Hostess, maker of Twinkies, says it is shutting down

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Hostess Brands — the maker of such iconic baked goods as Twinkies, Devil Dogs and Wonder Bread — announced Friday that it is asking a federal bankruptcy court for permission to close its operations, blaming a strike by bakers protesting a new contract imposed on them.

The closing will result in Hostess’ nearly 18,500 workers losing their jobs as the company shuts 33 bakeries and 565 distribution centers nationwide, as well as 570 outlet stores. The Bakery, Confectionery, Tobacco Workers and Grain Millers International Union represents around 5,000.

“We deeply regret the necessity of today’s decision, but we do not have the financial resources to weather an extended nationwide strike,” said CEO Gregory Rayburn in a statement.

Hostess will move to sell its assets to the highest bidder. That could mean new life for some of its most popular products, which could be scooped up at auction and attached to products from other companies.

A letter that Hostess sent to its network of stores that carry its product said it expects “there will be great interest in our brands.” But it said it could not give a time frame for when the sales would take place and its products would be available again.

But even if those brands are bought and restarted, the Hostess workers will not get their jobs back.

“The industry has overcapacity. We’re overcapacity. Our rivals are overcapacity,” said Rayburn in an interview on CNBC. Asked if the shutdown decision could be reversed if the Bakers’ union agreed to immediately return to work, he responded, “Too late.”

While approval of the bankruptcy court is needed before the company can start selling its assets in liquidation, the company said production at all of its bakeries has ceased effective Friday, and that stores will no longer receive products from Hostess Brands. But products that are already in stores can be sold, and the outlet stores will remain open for several days to sell the products they already have.

Rayburn said Hostess had annual sales of about $2.5 billion. The company said there are had been 500 million Twinkies made annually.

The company had given a 5 p.m. ET Thursday deadline for the bakers to return to work or face a shutdown of the company. The unions at Hostess could not be reached immediately for comment on the decision.

Hostess filed for bankruptcy in January, its second trip to bankruptcy court since 2004. It previously emerged from restructuring in 2009 after a four-and-a-half year process.

The company is now controlled by a group of investment firms, including hedge funds Silver Point Capital and Monarch Alternative Capital.

In September, one of its major unions, the International Brotherhood of Teamsters, voted narrowly to accept a new contract with reduced wages and benefits. The bakers’ union rejected the deal, however, prompting Hostess management to secure permission from a bankruptcy court to force a new concession contract on workers.

The Teamsters union, which represents 7,500 Hostess workers, has been sharply critical of the smaller Bakers’ decision to strike, saying it was forcing the company to the cusp of liquidation. The Teamsters said Thursday that the Bakers’ union should hold a secret ballot vote on the company’s offer, rather than the voice votes that were held in union halls around the country that authorized the decision to strike.

“It is difficult for Teamster members to believe that is what the [Bakers union] Hostess members ultimately wanted to accomplish when they went out on strike,” said the Teamsters’ statement.

The Bakers’ union has made several statements earlier in the week saying management is to blame for the condition of the company, not the strike.

The new contract cut salaries across the company by 8% in the first year of the five-year agreement. Salaries were then scheduled to bump up 3% in the next three years and 1 percent in the final year.

Hostess also reduced its pension obligations and its contribution to the employees’ health care plan. In exchange, the company offered concessions, including a 25 percent equity stake for workers and the inclusion of two union representatives on an eight-member board of directors.

34 comments

      • ntvsdks

        Ignorance…well displayed! What would you suggest they do with the people who need the temporary assistance? Not everyone who may need assistance are leaches. I worked for 30 years, lost my job and needed help temporarily, I was glad someone was there to help me, and by the way, I paid in for 30 years to have that help available if I ever needed it.

    • ntvsdks

      How would you ever link Obama care to the Hostess situation? If you read any of the history on this, you would know this started back in 2004. Which, in case you didn't know, was when Bush was in office.

    • Craig

      Your right it is because of Obama union types. (good for nothing but ensuring self preservation) economic leaches. Picture in your mind Al Gore's mama singing to him years before the actual song was composed. Look for the union label if your not able to afford to buy a car! And now add as a union bonus this new line. Look for the union tell tale sign if can't find a Twinkie or Ding Dong to gnaw on.

