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.
3436Comments
Nov 16, 2012 11:29AM
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If the Teamsters saw the writing on the wall and conceeded to these cuts there was your clue.  You win.  Hostess and the rest of us lose.
Nov 16, 2012 11:29AM
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They always blame the union when they have bad management. It beats admitting they screwed up.  I am so sick of this and the people who just can't wait to agree with them. This has been going on for many years.  I remember when the textile mills all moved south supposedly because of the unions and the first thing they did was buy all new equipment that increased their output tremendously. Funny they couldn't do that up north.
Nov 16, 2012 11:29AM
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This is quite a shame....Unions had their place when they were needed in the early 1900s thru the 50's.  They are parasitic and corrupt; and not needed anymore. We all know Obama wont bail out Hostess. :(  I think Warren Buffet should RESCUE the brand and run a Non-Union establishment. HELP THE TWINKIE WARREN!!!!
Nov 16, 2012 11:29AM
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YUP--OBAMAARE--aka-HEALTHCARE and the OBAMANATION UNIONS have cost 18+K PEOPLE their jobs---and this is just the tip on the OBAMABERG!!

 

HUSSIEN OBAMAS POLICYS ARE THE BIGGEST ECONOMIC KILLER IN PRESIDENTIAL HISTORY & THE PAST 4 YRS PROVE THAT FACT. I HOPE YOU ALL CRY TO YOUR LEADER AS YOU FOLLOW HIM OFF THE CLIFF. HE WONT CARE DESTROYING THE CAPITOLIST SYSTEM IS HIS AGENDA, I UNLIKE MOST OF YOU BLIND FOLLOWERS READ HUSSIEN OBAMAS BOOK & I SUGGEST YOU DO TO EVEN THOUGH ITS TO LATE

Nov 16, 2012 11:28AM
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And the labor union haters come out in droves. Yeah, I'm sure there are lots of scabs that are ready to take their places at minimum wage and work as part timers, the scabs can still get their food stamps and healthcare paid for by tax payers.
Wake up you idiots, America was most successful when unions were more dominant. The only thing that trickles down to workers today is the urine from the oligarchs. 
Nov 16, 2012 11:28AM
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Unions believe they have a friend in the White House. But they are wrong and the union officials took a gamble and all of the employees lost.

Now the middle and lower economic classes are fully going to realize what it feels like to have Obama in for the next four years.

Medical tax deductions going from 7% to 10% in 2013. Medicare cuts. All medical premiums up in 2013; not only did my premiums go up but my co-payments went up by 100% and 150% (Primary/Specialist).

And in 2014, be prepared for many companies to eliminate their medical coverage. We in the middle class have no chance.   

Nov 16, 2012 11:28AM
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Great another company going down because Wall Street financiers will make more money liquidating than they will running a company at a lower profit margin. Wake up people! Hostess has been over leveraged and wanted to get right on the backs of the people that work for them.
Don't think for a minute some venture capitalists is going to take a loss. We take the risks we deserve the reward? Sure. How many of you idiot union haters are going to take pay cut after pay cut from your bosses? All i hear is crickets.
Nov 16, 2012 11:28AM
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the union apparently was just like the rich take take take neither side knows when to quit
Nov 16, 2012 11:27AM
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Oh No!  Not twinkies and cup cakes, they were a lot better than the imitation ones.  Just say it isn't so, the union and the company should have worked it out, now look.  Yet what can you san, Look At Congress how they have been deadlocked on almost everything, have not passed much, and now where is our country going!!!
Nov 16, 2012 11:27AM
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I don't understand why a company/corporation should need "permission" from the courts to go out of business?  I mean, come on.  You lose money...you can't pay your bills...you lose suppliers...you can't produce...you lose your business.  Unionizers and democrats are so stupid!
Nov 16, 2012 11:27AM
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Some times you have to give your employer a  break. I'm a union member and I would rather take a pay loss rather than a job loss. If the teamsters took a cut that says to me that the company is really hurting. A unions obligation to it's members is to tell them what's the consequences of a strike is and then they vote on striking or not. I'm sure they had a vote but did the union give their members a true port rail of the companies financial picture? Also press like this really hurts peoples out look of unions in general. 
Nov 16, 2012 11:27AM
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You folk aint seen nothin yet. Thanks to all of the followers of the Democratic flock we will see much worse than a cake factory fail. Thanks Obama.

Nov 16, 2012 11:27AM
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If you were ever a sef employed, working everyday or at least available at all times, day after day, you soon realize its far better to be in control of your own destiny.  You must count on yourself to get out in the work place and make a buck or two for yourseft and your family.  If some entity wants to give you benefits and perks, one day they will want to collect on there generousity.  Then you may end up on government programs.

Decades ago the Unions played a large role in boosting employment.  Just like Twinkies being wiped out after 80 years, maybe the Unions have also surpassed their popularity.

Nov 16, 2012 11:27AM
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Thank you to the asshats that are costing the entire country a wonderful company and products.  Now my kids won't get to grow up with the products of my childhood.
Nov 16, 2012 11:27AM
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yes our kids and grandkids can definaltey do without  those sugar laden "treats", diabetes, heart attacks waiting to happen, maybe a healthier company will come about

Nov 16, 2012 11:27AM
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As a former hostess employee (22 years retired) they do not mention the other cuts we had to take because of mismanagement. About 2400.00 per employee per year.

Nov 16, 2012 11:27AM
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OMG! I have loved Twinkies since I was a kid. This is not only heartbreaking for me & millions of other Hostess fans, but what about the thousands of people without a job. So very sad!:(
Nov 16, 2012 11:26AM
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You are all so lost....and living under a rock, you really have no clue as to what is really happening in the world today. Blame the union, its all their fault. You poor ignorant fools. the Unions do not run the companies, they do not tell the companies how to run their businesses. Unions negotiate contracts that cover working conditions, wages and benefits for their members. You take everything for granted. Did you know that less than 15% of all industry in the US has union representation? 

In 1970 the average CEO made 50 times more than the average teacher, today the average CEO makes over 500 times that of the average teacher. And you idiots still want to blame the worker for making too much money. What the hell are you going to do when they target your job? Its a race to the bottom people.

 

Nov 16, 2012 11:26AM
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Or.... Hostess could have negotiated with the workers to  make them happy? I think its sad that a company would rather go out of business than pay its workers a little bit more.
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