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Hostess moves to liquidate after crippling strike

By Candice Choi and Tom Murphy

Associated Press

LAST UPDATED: 08:03 a.m. HST, Nov 16, 2012

NEW YORK » Twinkies may not last forever after all.

Hostess Brands Inc., which makes Ding Dongs, Wonder Bread and other snacks, filed a motion today with U.S. Bankruptcy Court seeking permission to shutter its operations. The move comes after the company said striking workers across the country crippled its ability to maintain production.

The closing would mean the loss of about 18,500 jobs. The company said employees at its 33 factories were sent home and operations suspended today and its roughly 500 bakery outlet stores will stay open for several days to sell remaining products.

Hostess CEO Greg Rayburn said in an interview that there was no buyer waiting to buy the company. But without giving details, he said that there has been interest in some of its 30 brands, which include Dolly Madison, Drake's and Nature's Pride snacks.

Rayburn said the financial impact of the strike makes it too late to save the company even if workers have a change of heart. That's because the company was operating on thin margins and stalling production meant the loss of critical sales.

"The strike impacted us in terms of cash flow. The plants were operating well below 50 percent capacity and customers were not getting products," Rayburn said.

Hostess, based in Irving, Texas, filed for Chapter 11 protection in January, its second trip through bankruptcy court in less than a decade, as it struggled with increased competition, Americans' move toward healthier eating and the high pension, wage and medical costs related to its unionized workforce.

The move to liquidate comes after a long battle with its unions. Thousands of members of the Bakery, Confectionery, Tobacco Workers and Grain Millers International Union went on strike last week after rejecting a contract offer that slashed wages. The bakers union represents about 30 percent of the company's workforce.

Rayburn said the union's leadership had misled members into believing there was a buyer in the wings who would rescue the company. He said the union hadn't returned the company's calls for the past month.

A representative for the bakers union did not immediately return a call seeking comment.

Although many workers decided to cross picket lines this week, the company said it wasn't enough to keep operations at normal levels; three plants were closed earlier this week.

The company had reached a contract agreement with its largest union, the International Brotherhood of Teamsters. The Teamsters had urged the bakery union this week to hold a secret ballot on whether to continue striking.

Hostess has said the company is unprofitable under its current cost structure, in large part because of its union wages and pension costs. Rayburn said that sales volumes had been flat to slightly down leading up the bankruptcy filing. In a statement on the company website, he said 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.

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 move to liquidate was unwelcomed news to some customers.

Adil Ahmed, whose family still eats Hostess treats during the holidays, said he rushed to the supermarket this 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.