  • Anonymous

    They had problems before Obama, but lets just blame it all on the black man. Seems to be what everyone else is doing. Stop forgetting when all the problems started people, and who started them!

  • Lynn

    Did anyone else read the part about 2.5 billion in annual sales? If you take away Half for operation cost and profit for the company and divide the rest amoung 20,000 employees the total would $62,000/yr for each employee…(this is most likely more than they were actually paid so that should cover insurance costs too). I am pretty sure the company owners and leaders will be personally no where near bankrupcy when all is said and done but the same can not be said of its employees… Big business leaders are unhappy with small profits, and would rather liquidate their business than ‘share’ their profits with their employees. This ‘maker’ ‘taker’ philsophy is backwards… The rich ‘take’ the profits from the hardwork and labor of the poor who actually are the ones doing All the ‘making.’

    • UnionMess

      Get it right…you can't file bankruptcy if a company shows a $1 profit. Courts will now allow it. Miss management? Probably. But when you have unions dictating margins and trying to run a company things go bad. I use to work for a teamster and they are evil. There's a reason why they're wealthy, they still from the sheep and the sheep don't even know it.

      • Lynn

        You do not understand how bankruptcy works…. A corporation filing Chapter 7 bankruptcy liquidates all the assets(including those said dollars of profit you said that they couldn’t file with) of the company then that money is paid off to: first, the cost of the bankruptcy, then all creditors and banks and vendors owed, then the primary shareholders, then if there’s any left the common shareholders(which would be like your average E trader or small time stockholder)… There will be money for those of the top of the list but it won’t make it very far.

    • ntvsdks

      Very observant. Did you also notice that the people who are in control of the company are hedge fund managers. They don't give a darn about people, its all about the money (their money)

    • Pat

      Sounds like what Ahold did to Tops in northeast Ohio . They didn't make enough money for their share holder soo…… They shut down 3000 jobs .An sold everything .An yes, As a union , We gave back too… For the last two contracts

  • Erik

    How about those Unions now. They just want want want. Well I guess they got what they deserved, no job at all. I think it is funny. Unions are just worthless and should be done away with. They already make FAR too much money and yet they always want more. Greed!!

    • Anonymously Anonymous

      Hmph, shows what you know about unions: Conventional, blanket statements and hearsay. Why don’t you do some research about what they’re doing to help people like in-home support workers and others who are at the mercy of corporate conglomerates looking to cut corners to keep more money in their coffers while their workers are wandering around unprotected.

  • UnionMess

    You would think these greedy people would just happy to have a job? People are starving out there and all they worry about is more more more and more…give me give me.

  • Anonymously Anonymous

    Hmph…It figures. Instead of trying to reach a compromise with their workers: They shover their burdens on the highest bidder and screw over tens of thousands in the process just because they’re afraid to talk things out. It’s pathetic. No wonder the rest of the world is laughing at us.

  • Debi Bulick

    Persoonaly, I think the greedy baker's should back down. Hostess is the best of all. No one can even begin to match up to them. This economy is stressed to the max now. They are only making it worse. We need to create jobs, not take them away. What are they thinking anyway????

    • David Kraft

      Their not thinking, just a bunch of greedy uneducated people depending on their union to make the right decision for them. I can live with out Hostess Twinkies and I hope they can live without a job!…

  • Deborah

    WOW 8% less money or no money. Hope those greedy bastards are happy. 5,000 people caused 13,500 others to lose their jobs. What is wrong with people. Some Unions are good and necessary but then there are those few that are just greedy. So sad I love just about all Hostess products. Guess I'm going to the outlet today to fill my freezer. Sad sad day.

  • John

    Whats sad is the unions don't care. They still get their dues from the members that come out of the unemployment checks. If they don't pay the dues, they cannot get on the list for jobs that is already too long. So the Union still get paid and the members get screwed.

  • franky lo

    The execs raised their salaries 80% the year before and had been planning to go bankrupt and blame Obamacare and Unions. Then the execs demanded to drop emps pay 8% and cut benes. Greed suckers dummies into blaming workers over bean counters. IQ not high enough to grasp simple manipulation.

  • franky lo

    Bankruptcy allows greedy execs to drain millions billions, screw emps, not pay bavk any monies and walk away from debt and all responsibility. SCUM and yet people defend these crooks. Why don’t execs have rap sheets those thieves.

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