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.
The company would spin it so the union is blamed. This seems to be the trend these days, and of course ALL THE ANTI-UNION TROLLS COME OUT TO COMMENT!
Hostess went out of business because they had too much debt. To blame it on unions is just conservative manipulation.
My husband has worked for the company for 17 years. They have been a great company to work for. Financial hardships and changes in the American diet have hit Hostess hard. The Teamsters union agreed to the cuts and understood that it was better to make less than nothing at all.The Bakery union did not. The Bakery, Confectionery, etc. union thought the company was bluffing, but the writing was on the wall. A company bluffing doesn't file for bankruptcy and tell employees 7 months ahead of time that they may have to liquidate assets as a scare tactic. Bakery, et.al, Union screwed EVERYBODY!!! So sad. 18,500 people out of a job. The union gambled and lost!
What a shame that “both sides” couldn’t reach an agreement; I don’t know the extent of the wage and benefits concessions, but I suspect failure on both sides. Hostess management didn’t take the necessary actions to avoid the negotiations conflict, such as did they (Hostess management) volunteer reduction in their salaries and benefits? I suspect not. Also, management should have trim up the products to be offered, as some products are poor sellers and should have been eliminated. New equipment should have been purchased to replace inefficient, high maintenance equipment (at the cost of management bonuses).
The union should have found ways to “lean up” the workforce by combining job tasks, this would have resulted in a few layoffs, but it would allow Hostess to reorganize and stream-line daily operations to emerge from the bankruptcy as a stronger company. I see this failure on both sides, which is too bad as if “both sides” worked together to solve the problems, Hostess would have been a stronger company.
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