Twinkies maker Hostess going out of business
Nearly 18,500 workers will lose their jobs as the company succumbs to the crippling effects of a nationwide union strike.
Hostess Brands, the bankrupt maker of Twinkies and Wonder Bread, said it has sought court permission to go out of business after failing to get wage and benefit cuts from thousands of its striking bakery workers.
Hostess said a national strike by members of the Bakery, Confectionery, Tobacco Workers and Grain Millers International Union that began last week had crippled its ability to produce and deliver products at several facilities.
The liquidation of the company will mean that most of its 18,500 employees will lose their jobs, Hostess said on Friday.
The 82-year-old company said it took the decision to shut down after determining that not enough employees had returned to work by a deadline on Thursday.
The company, which filed for bankruptcy in January for the second time since 2004, said it had filed a motion with U.S. Bankruptcy Judge Robert Drain in White Plains, New York, for permission to shut down and sell assets.
The Irving, Texas, company has 565 distribution centers and 570 bakery outlet stores, as well as the 33 bakeries. Its brands include Wonder, Nature's Pride, Dolly Madison, Drake's, Butternut, Home Pride and Merita, but it is probably best known for Twinkies -- basically a cream-filled sponge cake.
"We deeply regret the necessity of today's decision, but we do not have the financial resources to weather an extended nationwide strike," Chief Executive Gregory Rayburn said in a statement.
"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," Rayburn added.
Union President Frank Hurt said on Thursday that the crisis at the company was the "result of nearly a decade of financial and operational mismanagement" and that management was trying to make union workers the scapegoats for a plan by Wall Street investors to sell Hostess.
Hostess said its debtor-in-possession lenders had agreed to allow the it to continue to have access to $75 million to fund the wind-down process.
"There's no way to soften the fact that this will hurt every Hostess Brands employee. All Hostess Brands employees will eventually lose their jobs - some sooner than others," Rayburn said in a letter to employees.
The company has canceled all orders in process with its suppliers and said any product in transit would be returned to the shipper.
In its filing with the court, the company said it would have incurred a loss of between $7.5 million and $9.5 million from November 9 to November 19 in lost sales and increased costs.
"These losses and other factors, including increased vendor payment terms contraction, have resulted in a significant weakening of the debtors' cash position and, if continued, would soon result in the debtors completely running out of cash," it said.
Hostess had already reached agreement on pay and benefit cuts with the International Brotherhood of Teamsters, its largest union.
Reread the artical people. It's not the unions, it's the over paid management greedy decisions!
Great so does this mean 18,500 people will file for unemployment, food stamps, and welfare and get paid to do nothing now?
GONE...twinkies, Rubbermaid, Oldsmobile, Pontiac, Plymouth, Saturn, Mercury........Remember when shopping for a new TV you checked our Zenith, RCA, Dumont, Admiral, Magnavox, Curtis Mathis, (you can add to the list) and they were ALL made in America? Remember?
Bit by bit, and now accelerating, we are loosing our industry, freedom, country.....
Unions were definitely needed in the past when blue collar workers wages, work hours and safety were taken advantage of and are still needed today to maintain the achievements that have been made.
It is when a union takes a company into bankrupcy that they have need to look at the overall welfare of their members. The unions broke the backs of the steel companies and many other viable industries that are now being performed overseas.
I am certainly not advocating going back to sub-standard wages, unlimited work weeks or unsafe working conditions, but don't let your union ego get in the way of genuinely representing your members.
Yep blame unions exclusively cause that's what we are lead to believe...Fault lines lay on both sides of the Greedquake.
In March 2012, Brian Driscoll resigned from his position as CEO. Gregory Rayburn, who had been hired and named Chief Restructuring Officer only nine days earlier, assumed the leadership position. reported that unions within the organization had been unhappy with Driscoll's proposed compensation package of $1.5 million, plus cash incentives and a $1.95 million "long term compensation" package. Additionally, the court had discovered that Hostess executives had received raises of up to 80% the year prior. In an effort to restore relations, Rayburn cut the salaries of the four top Hostess executives to $1, to be restored on January 1 the following year.
Copyright © 2014 Microsoft. All rights reserved.
As geopolitical tensions threaten to spin out of control, investors are wondering how best to position their portfolios for the global turmoil.
VIDEO ON MSN MONEY
Top Stocks provides analysis about the most noteworthy stocks in the market each day, combining some of the best content from around the MSN Money site and the rest of the Web.
Contributors include professional investors and journalists affiliated with MSN Money.
Follow us on Twitter @topstocksmsn.