ONTD Political

Hostess Going Out of Business, CEO Blames Union Strike

10:14 am - 11/16/2012

Hostess, the makers of Twinkies, Ding Dongs and Wonder Bread, is going out of business after striking workers failed to heed a Thursday deadline to return to work, the company said.

“We deeply regret the necessity of today’s decision, but we do not have the financial resources to weather an extended nationwide strike,” Hostess CEO Gregory F. Rayburn said in announcing that the firm had filed a motion with the U.S. Bankruptcy Court to shutter its business. “Hostess Brands will move promptly to lay off most of its 18,500-member workforce and focus on selling its assets to the highest bidders.”

Hostess Brands Inc. had earlier warned employees that it would file to unwind its business and sell off assets if plant operations didn't return to normal levels by 5 p.m. Thursday. In announcing its decision, Hostess said its wind down would mean the closure of 33 bakeries, 565 distribution centers, approximately 5,500 delivery routes and 570 bakery outlet stores in the United States.

Hostess suspended bakery operations at all its factories and said its stores will remain open for several days to sell already-baked products.

The Irving, Texas-based company had already reached a contract agreement with its largest union, the International Brotherhood of Teamsters. But thousands of members in its second-biggest union went on strike late last week after rejecting in September a contract offer that cut wages and benefits. Officials for the Bakery, Confectionery, Tobacco Workers and Grain Millers International Union say the company stopped contributing to workers' pensions last year.

NBC's Savannah Guthrie read a statement on "Today" from the bakers' union that said: “Despite Greg Rayburn’s insulting and disingenuous statements of the last several months, the truth is that Hostess workers and the union have absolutely no responsibility for the failure of this company. That responsibility rests squarely on the shoulders of the company’s decision makers.”

Rayburn responded that he had been “pretty straightforward in all the town hall meetings I’ve done at our plants to say that in this situation I think there is blame that goes around for everyone.”

He denied that the decision to shut down could be a last ditch negotiation tactic to get the union back to the table.

“It’s over,” he said. “This is it.”

Rayburn, who first joined Hostess earlier this year as a restructuring expert, had earlier said that many workers crossed picket lines this week to go back to work despite warnings by union leadership that they'd be fined.

"The problem is we don't have enough crossing those lines to maintain normal production," Rayburn told Fox Business.

Hostess said that production at about a dozen of the company's 33 plants had been seriously affected by the strike. Three plants were closed earlier this week.

The privately held company filed for Chapter 11 protection in January, its second trip through bankruptcy court in less than a decade. The company cited increasing pension and medical costs for employees as one of the drivers behind its latest filing. Hostess had argued that workers must make concessions for it to exit bankruptcy and improve its financial position.

The company, founded in 1930, was fighting battles beyond labor costs, however. Competition is increasing in the snack space and Americans are increasingly conscious about healthy eating. Hostess also makes Dolly Madison, Drake's and Nature's Pride snacks.

If the motion is granted, Hostess would begin closing operations as early as Tuesday.

"Most employees who lose their jobs should be eligible for government-provided unemployment benefits," Hostess said.

Copyright Associated Press / NBC 5 Dallas-Fort Worth

lone_concertina 16th-Nov-2012 06:52 pm (UTC)
Were C-level pay cuts examined as a potential cost-saving measure?
awfulbliss 16th-Nov-2012 07:24 pm (UTC)
I have no idea as I'm not privy to the negotiations. I doubt that they were, of course, but I couldn't say. I would guess that it would not have made a difference at all based on the information available, though (not to say that they shouldn't be cut, of course). Clearly the factory workers aren't responsible for the fact that Twinkies aren't hot sellers anymore - management is, but that's unfortunately what happens when growth stagnates and you hope to continue operating with a dwindling market while still paying 18,000 people. It's a pretty horrible situation, and a lot of people will worse off now.
romp 16th-Nov-2012 08:21 pm (UTC)
So you agree it was shady for the CEO to say Hostess is folding because of union demands?
awfulbliss 16th-Nov-2012 09:04 pm (UTC)
Depends what you mean, I guess. He says that they can't continue business operations during a strike of this magnitude. That's obvious and I'm sure everyone would agree. I think that based on the information available that Hostess was going fold anyway and that failure to reach an agreement simply made it come about faster. I'm guessing large cost-cutting would've prevented the inevitable for a little while longer, but Hostess did not get to the point that it did because of labor costs.

Edited at 2012-11-16 09:05 pm (UTC)
fightingwords 16th-Nov-2012 07:47 pm (UTC)
Actually--CEO compensation went UP after the first bankruptcy: from $750K to $2.55 MILLION. They made out like bandits at the C-level.
idemandjustice 16th-Nov-2012 11:47 pm (UTC)
Do you have the source for that? I believe you, and just want to be able to have the source.
fightingwords 16th-Nov-2012 11:56 pm (UTC)
"Last July, the court documents said, the compensation committee of Hostess's board approved an increase in then-chief executive Brian Driscoll's salary from to $2.55 million from around $750,000. The company had hired restructuring lawyers in March 2011, the creditors said, and filed for bankruptcy protection on Jan. 11."

idemandjustice 16th-Nov-2012 11:56 pm (UTC)
Thanks! <3
celtic_thistle 17th-Nov-2012 12:23 am (UTC)
This page was loaded Dec 27th 2014, 3:55 pm GMT.