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

ultraelectric 16th-Nov-2012 06:02 pm (UTC)
I might get hate for this, but I'm curious how much they were already making (the Union workers) I think unions are good in a lot of ways, but sometimes I hear these people demanding more money and they are already making a boot load an hour (at least what I would consider a boot load given I grew up lower middle class).

By the way, kinda laughing they were still doing Pensions, from what I've learned in business class they aren't the greatest way to go.

Very sad situation. Though, I have heard they are more an likely going to sale their products off to other companies so the product will still be out there just under new ownership (Little Debbie is prob jumping on that right as we speak lol)
halfshellvenus 16th-Nov-2012 06:53 pm (UTC)
The unions were protesting having their wages and benefits CUT though, not that there wasn't an increase.

I'm surprised the Teamsters agreed to it, but not surprised that the other union did not.
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.
romp 16th-Nov-2012 08:08 pm (UTC)
I've never taken a business class but I'd be wary of believing what I was told there. I see a lot of criticism of the business and economic schools being, hmm, circle jerks. I can't think of a polite way to put that, sorry.
mutive 16th-Nov-2012 08:17 pm (UTC)
It's fair to remember, too, that there are good and bad unions.

There are some awesome ones that do a tremendous job protecting their workers.

I also had one that fought management about "unfair termination" over a guy who decided to drive his forklift at a woman on the packaging floor, trapping her between the two forks against the wall. (He won. Forklift driver remained with the company.)

And there are non-unionized workers who do crazy well, too. I was just at a mine where the miners were making $35/hr. + $23/hr bonus who weren't unionized.

There are a lot of variables.
evilgmbethy 16th-Nov-2012 09:48 pm (UTC)
this criticism is not off the mark. some economics departments have good people, though, it depends on their school of thought. I have an economics professor who I've studied closely under who is an Institutionalist (school of thought modeled after the work of Thorstein Veblen) and the theory is very sound.
bananainpyjamas 17th-Nov-2012 07:52 am (UTC)
I'm in a graduate program that straddles economics and sociology and tbh there's plenty of circle-jerking in both, it's definitely not unique to econ departments.
romp 17th-Nov-2012 08:09 am (UTC)
You could describe most of academia that way if you meant enabling one another but I meant the way one school of thought will be presented as The Truth. And how much of it is a swindle and was from the beginning. New Yorker had a great article on the origin of Harvard Business School a couple years ago.

And maybe you still mean that for sociology--there are definite fads and certain ways of thinking will be in vogue, then out of vogue in most fields. I guess I was thinking of how badly people were hurt by blind adherence to Milton Friedman's theories. Business and economics is used to affect policy and people's lives in a way I don't see with literacy criticism or mathematics or even resource management.
ultraelectric 17th-Nov-2012 03:18 pm (UTC)
I'm not even sure what your telling me to be wary of? I don't even know what a circle jerk is. If your thinking the first part of my comment (about unions) was formed in the classroom, it wasn't. The only comment I made regarding my business class was on pensions.
romp 17th-Nov-2012 07:22 pm (UTC)
It was just a thought in reaction to your comment about pensions. I'm sure you're plenty savvy--I've just heard a lot of criticism of business and economic schools of thought and their tendency to display their opinion as The Truth.
liret 16th-Nov-2012 09:38 pm (UTC)
I honestly think no matter what they were being paid, a worker has the right to stop being willing to do a job when they're suddenly told they have to do the same thing for less money and without benifits. No one's obligated to prop up a failing company by working under circumstances they didn't agree too.

Eta: Also, from another article, they'd stopped paying into pension plans almost a year ago, and the workers accepted that as a unavoidable cut.

Edited at 2012-11-16 09:42 pm (UTC)
ceilidh 16th-Nov-2012 11:25 pm (UTC)
those executives, they are good in a lot of ways, but they are also bad in a lot of ways, from what I've heard. I'm kind of laughing at their 300% bonuses, from what i heard that isn't the greatest way to go when you're about to be in bankruptcy.
idemandjustice 16th-Nov-2012 11:42 pm (UTC)
Yeah, that's why I have no sympathy. (For the company. I'm really fucking pissed on behalf of the workers.)
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