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Hostess bakery to close oven doors, fire thousands.
Published Nov. 19, 2012

Bloomberg News

NEW YORK - Hostess Brands, the bankrupt maker of Wonder bread and Twinkies, said Friday 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 Gregory F. Rayburn said Friday 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, he 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.

Flowers Foods Inc., the Thomasville, Ga., 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 Friday in a note.

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

The Bakery, Confectionery, Tobacco Workers and Grain Millers International Union went on strike Nov. 9 after a bankruptcy judge in White Plains, N.Y., 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 Thursday in a statement. Hostess "attempted to resolve the mess by attacking the company's most valuable asset - its workers."

In the past 15 months, Hostess has unilaterally ended contractually obligated payments to the workers' pension plan and demanded as much as 32 percent cuts 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.

Hostess, based in Irving, Texas, closed three of its 36 plants permanently Monday, blaming the strike. The company said it determined Thursday night that not enough employees had returned to work to restore normal operations. The remaining 33 bakeries and 565 distribution centers also will be shut.

Hostess on Friday filed a motion asking the judge overseeing its bankruptcy to hold a hearing Monday to approve the company's request to close.