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 07:37 pm (UTC)
Just remember, just because the economy is slowly picking up doesn't mean all companies are. Hostess has been on a downward spiral for awhile.
layweed 16th-Nov-2012 07:40 pm (UTC)
Yeah it's the second time since 2004 that they filed for bankruptcy. Plus I keep seeing off-brand "twinkies" and stuff like that, which has to eat into their market share (no pun intended). Plus mismanagement and whoa.

tbh though I wonder if people are just moving on...even McDonalds posted loses for the first time in 9 years, are we finally getting smart about what we eat?
ultraelectric 16th-Nov-2012 07:45 pm (UTC)
It could be a mix of the two. And I wish I had the article I read/heard this in, but I thought I heard someone talking that when the economy starts to get better or is good McDonald's doesn't do well, they tend to do better off when the economy isn't great -- though, please don't hold me to that -- and if that's the case, than maybe this means the economy is gonna be super awesome soon lol ;)
amyura 17th-Nov-2012 03:56 am (UTC)
That makes sense. A lot of sales at fast food places are because they give the biggest bang for your buck calorie-wise. If I'm poor, work full time, live in a food desert, and have a family, I'm going to want food that cheap and convenient, and McDonald's fits the bill. If I'm making more money or my working conditions improve, I'm going to choose something better.

Heck, I'm middle-middle class, work full time, and have a family, and while I haven't set foot in a McDonald's in eight years, I and every other working mom I know is constantly juggling the cheap-convenient-healthy factors.
halfshellvenus 16th-Nov-2012 07:48 pm (UTC)
That may be true, but the owners still manage to get rich while they quibble over the crumbs of cake they'll toss to their workers.

It's the insistence on MAXIMUM PROFIT AT ALL TIMES that tends to create this problem.

It's a false dichotomy, really. They could operate with less profit, but they chose to gamble with the unions and lost.

Small business owners, now... those are the people who've really been hit. They're closer to the economy, and they have far less cushion and fewer options (such as closing 20% of some 20+ factories and whatnot). I hate to see businesses that are decades old going under.

But I can't feel sorry for Hostess here. Their employees likely were not doing all that well beforehand, and a cut would have made things worse.
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