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

skellington1 16th-Nov-2012 06:57 pm (UTC)
It looks like the package they were striking about was a wage cut, not that they'd decided to demand more when the company was in tough straits. They were trying to stop a downward slide. It's not like cost-of-living has gone down.

I've occasionally had bones to pick with the exact terms of union agreements, too -- i.e., I think unions are a very necessary tool, but in some cases parts of what they ask for can be harmful ( and I have seen at least one close-to-home case where people were better off not unionized, which is a very rare case), so I'm not terribly knee-jerk about it. Still, on the balance they do a lot of good, and I think the argument that they were good in the past but served their purpose has been pretty roundly trounced by bad business behavior in the last two years.

Given the previous bankruptcy filing, and their focus on what is becoming the snack-non-grata niche in the US, it seems like 'poor overall business decisions' are probably more to blame, here.

EDIT: Layweed had some more information. Apparently the Teamsters union examined the company finances and agreed to the cut because the company really was THAT stuck. I can still understand the other union balking at a cut, but it looks like there was no good way out of this one.

Edited at 2012-11-16 07:00 pm (UTC)
idemandjustice 16th-Nov-2012 11:40 pm (UTC)
Were they really that stuck, though? How much was the CEO making?
skellington1 16th-Nov-2012 11:42 pm (UTC)
No idea -- I'm going off of Layweed's other articles, which said the teamsters union had agreed on their stuckness -- which to me seems more reliable than the company's assessment, anyway.
idemandjustice 16th-Nov-2012 11:43 pm (UTC)
I'm just reading about the execs getting all kinds of bonuses, and I'm kinda full of hate. :(
skellington1 16th-Nov-2012 11:44 pm (UTC)
Ah, THAT'S a problem -- article? From everything else it looked like they were on the verge of bankruptcy -- wish I got bonuses for driving my employer to the bring. :P
idemandjustice 16th-Nov-2012 11:44 pm (UTC)
I'll look. I'm mostly seeing it in comments.
idemandjustice 16th-Nov-2012 11:52 pm (UTC)
There was this one, in some of the other comments:
skellington1 17th-Nov-2012 08:52 pm (UTC)
Thank you. Looks like a new article just was posted on ONTD_P, too. I take back any smidgeon of sympathy I had for them. It's not a genuine rock-and-a-hard-place situation if you intentionally put yourself there to screw someone else over.

I wish someone would pay me big bucks to run a company into the ground. I'm sure I could manage it!
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