Hostess shutting down

NEW YORK (CNNMoney) -- Hostess Brands -- the maker of such iconic baked goods as Twinkies, Devil Dogs and Wonder Bread -- announced Friday that it is asking a federal bankruptcy court for permission to close its operations, blaming a strike by bakers protesting a new contract imposed on them.

The closing will result in Hostess' nearly 18,500 workers losing their jobs as the company shuts 33 bakeries and 565 distribution centers nationwide. The bakers' union represents around 5,000.





Hostess will move to sell its assets to the highest bidder. That could mean new life for some of its most popular products, which could be scooped up at auction and attached to products from other companies.

"We deeply regret the necessity of today's decision, but we do not have the financial resources to weather an extended nationwide strike," said CEO Gregory Rayburn in a statement.

The company had given a 5 p.m. ET deadline for the bakers to return to work or face a shutdown of the company. The unions at Hostess could not be reached immediately for comment on the decision.

Hostess filed for bankruptcy in January, its second trip to bankruptcy court since 2004. It previously emerged from restructuring in 2009 after a four-and-a-half year process.

The company is now controlled by a group of investment firms including hedge funds Silver Point Capital and Monarch Alternative Capital.

In September, one of its major unions, the International Brotherhood of Teamsters, voted narrowly to accept a new contract with reduced wages and benefits. The bakers' union rejected the deal, however, prompting Hostess management to secure permission from a bankruptcy court to force a new concession contract on workers.

The new contract cut salaries across the company by 8% in the first year of the five-year agreement. Salaries were then scheduled to bump up 3% in the next three years and 1% in the final year.

Hostess also reduced its pension obligations and its contribution to the employees' health care plan. In exchange, the company offered concessions, including a 25% equity stake for workers and the inclusion of two union representatives on an eight-member board of directors

I can't help but feel terribly sad when thinking of all those out of a job due to this. One thing I noticed in the last couple years at the checkout lines at the market is Hostess products such as HoHos and Twinkies are crazy expensive. I can't see how they would stay afloat when their tiny confections were nearing $2 per package.

Or $5 for a box instead of $2.50 or $3, it's no wonder nobody's buying, and in honesty we probably won't miss it much anyway, about the only thing I get semi-regularly is the two packs of Sno-balls.

Not gonna affect me much as I try to keep pastries to a minimum. But I do feel bad for the workers who weren't part of this boneheaded union strike. I hope this union is happy now that their bakers are all unemployed.

It's not surprising. Hostess has been having problems for almost 10 years.

They wanted to actually cut the workers pay. Make more money on the product and cut the workers pay and benefits. That sounds fair to some right wingers.I wonder what sort of bonus's and benefits the management will receive!

Devotees should stock up now. The shelf life of a Twinkie is like 10,000 years. One of their bakeries was nearby to our first apartment. It smelled so good!

Forgiveness Man wrote:Not gonna affect me much as I try to keep pastries to a minimum. But I do feel bad for the workers who weren't part of this boneheaded union strike. I hope this union is happy now that their bakers are all unemployed.

Exactly. WGN noon news just had a guy on from the union. He says something about how he wanted it to go another way then said, "We'll see how this all turns out." Um, you're jobless. That's how this turned out.

It is simply a ploy by the company to get rid of the union, they will close down briefly , sell to someone within the company or family regroup and hire new non union employees. Remember a few years ago when they said they weren't going to produce Twinkies any more? Twinkies never left the shelves , so either the Twinkies are years old or the company lied.

It was probably going to happen regardless of what could be worked out between the players here. This has been about 10 years in the making.

With Hostess claiming that its union contracts were too onerous,
the Teamsters acquiesced in September to significant pay and pension cuts for workers, even though employees had agreed to concessions in Hostess' previous bankruptcy. The bakers' union, however, fought the proposal, culminating with a strike launched last Friday that affected more than 20 of Hostess' bakeries, according to the company.

Now, Hostess is winding down. Publicly, management has attributed its decision directly to the bakers union strike, even though the company had plenty of problems aside from labor issues, including a customer base that has been turning away from the likes of Twinkies and Ding-Dongs for healthier foods.

"The crisis facing Hostess Brands is the result of nearly a decade of financial and operational mismanagement that resulted in two bankruptcies, mountains of debt, declining sales and lost market share," the union said. "The Wall Street investors who took over the company after the last bankruptcy attempted to resolve the mess by attacking the company’s most valuable asset -- its workers."

The very long article in its entirety:
http://www.huffingtonpost.com/2012/11/16/hostess-liquidation-teamsters-bakers-union_n_2145851.html

Suzi wrote:It is simply a ploy by the company to get rid of the union, they will close down briefly , sell to someone within the company or family regroup and hire new non union employees. Remember a few years ago when they said they weren't going to produce Twinkies any more? Twinkies never left the shelves , so either the Twinkies are years old or the company lied.

Word going around is that Flowers is looking at it.

RedBedroom wrote:

Exactly. WGN noon news just had a guy on from the union. He says something about how he wanted it to go another way then said, "We'll see how this all turns out." Um, you're jobless. That's how this turned out.

