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Hostess to close, cites nationwide worker strike

Hostess suspended bakery operations at all factories, says its stores will remain open for several days to sell already-baked products

Posted: November 16, 2012 - 8:55am
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Hostess, the maker of Twinkies and Wonder Bread, plans to go out of business, lay off its 18,500 workers and sell its snack cake and bread brands.

The Irving, Texas, company said a nationwide strike crippled its ability to make and deliver its products, which also include Ding Dongs, Ho Ho’s and Home Pride bread.

Hostess suspended bakery operations at all its factories and said its stores will remain open for several days to sell already-baked products.

The company 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.”

“Unfortunately, because we are in bankruptcy, there are severe limits on the assistance the (company) can offer you at this time,” Rayburn wrote.

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 said the company is unprofitable “under its current cost structure, much of which is determined by union wages and pension costs.”

A union representative did not immediately return a call from The Associated Press seeking comment on the company’s announcement.

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.

Hostess had already reached a contract agreement with its largest union, the International Brotherhood of Teamsters.

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.

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Victory

Another victory labor unions who still don't get it. Obama must be proud.

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Dangit

People need work and look at this mess.

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The other side

of the story isn't in the article. Look up Mr. Rayburn and see how many companies he's worked for as CEO as they "reorganized." There is a Wall Street Journal Article from April 4 of this year about the executives at Hostess getting a salary boost just before filing for bankruptcy. I'd like to see if this company's income would have been insufficient if you took out the fat at the top and not just the workers' pay and benefits. I'm not saying unions don't push the envelope too hard, but executives have a long, long history of gorging themselves off the backs of the workers.

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Executives can't "[gorge]

Executives can't "[gorge] themselves off the backs of the workers" unless the workers allow it. Unions eliminate individuals' right to work. I guarantee that not all of the employees wanted to strike, and many were content with their jobs. The individuals that did not feel adequately compensated should have quit and found work elsewhere instead of dragging down everyone with them.

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The bankruptcy judge approved

The bankruptcy judge approved the reduction in pay. He had access to all financials. One union agreed one did not. If I were the layed off empolyees I would sue the union for breach of contract. There are those companies that take advantage of workers, there are more unions that take advantage of employers and tax payers.

I have beeen self employed for most of my life. I have yet to find where it is written that a company is responsible for an employees, healthcare, retirement and life style.

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When is America gonna learn

When is America gonna learn that the unions are helping to put lots of people out of a job. The more they fight for higher pay in an already weak ecomony the more businesses are gonna fail. We the people need to wake up and smell the roses. 18000+ are losing jobs due to poor management and union strikes. I wonder if those that were involved in the union strike think it was well worth it. Now more of my tax dollars are going to help idiots.

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From what I've just read in

From what I've just read in the comments the executives live off the union workers and the union workers live off the customer.

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Never thought I would read

Never thought I would read this about twinkies and ding dongs. Sad day indeed!

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No more Twinkies? Man, what

No more Twinkies? Man, what a said day in America. It's Bush's fault you know.

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What's really "said" about this

is that the kneejerk reaction is to blame "the unions" when it's all about how poorly management has performed... in spite of receiving huge bonuses.

Before you go blaming "the union" for Hostess' problems, look at the facts.

In 1995 a company called International Bakeries, which was essentially a vulture capital arm of a computer company called Data Processing Financial and General Corporation, went on a massive spending spree. They not only bought Hostess but the San Francisco French Bread Company, John J. Nissen Baking Company, Drake's, My Bread Company, and tons of other companies.

They did this by borrowing like crazy and eventually defaulting on their loans, leading to bankruptcy in 2004.

In 2009 they emerged from bankruptcy by BORROWING MORE MONEY. They borrowed from Ripplewood Holdings, Silver Point, Monarch, and GE Capital. All these loans caused more payments and more interest accruing, leading to more and more debt. It was this debt that caused their collapse.

"Hostess was able to exit bankruptcy in 2009 for three reasons. The first was Ripplewood's equity infusion of $130 million in return for control of the company (it currently owns about two-thirds of the equity). The second reason: substantial concessions by the two big unions. Annual labor cost savings to the company were about $110 million; thousands of union members lost their jobs. The third reason: Lenders agreed to stay in the game rather than drive Hostess into liquidation and take whatever pieces were left. The key lenders were Silver Point and Monarch. Both are hedge funds that specialize in investing in distressed companies -- whether you call them saviors or vultures depends on whether you're getting fed or getting eaten."

http://management.fortune.cnn.com/tag/gregory-rayburn/

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