Hostess going out of business, shutting down plantsPosted: Updated:
Hostess Brands says it is going out of business, closing plants that make Twinkies and Wonder Bread and laying off all of its 18,500 workers.
The company said it will put its iconic brands like Twinkies and Wonder bread up for sale. Its brands also include Ding Dongs, Ho Ho's and Dolly Madison.
A company official said, "It's over," and this is not a negotiating ploy.
The Irving, Texas, company says a nationwide worker strike crippled its ability to make and deliver its products at several locations.
Hostess was founded in Kansas City, Mo. in 1930.
After a 2004 bankruptcy, the company moved its headquarters to Texas.
It has plants in Emporia and Lenexa as well as Boonville and St. Louis, Mo. Hostess said employees at its 33 factories were sent home and operations suspended Friday. Its roughly 500 bakery outlet stores will stay open for several days to sell remaining products.
Hostess had warned employees that it would file a motion in U.S. Bankruptcy Court to unwind its business and sell assets if plant operations didn't return to normal levels by Thursday evening. The privately held company filed for Chapter 11 protection in January, its second trip through bankruptcy court in less than a decade.
"Many people have worked incredibly long and hard to keep this from happening, but now Hostess Brands has no other alternative than to begin the process of winding down and preparing for the sale of our iconic brands," CEO Gregory F. Rayburn said in a letter to employees posted on the company website.
He added that all employees will eventually lose their jobs, "some sooner than others."
Thousands of members of the Bakery, Confectionery, Tobacco Workers and Grain Millers International Union went on strike last week after rejecting in September a contract offer that cut wages and benefits. Hostess had already reached a contract agreement with its largest union, the International Brotherhood of Teamsters.
Hostess has said that production at about a dozen of the company's 33 plants has been seriously affected by the strike. Three plants were closed earlier this week.
The company, founded in 1930, was fighting battles beyond labor costs. Competition is increasing in the snack space and Americans are increasingly conscious about healthy eating. Hostess also makes Dolly Madison, Drake's and Nature's Pride snacks.
Rayburn said in an interview that there was no buyer waiting in the wings to rescue the company. But without giving details, he said that there has been interest in some of its 30 brands, which include Dolly Madison and Nature's Pride snacks. Experts agreed that it was likely the biggest brands would survive.
Although many workers decided to cross picket lines this week, Hostess said it wasn't enough to keep operations at normal levels; three plants were closed earlier this week. Rayburn said Hostess was already operating on thin margins and that the strike was a final blow.
"The strike impacted us in terms of cash flow. The plants were operating well below 50% capacity and customers were not getting products," Rayburn 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.
"We believed there was a pathway for this company to return to profitability," Hall said, noting that the liquidation could've been prevented if the bakery union had agreed some concessions as well.
Although Hall agreed that it was unlikely anyone would buy the entire company, he said "people are going to look for some fire sale prices" for some of the brands. For now, he expects Hostess products will be on shelves for another week or so.
"Frankly it's tragic, particularly at 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.
He blamed the bakery workers union for rejecting a proposed contract.
"They screwed us big time," he said.
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.
"There's no other alternative," he said.
The company's demise stoked nostalgia among customers as well.
Adil Ahmed, whose family still eats Hostess treats during the holidays, said he rushed to the supermarket Friday morning after hearing the news. Growing up in New Jersey, he said his Southeast Asian family bought Wonder Bread to dip in curries and loaded up on sweets from a nearby warehouse for the holidays.
"I have nephews and nieces - we have to pass on the tradition to the next generation," said Ahmed, a 25-year-old union worker in Baltimore. He bought four boxes of Twinkies and other snacks for a family get together this weekend.
Samantha Caldwell of Chicago also took a quick detour on her way to work Friday morning after she heard the news on NPR. The 41-year-old attorney stopped at a CVS store.
She got a package of 2 Twinkies to have with her morning tea, and another for her 4-year-old son, who has never had one.
"This way he can say, 'I had 1 of those,'" she said.
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