Yeah, pretty much. lol They called a bluff and it blew up in their faces.

I haven't had anything made by Hostess in years. Maybe I'll go buy something if I can find it. I read they first filed for bankruptcy in 2004. Now this and they're done.

I think it's a sign of the time. With all the foodies and health warnings and so forth, people are just not buying this stuff. Too bad in a way, I grew up with it like a lot of people did.

They've had serious competition from Little Debbie for a long time. The food size has been slightly reduced over the years but the prices haven't skyrocketed to extremes. When given a choice between the two, if price is a factor Little Debbie has the advantage especially considering the variety.

No doubt they could outsource he jobs after all Twinkies don't spoil. Personally I will never knowingly buy any Hostess product.

i loved the apple and blueberry pies as a kid. they used to have a wonder store near us... my mom would stock up every sunday... miss it.

i read somewhere that the company said it was caused by obamacare... they could not afford to pay for the health insurance. This is what scares me about obamacare.... forcing people to provide insurance. Many ppl do not realize how much insurance freaking costs a company. As a postal worker i am lucky, but even the aetna plan that they are offering this year has a premium of $500 for an INDIVIUAL-- and the PO pays a higher percentage of the total premium than other federal employees. So realistically, the Aetna plan for one person could be $1500-$2000 per month. That is way too much to expect for small businesses to pay for their employees without expecting some sort of cutbacks or layoffs.

the Federal Employees Health Benefits plan does offer a BCBS (which I have, paying $180 per month---so the PO is probably paying another $500 or so)--- I wrote to congress and told them they should open this plan up to everyone across the country. there are some ppl paying thousands a month and barely getting by--so offer this to everyone... and the more ppl u have the lower the premiums go.

wants2laugh wrote:i read somewhere that the company said it was caused by obamacare... they could not afford to pay for the health insurance.

First they claim it was the union now "Obamacare". Easy excuse for companies to use but not the case here.

Workers at more than 20 Hostess plants have gone on strike after overwhelmingly rejecting the company's demands for major wage and benefits concessions. In response, Hostess is claiming that it may have to close plants because of the strike. The Bakery, Confectionery, Tobacco Workers, and Grain Millers union has a convincing argument that's a lie, though:

In fact, according to the company’s 1113 filing with the bankruptcy court earlier this year as well as its last/best/final and non-negotiable proposal to its BCTGM-represented workers, the company was planning to close at least nine bakeries as part of its reorganization plan, although the company refused to disclose which bakeries it intended to close. This is in addition to the three bakeries that were to be closed as a result of the company’s planned sale of its Merita division.

Moreover, St. Louis Mayor Francis Slay was quoted in a November 13 KMOX-CBS St. Louis article stating, “I was told months ago they were planning on closing the site in St. Louis… And there was no indication at that time it had anything to do with the strike the workers were waging.”

Hostess is in bankruptcy for the second time in recent years. Workers took concessions just a few years ago and this year the company has stopped making its contractually obligated contributions to their pensions. Meanwhile, according to the union, the company's CEO got a 300 percent raise, from $750,000 to $2,250,000, while other top executives got raises of hundreds of thousands of dollars apiece. Hostess may have problems, but, like the possible plant closings, they don't come from what the rank and file workers have done.



http://www.dailykos.com/story/2012/11/14/1161679/-Hostess-lies-about-strike-causing-possible-plant-closings#

They've been in trouble for years. Between some fierce competition, people choosing to eat healthier & some gross mismanagement it's surprising they managed to stay in business for the last 10 years.

Oy! I haven't had a Twinkie in probably over forty years. Now I want one!

Sad ending to such an Iconic company.

Well now, the disgruntled Hostess employees should team up with the disgruntled Papa John's employees, and make Twinkie Pizzas--that should kick-start some revenue and save those suet-filled spongecakes that people so love for some reason. Double-win!

And they stole the workers retirement moneys.
http://www.dailykos.com/story/2012/11/18/1162786/-Inside-the-Hostess-Bankery

In July of 2011 we received a letter from the company. It said that the $3+ per hour that we as a Union contribute to the pension was going to be 'borrowed' by the company until they could be profitable again. Then they would pay it all back. The Union was notified of this the same time and method as the individual members. No contact from the company to the Union on a national level.

This money will never be paid back. The company filed for bankruptcy and the judge ruled that the $3+ per hour was a debt the company couldn't repay. The Union continued to work despite this theft of our self-funded pension contributions for over a year. I consider this money stolen. No other word in the English language describes what they have done to this money

That sux soooo bad. The freaking federal government did the same thing to the postal pensions... now when the USPS asks for it back, they call it a "bailout".... NO... it's a repayment of a freaking loan. and i want it back WITH interest. They all talk about the post office can't pay this or that, but they took our money dammit. give it back! And another thing people misunderstand is that we do not take taxpayer money-- our salaries, health insurance, and pensions are paid by us and the products/services with provide--- not the federal govt.

i truly feel for these people... and having seen what my paycheck this week with all the overtime amounts to, i even feel a little guilty.