in Irving, Texas, said its stores will remain open for several days to sell remaining products. Operations at its 33 factories were suspended Friday. The privately held company filed for Chapter 11 protection in January, its second trip through bankruptcy court in less than a decade.

The move comes after thousands of members of the Bakery, Confectionery, Tobacco Workers and Grain Millers International Union went on strike last week after rejecting a contract offer that slashed wages and benefits in September. The bakers union represents about 30 percent of the company's workforce.

Rayburn said the union's leadership had misled members into believing there was a buyer in the wings who would rescue the company. He said the union hadn't returned the company's calls for the past month.

A union representative did not immediately return a call seeking comment.

Hostess had said earlier this week that production at about a dozen of its plants were seriously affected by the strike. Although many workers decided to cross picket lines, the company said it wasn't enough to keep operations at normal levels. Three plants were closed earlier this week.

Hostess had already reached a contract agreement with its largest union, the International Brotherhood of Teamsters. The Teamsters had urged the bakery union this week to hold a secret ballot on whether to continue striking.

Hostess said the company is unprofitable under its current cost structure, in large part because of union wages and pension costs. Rayburn said in a statement on the company website that all employees will eventually lose their jobs, "some sooner than others."

"Unfortunately, because we are in bankruptcy, there are severe limits on the assistance the (company) can offer you at this time," Rayburn wrote.

After union bakers walked out last week over wage and benefit cuts, Hostess Brands quickly closed three plants,

A Hostess Brands plant in St. Louis employing 365 people closed last week after union bakers walked out because of wage and benefit cuts, according to the St. Louis Post-Dispatch.

Hostess, founded in 1930, was fighting battles beyond labor costs. Competition is increasing in the snack space and Americans are increasingly conscious about healthy eating.


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Comments

Michael Williams November 16, 2012 | 1:22 p.m.

"Hostess said the company is unprofitable under its current cost structure, in large part because of union wages and pension costs. "
______________________

We'll be hearing a lot of that refrain.......

Wonder if the Chinese like making Twinkies and HoHos?

(Report Comment)
Tim Dance November 16, 2012 | 1:36 p.m.

The workers haven't been misled. This company was going to south way before this strike. They decided they were going to put the onus of their bad decision making on workers, cutting their livelihood. The workers decided they rather strike then to be extorted. Their pay structure was probably so idiotic that not even the scabs wanted to work there. But of course people like the original commenter have been conditioned to believe that the rich are victims. If you are a person of modest means, listen up, there are coming for your wages and the Boss Twill lackeys will flood these comment section to make excuses for them.

(Report Comment)
Michael Williams November 16, 2012 | 2:57 p.m.

TimD: If you had bought more Twinkies, this wouldn't have happened. You didn't hold up your end of the deal.

As for "The workers decided they [would] rather strike then to be extorted".....well, I guess they struck themselves right out of a job. 18500 of them, like lemmings over a cliff.

Maybe they feel righteous, tho. Yeah, we showed them!

To bad ya can't eat "righteous".

PS: As for my conditioning, we've been poor and we've been wealthier but not rich, so I figure we've conditioned ourselves and discovered making good decisions and understanding our asset from a hole in the ground is better than...um....not.

(Report Comment)
Mark Flakne November 16, 2012 | 4:28 p.m.

Here is a pretty good piece on the whole thing written a few months ago. Suffice it to say that big unions stink and big hedge-fund bankers who preserve monopoly-like conditions via government coercion and regulation stink as well. It is worth noting that had the Bakers Union followed the lead of the Teamsters, workers would still be pumping out poison Twinkies.

http://management.fortune.cnn.com/2012/0...

(Report Comment)
Michael Williams November 16, 2012 | 4:56 p.m.

MarkF: Great article. Thanks for posting the link. Lots of fault to go around, but the fact remains that if TimD had purchased more Twinkies, the company would be healthy today...although TimD wouldn't. ;^)

Lots of paragraphs stood out, but this one hit me right between the eyes: "And Hostess still had ludicrous work rules: The Teamsters had separate drivers for deliveries of such goodies as Yankee Doodles and Nature's Pride Nutty Oat. (Of course this jobs-preserving work rule was agreed to by Hostess in the last labor negotiation.)"

I remember that kind of crap back when I worked in a union-shop steel mill in the late 60's/early 70's. One that is no longer in business, btw.

One HUGE fact is this: With the economy and serious problems we have today, ANYONE with a job who shows up late, doesn't work hard, agitates, discusses salaries with others, demands more salaries, demands more benefits, and otherwise causes the boss problems is a complete and utter workplace moron.

For now, at least, doing your job and ass-kissing are "in".

(Report Comment)
Corey Parks November 16, 2012 | 5:07 p.m.

"I love it when a plan comes together"

That is the problem with people today. They would rather have all or nothing. I am glad that someone finally called their bluff. Even thought the writing was on the wall for a year or more they just chose not to listen.

(Report Comment)
hank ottinger November 16, 2012 | 8:51 p.m.

I think the time of Twinkies had gone, along with the Ho-hos, Sno-Balls, Ding-Dongs and Blunder Bread. More and more folks realized how utterly terrible these products were--and they moved on. Hostess didn't: free market at work.

(Report Comment)
Mark Foecking November 17, 2012 | 2:09 a.m.

Tim Dance wrote:

"The workers decided they rather strike then to be extorted."

Well, no. They were asked to take an 8%, one year pay cut, which would be made up by increases of 3% over the next three years and a 1% increase the next. It's called cooperating to save your job.

At this point, it doesn't matter how well or poorly the company was managed. They're losing money in a tough market and can't go on the way they were. Now, instead of tightening their belt for a few years, all Hostess employees, including non-union management and support people, are taking 100% pay cuts. Since employees don't pay their own salaries, I'd think they'd understand that a temporary pay cut is better than no pay at all.

DK

(Report Comment)
John Schultz November 17, 2012 | 5:21 a.m.

Hank, the free market didn't do Hostess in - they sold $2.5 billion of product according to the article, so someone somewhere is buying what they make.

(Report Comment)

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