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.

By MSNMoney partner Nov 16, 2012 9:37AM
File photo of a twin pack of Hostess Twinkies and CupCakes, PAUL J. RICHARDS, AFP, Getty ImagesBy Tanya Agrawal, Reuters

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.
3428Comments
Nov 16, 2012 11:15AM
avatar
So, how did that SECOND bankruptcy work out for you? Oh, lost the company because you can't manage your way out of a phone booth with a map and a flashlight? Do not feel sorry for anyone who owns a piece of you. The union is the lightning rod but the real storm that washed away this company is the mismanagement team in place. Way to go. Hope you folks in the board room get to join the 18,000 people who trusted you to actually be able to operate a business that you let down.
Nov 16, 2012 11:15AM
avatar
Okay...this is a sad situation and people are losing their job but everyone is blaming the union. The people are the union. The people have to vote together as one as to what they want to do and apparently the majority voted to not take the cuts in pay. The union itself, and those who were voted in to talk, cannot make the decision for the people. There may be many reasons why they voted to not take the cuts in pay and benefits. Apparently the company has already filed bankruptcy several times and maybe the cuts have become so deep that the people wouldn't make their own bills anyway. who knows what the reasons are but it is the employees that made that decision. It's easy to say "the union" did this but it's the people who voted and why they voted this way we don't know. It also appears the company has had problems for a while because if they filed bankruptcy back in 2004 there were also problems before then. This apparently has been a long hard road for all involved and it's sad either way. Just don't judge because we do not know all that is involved. It may be the people have made a stupid decision and it may be that each side has reached rock bottom of what they can afford. We do not know. 
avatar
Oh...but the economy is Fiiiiiiiine .... right ?  Let's see what we'll look like after another 4 more years of hope an change....suckers.
Nov 16, 2012 11:14AM
avatar
Good work union.  You really showed Hostess a thing or two.  Of course everyone lost their jobs but that is just part of the game I guess.  You should maybe move to New Jersey where they refused non-union emergency aid help in the form of electrical linemen, all while people had no electricity, gas, water or heat.
Nov 16, 2012 11:14AM
avatar
The rush to the grocery stores to snag any remaining twinkies begins.

Weren't most of their products junk food anyway?
This might be a good thing for American's health.
Nov 16, 2012 11:14AM
avatar
The owners and administration made millions on this company before going bankrupt,  then blame it on the workers who will suffer the most.
Nov 16, 2012 11:14AM
avatar
The union issue is just another example of Americans having the entitlement mentallity.  A fair wage for a job is one thing but the amount of money these people get paid is amazing.  When unions were started, the worker was the one being abused by the company.  Today the rolls have changed.  Companies are being forced to do things that normal workers wouldn't even consider.  I have been in many companies and have seen many strange things with workers.  The worst abuse is always from union employees.  In one such place,  the employee is assigned an area to work and if there is no work in that area they do nothing.  I asked serveral employees why they just stand there and not help out other people and they said it wasn't there job. This people make 20+ dollars and hour to do unskilled labor and won't do anything more than the union tells them to do.  They forget that the employer pays them not the union.  These people should have done what was necessary.  Unfortunately, this place is now closing and moving to a third party distributor that uses temporary workers.  These workers are more than happy and enjoy there jobs.  The unions are going to price themselves right out of existance or take the rest of the Country down with them.
Nov 16, 2012 11:14AM
avatar
I dont think that you can just discount all unions just because this one made the wrong call. The UAW made a lot of concessions to keep chrysler and GM profitable when they had to.
Nov 16, 2012 11:14AM
avatar
The union workers have taken two pay cuts in three years only to have the company turn around and give multimillion dollar bonuses to several top management officials. The workers declined to contribute to the bonus effort this year, so they are being blamed for the company's cash flow problem. The company brought it on its self. If they had kept their work to the workers, they would not be in the fix they are in now.
Nov 16, 2012 11:14AM
avatar
Well hopefully someone will buy the recipes for the Twinkees & other products Hostess offered & at the same time some of the 18,500 workers who were let go will find jobs within the same industry of "cupcakes & breads".  It is a terrible shame to see all these people lose their jobs because of the "GREED" of others.
Nov 16, 2012 11:14AM
avatar

Reread the artical people. It's not the unions, it's the over paid management greedy decisions!

Nov 16, 2012 11:13AM
avatar
once again the union puts people out of work
Nov 16, 2012 11:13AM
avatar

Great so does this mean 18,500 people will file for unemployment, food stamps, and welfare and get paid to do nothing now?

Nov 16, 2012 11:13AM
avatar
The union there you go cost more jobs you are all greedy bastards and your a big part of why this country has gone to ****. Auto makers 50-60 and hr min wage 8.50 who can afford to buy the car. I guess we will be eating hostess made in China unless we do away with the unions and democrats this Usa that I defended for over 21 yrs is doomed. 
Nov 16, 2012 11:13AM
avatar

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.....

Nov 16, 2012 11:13AM
avatar
The union gambled that Hostess would not actually liquidate and lost.  For all you mindless union supporters out there, note there are consequences to your actions.  I, for one, will never buy another Hostess product, regardless of who picks up the brand, as long as they are made by union workers.  Good luck in the future, you really screwed the pooch on this one.
Nov 16, 2012 11:13AM
avatar
What will Woody Harrelson do when he kills zombies?
Nov 16, 2012 11:13AM
avatar

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.

Nov 16, 2012 11:13AM
avatar
Here we go again....It's all about the Almighty Dollar! This is not the last we've seen in our Country. Thanks to the 1%.
Nov 16, 2012 11:13AM
avatar

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.

Read more:

Report
Please help us to maintain a healthy and vibrant community by reporting any illegal or inappropriate behavior. If you believe a message violates theCode of Conductplease use this form to notify the moderators. They will investigate your report and take appropriate action. If necessary, they report all illegal activity to the proper authorities.
Categories
100 character limit
Are you sure you want to delete this comment?

DATA PROVIDERS

Copyright © 2014 Microsoft. All rights reserved.

Fundamental company data and historical chart data provided by Morningstar Inc. Real-time index quotes and delayed quotes supplied by Morningstar Inc. Quotes delayed by up to 15 minutes, except where indicated otherwise. Fund summary, fund performance and dividend data provided by Morningstar Inc. Analyst recommendations provided by Zacks Investment Research. StockScouter data provided by Verus Analytics. IPO data provided by Hoover's Inc. Index membership data provided by Morningstar Inc.

STOCK SCOUTER

StockScouter rates stocks from 1 to 10, with 10 being the best, using a system of advanced mathematics to determine a stock's expected risk and return. Ratings are displayed on a bell curve, meaning there will be fewer ratings of 1 and 10 and far more of 4 through 7.

111
111 rated 1
272
272 rated 2
474
474 rated 3
656
656 rated 4
638
638 rated 5
699
699 rated 6
623
623 rated 7
486
486 rated 8
260
260 rated 9
128
128 rated 10
12345678910

Top Picks

SYMBOLNAMERATING
DYNDYNEGY Inc10
TAT&T Inc9
VZVERIZON COMMUNICATIONS9
EXCEXELON CORPORATION8
AAPLAPPLE Inc10
More

VIDEO ON MSN MONEY

ABOUT

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.