Hostess Brands Inc, the bankrupt maker of Twinkies and Wonder Bread, said it had sought court permission to go out of business after failing to get wage and benefit cuts from thousands of its striking bakery workers.
Workers at a Hostess plant in Biddeford, Maine, say they hope it will be reopened under new ownership following the company’s decision to cease operations.
Fifty-two-year-old Rich Reardon says he and fellow workers are confident that the Biddeford plant will be bought and reopened because the 13-year-old plant is modern and efficient.
The closing would mean the loss of about 18,500 jobs. The Biddeford plant employs about 330 people.
Hostess, which has about $2.5 billion in sales from a long list of iconic consumer brands of snack cakes and breads, said it had suspended operations at all of its 33 plants around the United States as it moves to start liquidating assets.
“We’ll be selling the brands and as much of the infrastructure as we can,” said company spokesman Lance Ignon. “There is value in the brands.”
Hostess said a 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, and it had no choice but to give up its effort to emerge intact from bankruptcy court.
The Irving, Texas-based company said the liquidation would mean that most of its 18,500 employees would lose their jobs.
Hostess had given employees a deadline to return to work on Thursday, but the union held firm, saying it had already given far more in concessions than workers could bear and that it would not bend further. Union officials blamed mismanagement for the company’s woes.
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.
Hostess 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 do not have the financial resources to weather an extended nationwide strike,” CEO 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.”
The company said in court filings that it would probably take about a year to wind down. It will need about 3,200 employees to start that process, but only about 200 after the first few months.
Union President Frank Hurt said the company’s failure was not the fault of the union but 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 it to retain access to $75 million to fund the wind-down process.
The company has canceled all orders 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 an agreement on pay and benefit cuts with the International Brotherhood of Teamsters, its largest union.
In its January bankruptcy filing, Hostess listed assets of $981.6 million. In a February filing, it assessed the value of its patents, copyrights and other intellectual property at some $134.6 million, although it did not break down the value by brands.
The company’s last operating report, filed with the bankruptcy court in late October, listed a net loss of $15.1 million for the four weeks that ended in late September, mostly due to restructuring charges and other expenses.
The Associated Press contributed to this report.
Way to go bakers union. You really showed them! Even the teamsters saw the handwriting and negotiated a contract. You really got me mad….I LOVE TWINKIES! So you not only hurt 18.5K of your fellow employees, you wrecked MY TWINKIES! I guess making some concessions is worse than losing your job and the jobs of others. Yep, it is all managements fault, now go see Obama and collect your unemployment then go on welfare, you earned it.
Way to go hedge fund managers, you just Romneyed another company by looting it of $700 million.
Source?
The hedge funds Silver Point and Monarch, looted the company of millions of dollars. They bought distressed debt funds for pennies on the dollar, had the Unions take most of the risk (to the tune of $130 million in concessions and having the Union take on some of the debt in their pension plans) and then borrowed money against the companies assets. The money they borrowed against the companies assets more than equaled the amount they paid for distressed debt. They then took the extra money paid themselves back entirely and left the company to wither and die. I would suggest learning about the entire process before blaming people who were willing to do an honest days work for an honest days pay. I do not think 30k a year is too much to ask for your labor.
And by some, I mean that of the $1,000,000,000 in debt, the Union owns $944,000,000 or 94% of it. Where is the owners skin in this game?
And I don’t think some jobs deserve 30K for your labor. And if you are so concerned about your “labor” then why aren’t you screaming about how the rewards for your”labor” are taken by the govt, AND the unions? Why aren’t you screaming that you deserve to KEEP what you labored for? As for skin in the game by the owners? If the employees OWNED the company then it would be their skin. And so what if a company came in and kept the corporation going and now decides enough is enough? That is their RIGHT to stop throwing money away. And even the TEAMSTERS aren’t happy with the union who really showed their power. Yes, they really proved their point didn’t they? The company was not laying ANYONE off and was trying to stay in business. Spin it however you want…the UNION WON didn’t they?
That’s just a difference between you and me I guess. I believe that if people are working 40 hours a week they should be able to keep a roof over their head, stay healthy, get to and from work, be able to eat, and save some money for their retirement without relying on the government. You apparently believe it is the governments job to shoulder the responsibility of the company (paying their workers a liveable wage).
Did you even read his post before you started slamming unions, again? 30K is not that far above the federal poverty level for a family of four these days. See any of them driving up to the picket line in a Rolls Royce? This company was mismanaged and stripped of anything valuable by the thieves on Wall Street ten years ago. You do realize that most of our founding fathers were members of the world’s oldest union, the brotherhood of Masons, don’t you? Thank God people like them put this great nation together instead of people like you. The Scab States just wouldn’t have sounded right.
In your own words, what do you think hedge funds are?
They all have something to do with money and that’s baaaaad.
:)
Have no fear. The workers can surely find employment at the local organic food production facility, right? Isn’t Pingree spending her efforts in DC creating Maine jobs in food production? How about it, Chellie?
Oh geez, dont blame Obama…. here is Twinkie solution. If you love twinkies so much, just go and stock up on the little yellow things…they last 200 years before they decompose, so you will be good for a LONG time!
yeah, it’s just fine if your employer makes deductions from your paycheck for a pension fund and then keeps the money. who’s the CEO? Romney?
