Twinkie Maker Hostess to Shut Down After Strike

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Twinkie Maker Hostess to Shut Down After Strike

Post by TexasBlue on Fri Nov 16, 2012 5:46 pm

Twinkie Maker Hostess to Shut Down After Strike

Dawn McCarty and Phil Milford
Business Week
November 16, 2012


Hostess Brands Inc., the bankrupt maker of Wonder bread and Twinkies, said it will fire more than 18,000 workers and liquidate after a nationwide strike by bakery workers crippled operations.

“Companies in bankruptcy don’t have any margin for error,” Chief Executive Officer Gregory F. Rayburn said today in an interview with Betty Liu on “In the Loop” on Bloomberg Television. “We just didn’t have enough workers crossing the picket line.”

The 82-year-old maker of Hostess CupCakes, Ding Dongs and Ho Hos was undone by the strike after changes in American diets led to years of declining sales while ingredient costs and labor expenses climbed. The decision to liquidate capped a weeklong standoff between the company, once the largest U.S. wholesale baker, and a union that called its proposed labor contract “horrendous.”

Rayburn said Hostess will dismiss most of its 18,500 employees and focus on selling assets. Shipments of bread, snack cakes and other products will continue until supplies run out, he said. While Hostess has fielded interest in pieces of the business, its labor contracts and pension obligations have deterred any bids for the whole company, Rayburn said.

“Hopefully, someone will buy the brands, and some of the brands can live on, but that’s a pretty small consolation for people who are out of work,” Rayburn said. The company’s brand names include Dolly Madison, Drake’s, Merita and Butternut.

‘Death Spiral’

Twinkies and other Hostess brands will probably disappear from the marketplace, said Tim Ramey, a Lake Oswego, Oregon- based analyst for D.A. Davidson & Co. Any buyer would need a distribution system, he said.

“Without your own distribution, it’s pretty problematic,” Ramey said today by telephone. “Twinkies has been on a slow death spiral for a long time. Somebody might decide they want something to do with it, but it’s not likely.”

Flowers Foods Inc. (FLO), the Thomasville, Georgia-based baker of Nature’s Own bread and Tastykake snacks, may be interested in buying some Hostess assets, William Chappell, an analyst for SunTrust Robinson Humphrey, wrote today in a note. Flowers shares jumped 10 percent in New York trading.

“This is an unfortunate situation and we are very sad for all those impacted,” Keith Hancock, a spokesman for Flowers Foods, said in an e-mailed statement. “We are staying focused on making sure our consumers and customers have the baked foods they need –- and on serving the market.”

‘Operational Mismanagement’

The Bakery, Confectionery, Tobacco Workers and Grain Millers International Union went on strike Nov. 9 after a bankruptcy judge in White Plains, New York, imposed contract concessions opposed by 92 percent of the union’s members. The union represents about 5,000 Hostess workers.

“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 yesterday in a statement. Hostess “attempted to resolve the mess by attacking the company’s most valuable asset -- its workers.”

Wage Cuts

In the past 15 months, Hostess has unilaterally ended contractually obligated payments to the workers’ pension plan, and demanded cuts of as much as 32 percent in wages and benefits, the union said in the statement.

Frank Hurt, the union’s president, didn’t immediately return a call seeking comment on the liquidation.

Sally Greenberg, executive director of the Washington-based National Consumers League, accused the company’s executives in a statement of “scapegoating” the union, “rather than take responsibility themselves.”

Hostess, based in Irving, Texas, today asked a bankruptcy judge to hold a Nov. 19 hearing to approve the company’s request to close its 33 remaining bakeries and 565 distribution centers. Some workers will be retained to clean plants and mothball equipment, Hostess said.

Officials of the International Brotherhood of Teamsters, representing about 6,700 Hostess employees, were “incredibly disappointed” and “angry” about the shutdown, Rayburn said. The Teamsters union yesterday urged the bakers’ union to let members decide by secret ballot whether to continue the walkout.

“The company has clearly been mismanaged for some time,” the Teamsters said today in a statement. “Unfortunately, the company’s operating and financial problems were so severe that it required steep concessions from a variety of stakeholders but not all stakeholders were willing to be constructive.”

‘Protect Jobs’

Drivers represented by the Teamsters earlier ratified a new contract with 8 percent in wage concessions and 17 percent in benefit reductions. Teamsters members “understood what was at stake and voted to protect all jobs at Hostess,” the union said in today’s statement.

Rayburn, who previously helped to guide companies including Syntax-Brillian Corp., Indianapolis Downs LLC and Sunterra Corp. through bankruptcy, said yesterday that Hostess lacked the financial strength and manpower to stay open during a strike.

“When you get to a certain point, customers are going to say, ‘Hey, you know, I’ve been as supportive as I can be but I can’t be out of stock,’” Rayburn said in today’s Bloomberg Television interview.

Hostess closed three of its 36 plants permanently Nov. 12, blaming the strike. The company said it determined last night that not enough employees had returned to work to restore normal operations.

Crippled Production

Bakers’ union members “crippled the company’s ability to produce and deliver products at multiple facilities,” and “bakery operations have been suspended at all plants,” the company said in a statement.

Hostess filed under Chapter 11 for a second time in January, listing assets of $982 million and liabilities totaling $1.43 billion. Rayburn was hired as chief restructuring officer in February and named CEO in March.

The baker ended an earlier trip through bankruptcy court in February 2009 when buyout firm Ripplewood Holdings LLC and lenders took control of Interstate Bakeries Corp., which was renamed Hostess Brands. The Teamsters and the bakery workers’ union both made voluntary concessions in the first Chapter 11 reorganization.


Last edited by TexasBlue on Fri Nov 16, 2012 5:49 pm; edited 1 time in total


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“I’m not in favor of fairness. I’m in favor of freedom, and freedom is not fairness. Fairness means somebody has to decide what’s fair.” - Milton Friedman
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Re: Twinkie Maker Hostess to Shut Down After Strike

Post by TexasBlue on Fri Nov 16, 2012 5:47 pm

Unreal. This is why I hate unions. In this case, they put the final nail in the coffin. Good going, greedheads.

Related topic.


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“I’m not in favor of fairness. I’m in favor of freedom, and freedom is not fairness. Fairness means somebody has to decide what’s fair.” - Milton Friedman
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