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allie wrote:
on November 16,2012 | 05:24AM
Papakolea wrote:
Besides the high labor costs, I think the thing that killed Hostess is the advent of in-store bakeries in all the major supermarkets. Why would anyone buy a pastry that was baked two weeks ago when they can get one baked two hours ago?
on November 16,2012 | 05:45AM
Highinthesierras wrote:
What?????? Obviously your one of the slim, trim healthy folks - true?
on November 16,2012 | 10:02AM
GooglyMoogly wrote:
@Papakolea, you're missing the point. The people who bought Hostess products weren't looking for a "pastry". They were looking for Twinkies, Ho-Ho's and Ding Dongs. Sure, an in-store bakery could sell a cream-filled sponge cake, but that doesn't make it a Twinkie. What a shame. Not so much from culinary view, but more from a cultural one. Now all I'll see when I walk in to pay for my gas are those crappy bear claws and danish-like pastries.
on November 16,2012 | 11:04AM
vernchs wrote:
What, Obama not getting involved for a business too big to fail???????
on November 16,2012 | 05:59AM
f206 wrote:
Give it a rest!!
on November 16,2012 | 09:07AM
DAGR81 wrote:
Does any one think that Obama would challenge any union...he will just not do anything. What's new?
on November 16,2012 | 09:49AM
peanutgallery wrote:
No kidding. Especially when there's a union involved.
on November 16,2012 | 10:16AM
kauai wrote:
Not a big Obama fan here, but get your facts straight. "Too big to fail" mentality was started under the Bush administration via TARP. Obama simply continued that taxpayer-money-to-bail-out-Wall-Street, instead of performing an orderly wind-down of the companies that made stupid financial/economic/management decisions. All the crowing about capitalism and free-markets means that those corporations should have been run into bankruptcy like Lehman Brothers.
on November 16,2012 | 10:44AM
Wahiawamauka wrote:
Thats right. Unfortunately most of the people on here get there 'facts" from conservative talk radio. LOL
on November 16,2012 | 06:38PM
Pacej001 wrote:
You're right. I demand a Twinkie bailout.
on November 16,2012 | 11:29AM
likewise wrote:
Bummers. Had Hostess given into the union demands you would be paying much more for that two week old Twinkie then it was worth. I haven't had a Hostess product in years. I"m going to have to go and get some Ding-Dongs and Snowballs for old times sake.
on November 16,2012 | 06:08AM
Hapa_Haole_Boy wrote:
No Twinkies, or Ding Dongs, or Ho Hos, oh no!!! A real travesty. Good job nincompoop unions.
on November 16,2012 | 06:40AM
NuuanuMama wrote:
This will at least be good for the fight against obesity.
on November 16,2012 | 06:42AM
dly223 wrote:
Looks like their second largest union just screwed everybody at Hostess. Now nobody has a job. Makes me wonder if unions still have a place in this economy. This one just committed suicide and brought the other union along for the ride. I guess you take your chance when you unionize and have somebody represent you.
on November 16,2012 | 06:43AM
TMJ wrote:
The destruction of this company was brought to you by union bosses. Congratulations!
on November 16,2012 | 06:54AM
tiki886 wrote:
Every time a union member loses their job, an angel gets his wings!
on November 16,2012 | 08:11AM
Maneki_Neko wrote:
Expect to see reports of domestic violence as Ho-Ho withdrawal hits Hawaii families.
on November 16,2012 | 07:27AM
AhiPoke wrote:
I grew up learning and believing in the benefits of the early unionization efforts. Back then pay, benefits and working conditions were horrible. That was 100 years ago. Since then federal and state laws have all but eliminated poor pay, benefits and working conditions. Now unions primarily serve to protect bad workers. You need only to observe what's going on in Europe to see where we may be headed if union mentality prevails. Yes, we'd all like 30 hour work weeks and 3 months of vacation. Unfortunately, that's a recipe for American failure. What's scary is that President Obama is a huge supporter of unions.
on November 16,2012 | 07:58AM
peanutgallery wrote:
The union credo mophed from "pay us a fair wage, for an honest days' work" into "we want as much as we can get for doing as little as possible." The Hostess example is just one of many more to come. Airlines are next.
on November 16,2012 | 10:18AM
tiki886 wrote:
Hostess about to go bankrupt when marijuana is about to be legalized? Say it ain't so!
on November 16,2012 | 08:09AM
busterb wrote:
on November 16,2012 | 09:51AM
96706 wrote:
The UNION killed its own members. How sad.
on November 16,2012 | 08:43AM
kennie1933 wrote:
Growing up, I never liked any of the Hostess products. I always thought the chocolate coatings were waxy and Twinkies were kid of stale and too sweet. But, having said that, for better or worse, there goes another icon from the past.
on November 16,2012 | 09:03AM
CriticalReader wrote:
Who in their right mind still eats twinkies, ho hos or ding dongs? The reason this "company" is dying is because its products are bad and becoming more and more disfavored because of what they are - bad for you, and bad for the people who you might be uncaring enough to feed them to. Look at the nutritional or health information about Hostess products, and you'll see an excess of all those things an educated populace is beginning to avoid with a vengence. Hate to see any large employer go down. But, when the product is as objectively bad as Hostess' are, it makes sense. I'm sure the US lost many Asbestos jobs a few years back.
on November 16,2012 | 09:29AM
DAGR81 wrote:
The real issue is that unions and their members refuse to recognize and accept the reality of the situatlion.
on November 16,2012 | 09:52AM
quint34 wrote:
the twinkies defense is now out.
on November 16,2012 | 10:27AM
AhiPoke wrote:
While your statements may be factual, the bottom line is that their bad products help to employ 18,500 people who are now losing their jobs about 5 weeks before Christmas.
on November 16,2012 | 10:35AM
hilopango wrote:
Unions have little use in our present-day economy, except to make the union bosses and higher-ups fat and happy. Their real purpose is no longer valid. Many major corporations do very well without the interference of unions.
on November 16,2012 | 09:32AM
peanutgallery wrote:
Unions only exist today to protect the inferior workers and enrich the union bosses.
on November 16,2012 | 10:20AM
retire wrote:
Obama won't do anything, he just got re-elected. Lame duck time.
on November 16,2012 | 10:14AM
magnod wrote:
This story should focus more on the poor management of a company rather than the inability of contract negotiations. The union is not the cause of the company's financial woes. Hostess' inability to adapt and create new products that fit into today's snack market is what caused the company to close. People have moved on to being healthier, yet Hostess has not. Poor management and product development is the true problem with the company.
on November 16,2012 | 10:16AM
nodaddynotthebelt wrote:
This is just an example of what happens when unions are allowed to establish their parasitic tentacles into business and government. Remember Circuit City? Same thing happened to them. Now these greedy union members will be without a job. I can't say that I feel sympathy for them. They made their bed now they have to sleep in it. I suspect that Hostess products are overpriced due to high labor costs. Why would anyone buy their highly processed and preserved products when fresh products can be had at a lower price? A lot of consumer grew up eating their products but with the economy being the way it is I am sure they are less apt to buy them now. Those union employees do not realize that people have moved on as can be seen in the lack of interest by investors for their company. I think their union advised them wrong. I am sure the union will still have their jobs. It's their union members who now will have to stand in the unemployment line.
on November 16,2012 | 10:45AM
GooglyMoogly wrote:
The union's calculated risk failed miserably. Sometimes, when a company tells you that it can't afford to meet your contract demands, they aren't lying.
on November 16,2012 | 10:59AM
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