Another reason not to like Unions, I guess they won’t have to worry about cuts, now they can only HOPE to find a minimum wage job just before the Holidays
That didn’t go well.
i said it 3 days ago. This union,corrupt like all of them, will strike right up until the gates are shut and the equipment is sold off,and then blame it all on the company.How stupid are union members? The company said: “We need to cut wages ,or shut the doors”. How hard is that to understand? Now they are all out of a job, but the union bosses will still get well paid. just like at the plant in Jay, in 1987. unions do not learn from past mistakes. they just keep doing the same thing over and over again, hoping for different results. unions are corrupt to the core, and do not give a damn about the rank and file. To all you guys who are bigtime union supporters,….you brought this on yourselves.
The big guys at the top of the International will still get their pay check from the other locals that come under their umbrella. Good Job(less)! when Hostess is sold to the highest bidder,you people can go work for them for less money and benefits.
I have never seen a more clear example of how bad unions can be.
And I have never seen a clearer example of why Unions are needed. The company stuck the Union with almost the entire real debt. They owned 94% of the actual debt of the company (not the $700 million dollar loan that the owners claimed to have given the company and then collected on by raiding the Unions pension). They gave wage concessions 4 years ago to save jobs and then the company closed the factories anyways and gave their management 80% raises (all while not funding the Unions Pension). It is unfortunate that the workers are out of work, but it is not unfortunate that the Vulture capitalists have one less company.
There was no Pension fund raiding. That is a lie…
Out of the mouth of a union Representative.
. “They
stopped paying into our pension fund contractually they were supposed to be paying into people’s pension fund,” explains union representative
John Price.
If the union actually owns the debt then they are first in line when parts of the company are sold. That’s the way the law works unless you are an owner of the debt in GM …. then your first in line rights are stolen and ownership is transferred to the union.
Cheese, you need to look into it. Not only did they stop paying into the Pension fund, but in 2008 they made the Union Pension buy up a lot of the companies debt. They told them that they needed three things from them to keep the factories open. The workers were to take pay cuts, the Pension needed to take on some of the debt, and they needed to not pay into the Pension for a couple of years. The workers agreed to all of these to save the factories and the company. Then the Owners closed the factories anyways and gave the executives 80% raises. Now, they come back saying in order to keep the rest of the factories open we need to stop payments into the pension, get 8% pay cuts from the hourly workers (not touching executive compensation), and the Pension needs to take in more of the debt incurred by our inability to sell a product universally loved and readily available to everyone because we CAN’T RUN A COMPANY correctly… oh and of course this debt that we have incurred is because we need to pay ourselves even more money. Forgive me if I don’t blame the workers making a working class wage and instead blame the people who actually made the decisions to do this (and have done the same thing at nearly every other company they have owned).
Goodbye to some very iconic brands. Guess that union dues was a good investment in the employees futures. The brands will probably survive, I wonder how the soon to be former employees will fare. I guess they have not been watching the news for the last few years, there are very few jobs out there. The brands will survive, as another company will pick them up and begin producing them again soon. I am sure it will be in a non-union atmosphere.
Unions are nothing but a monopoly over their employer. They should be illegal.
I consider union dues extortion money.I belonged to a union for 30 years.
I was a union shop steward in Chicago. You have no idea how corrupt the union is until you’ve seen that.
“…………………….members of the Bakery, Confectionery, Tobacco Workers and Grain Millers International Union…………………”
So, How’s that strike working out for all of you??
How sad! 18,500 more unemployed. So, what was the purpose of the strike again? I understand wanting a bigger piece of the pie when business is booming but exactly what did they hope to accomplish with a company in its second round of Chapter 11?
The point was to not give back even more money to the hedge funds who bought, leveraged, and controlled hostess. Hostess asked the union to take pay cuts in 2008 or they would have to shut down factories. They did, then Hostess gave their management fat bonuses using the workers money and then closed down the plants anyways. They tried the same thing this time. The workers figured why give them concessions, have them give bonuses to the people who don’t work and then lose their jobs anyways.
Thank you, it didn’t make sense and yes, I did hear about the bonuses and pay increases for the CEOs. I didn’t know about the union cuts and other goings on in 2008. It makes a little more sense now, but I don’t see how they thought that there would be any other resolution other then what happened.
Hold on nobody blamed this on lepage yet. Oh yea i forgot its not his fault
Can’t blame Lepage…he was a big buyer of Twinkies…..he is what kept the business alive.
They were making only 30K a year and they wanted them to take ANOTHER pay cut? Hopefully the new owners will have better management skills.
Only problem with that is THERE ARE NO NEW OWNERS
Hostess had $3.6 billion in sales last year and ,unfortunately, Twinkies are a household name. Someone will step in and pick up the pieces, trust me. They will move production to a “right to starve” state and hire illegals for $2 an hour. Once this is accomplished, the executive bonuses will start to flow, again. Welcome to 2012 America. Any job is better than no job. Be thankful you have a job. Minimum wage is better than no wage.
W T Grant use to be a household name, as did Zenith, Chickletts, Tab and FW Wollworth.
I remember shopping at those stores. I also owned Zenith televisions for years. It is absolutely disgusting and a perfect example of everything that is wrong with this country when you can’t buy a television made in America. Or a computer. Two things that we basically invented. My girlfriend and I have resolved to have a 100% American made Christmas this year. We are doing our shopping online, because no one sells American made products at retail stores anymore. Profit in front of patriotism. Pretty sad.
I agree with you. Too bad the the unions don’t.
A fine example of stupidity. A paying job is better then no job. It says a lot when the teamsters agreed to help and the other union didn’t. These people gambled with thier jobs and lost. Those that think that some company will come in and bit the plant are dreaming. Their isnt any investment money out there. Some one may buy the rights yo the brands but not the assedts