Hostess moves to liquidate after crippling strike

About 18,500 workers laid off

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A Twinkies sign is shown at the Hostess plant in Ogden, Utah. Hostess, the maker of Twinkies, Ding Dongs and Wonder Bread, announced Friday it is winding down operations and has filed a motion with the U.S. Bankruptcy Court seeking permission to  close its business and sell its assets, including its iconic brands and facilities.   FILE/ASSOCIATED PRESS
A Twinkies sign is shown at the Hostess plant in Ogden, Utah. Hostess, the maker of Twinkies, Ding Dongs and Wonder Bread, announced Friday it is winding down operations and has filed a motion with the U.S. Bankruptcy Court seeking permission to close its business and sell its assets, including its iconic brands and facilities.

NEW YORK — Twinkies may not last forever after all.

Hostess Brands Inc., the maker of the spongy snack with a mysterious cream filling, said Friday it would shutter after years of struggling with management turmoil, rising labor costs and the ever-changing tastes of Americans even as its pantry of sugary cakes seemed suspended in time.

Some of Hostess’ beloved brands such as Ding Dongs and Ho Hos likely will be snapped up by buyers and find a second life, but for now the company says its snack cakes should be on shelves for another week or so.

Hostess, whose roster of brands dates as far back as 1888, hadn’t invested heavily in marketing or innovation in recent years as it struggled with debt and management changes.

As larger competitors inundated supermarket shelves with an array of new snacks and variations on popular brands, Hostess cakes seemed caught in a bygone time. The company took small stabs at keeping up with Americans’ movement toward healthier foods, such as the introduction of its 100-calorie packs of cupcakes.

CEO Gregory Rayburn, who was hired as a restructuring expert, said Friday that sales volume was flat to slightly down in recent years. He said the company booked about $2.5 billion in revenue a year, with Twinkies alone generating $68 million so far this year.

Hostess’ problems ran far deeper than changing tastes, however. In January, the company filed for Chapter 11 bankruptcy protection for the second time in less than a decade.

Hostess, based in Irving, Texas, said it was saddled with costs related to its unionized workforce. The company had been contributing $100 million a year in pension costs for workers; the new contract offer would’ve slashed that to $25 million a year, in addition to wage cuts and a 17 percent reduction in health benefits.

Management missteps were another problem. Hostess came under fire this spring after it was revealed that nearly a dozen executives received pay hikes of up to 80 percent last year even as the company was struggling.

The shuttering means the loss of about 18,500 jobs. Hostess said employees at its 33 factories were sent home and operations suspended.

Its roughly 500 bakery outlet stores will stay open for several days to sell remaining products.

In a statement, the bakery union said Hostess failed because the six management teams over the past eight years weren’t able to make it profitable — not because workers didn’t make concessions.

“Despite a commitment from the company after the first bankruptcy that the resources derived from the workers’ concessions would be plowed back into the company, this never materialized,” the union said.

Ken Hall, general secretary-treasurer for the Teamsters, said his union members decided to make concessions after hiring consultants who found the company’s financials were in a dire situation. But he said that he believed the company could’ve survived.

“Frankly it’s tragic, particularly at this this time of year with the holidays around the corner,” Hall said, noting that his 6,700 members at Hostess were now out of a job.

Kenneth McGregor, a shipper for Hostess in East Windsor, Conn., arrived at the plant Friday morning and said he was told he was laid off immediately.

In a statement on the company website, CEO Rayburn said there would be “severe limits” on the assistance the company could offer workers because of the bankruptcy. The liquidation hearing will go before a bankruptcy judge Monday afternoon; Rayburn said he’s confident the judge will approve the motion.

“The strike impacted us in terms of cash flow. The plants were operating well below 50 percent capacity and customers were not getting products,” he said. “There’s no other alternative.”

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seenitB4 11/17/12 - 08:18 am
Wait a minute here

Ok union members....some of yall just go to the Shark Tank & get some help with this.....restart the Twinkies Train....:)

soapy_725 11/17/12 - 09:15 am
Hormel employees bought their company.

An option for those who want to work and not ride a gravy train. Unions once represented workers. Now unions are massive corporate giants themselves and only represent the UNION, not members.

Unions and Democrats are twins sister. They vote the line even when it cuts their own throat.

burninater 11/17/12 - 10:20 am
Company selling worthless

Company selling worthless crap with a declining market share going out of business. Must have been those wascally unions!

rebellious 11/17/12 - 10:21 am
The union didn't blink

in this staredown. Problem was, they didn't hold any bargaining chips and had everything to loose. This golden goose is dead!

This is just the beginning of tough business decisions to remain profitable or cease breakeven operations. Talked with a business owner the other day. He is reviewing contracts which are at breakeven and he maintained just to keep his employees gainfully employed. No more will he do so. Why you ask? He is in preservation or survival mode and has no incentive to perform breakeven work. He is also looking at splitting his business into two separate companies to escape the hour threshold and employee count threshold for Obamacare. Look for more and more of these type of creative solutions to the obstacles this President and his administration have thrown in front of small businesses.

The downward spiral is starting folks. God Bless us, everyone.

seenitB4 11/17/12 - 10:29 am
Yep Rebel

I'm hearing the same thing....part time hours.....splitting company......fewer employees...etc......sometimes we cut offour nose to spite our face but as usual the middle class will take a hit.....squeezed from both sides......we have to go back to work for food.....or don't eat everyday.

Conservative Man
Conservative Man 11/17/12 - 10:49 am
Rebel & seenit..

...have got it totally right......

...Lefties and like minded individuals have no problem killing the golden goose, then complaining about there being no more golden eggs...

Gage Creed
Gage Creed 11/18/12 - 12:04 am
Yeah BPee.....that's why

Yeah BPee.....that's why Grupo Bimbo is eyeing the brand....again.

They want to lose money on a declining market for crappy products. (eyeroll)

David Parker
David Parker 11/19/12 - 09:40 am
Sounds to me like a business

Sounds to me like a business didn't run itself successfully and went under. Also sounds like a Union fleeced its employer. I didn't see where Mr President stepped in and made this mess up out of thin air. Yall seem to have some pretty crucial info to make such a direct connection. Vote Lib Party next time and focus on substance instead of cult of personalities like GOP and Dem candidates.

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