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Hostess to close all plants, fire thousands of workers

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Hostess Brands Inc. said Friday it will close all of its plants, leading to the loss of hundreds of jobs in Indiana and thousands more nationwide.
 
The Irving, Texas-based maker of Twinkies, Ho-Hos, Ding Dongs and Wonder bread said in a prepared statement it will file for liquidation because an “insufficient number” of striking employees returned to work. The decsion will mean the firing of 18,500 workers, including nearly 300 in Indianapolis.
 
Indiana is home to two Hostess plants—one in Indianapolis and one in Columbus—with outlet stores and distribution centers in 19 other cities.
 
“Companies in bankruptcy don’t have any margin for error,” CEO Gregory F. Rayburn said Friday. “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.-based 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.

“This is an unfortunate situation and we are very sad for all those impacted,” Keith Hancock, a spokesman for Flowers Foods, said in an e-mailed 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, which represents about 5,000 Hostess workers, 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 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,” BCTGM International President Frank Hurt stated in a Thursday message on the union’s website. “The Wall Street investors who took over the company after the last bankruptcy attempted to resolve the mess by attacking the company’s most valuable asset: its workers.”

The BCTGM union represents about half of Hostess’ employees in Indiana. A May letter to the Indiana Department of Workforce Development said the company would lay off 856 Hoosiers if the company ceased operations.

Union members walked out Nov. 9 over proposed labor contracts with steep cuts, including an 8-percent wage reduction. Hostess told the union on Wednesday that members had until 5 p.m. Thursday to get back to work or else the company would liquidate.

The BCTGM unions’s 436 members who work at Hostess’ Indianapolis and Columbus plants joined in nationwide pickets.

The company employs 288 in Indianapolis, 212 of them BCTGM members.

Corporate management has pinned the responsibility for the company’s financial woes on the union’s unwillingness to concede wages the company says it cannot afford.
 
Hostess closed three of its 36 plants permanently Nov. 12, blaming the strike. Hostess said it determined Thursday night that not enough employees had returned to work to restore normal operations. The wind-down will close the remaining 33 bakeries and 565 distribution centers, Hostess said.

Rayburn said this week the company would seek authorization to shut down entirely on Nov. 20. It will ask the judge to hold a liquidation hearing Nov. 19, he said.
Hostess, based in Irving, Texas, filed under Chapter 11 for a second time in January, listing assets of $982 million against liabilities totaling $1.43 billion.

Rayburn, who previously helped to guide companies including Syntax-Brillian Corp., Indianapolis Downs LLC and Sunterra Corp. through bankruptcy, said Thursday that Hostess lacked the financial strength and manpower to sustain operations during a strike.

“When you get to a certain point, customers are going to say, ‘Hey, you know, I’ve been as supportive as I can be, but I can’t be out of stock,” Rayburn said.

Some workers will be retained to clean plants and mothball equipment, Hostess said.

Officials at the International Brotherhood of Teamsters, which represents Hostess’s drivers, were “incredibly disappointed” and “angry” about the shutdown, Rayburn said. The Teamsters had urged the bakers’ union to have members decide by secret ballot whether to continue the strike.

Hostess drivers represented by the Teamsters ratified a new contract with 8 percent in wage concessions and 17 percent in benefit reductions.

Teamsters officials in Washington didn’t immediately return a voice-mail message seeking comment on the liquidation.

 

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  • Josey, Get the Facts Right
    The Republicans haven't ruled for the last 40 years, the 47% you refer to are the people who don't pay any income tax or are sucking of the rest of us who work...try reading a little before you comment. Reading about the Hostess problem is no matter what the cause, now 18500 people are out of work because of a greedy 5000 that belong to the union. Shame, Shame on you union members for ruining Christmas for so many. How could you be so selfish? I'm sure all of you will be collecting 99 weeks of unemployment, working under the table, and then going on disability...oh yeah, and most of you voted for Obama believing the problem are all the rich people making over $250,000 a year. Don't worry the country is spending itself off a cliff and we'll all be broke soon. Better learn to speak Chinese.
  • Unions Suck
    Unions outlived their usefulness about 80 years ago. I had to take a 25% paycut to keep my job a few years ago and did because I have pride in my work and myself and don't want to be a ward of the government. More and more these days people want the government to take care of everything and Obama is more than willing to do so. Look how many freedoms we've lost and how much power has been taken away from our congress and senate via "Executive Power" in the past 4 years. The entire country is headed down the same path as Hostess and most of the sheep are too blind to see it.
  • BE INFORMED
    Before we sign a contract we read it. Before we pass a decision or vote we need to read. Be informed, read facts. Cross check between many sources, not skewed,or one sided ones. financial balance sheets are public info. and they do tell a lot. it just requires thought. Don't let someone else think for you.
  • Hostess
    Hostess had hundreds of millions of dollars of loans and leases outstanding. One unsecured loan was for $186,000,000.00. The 75 million for pension and employee benefits would not be a drop in the bucket in comparison. The excuse Hostess offers is a bunch of bunk. And no, right to work will lower the standards of living for everyone. The unemployed are not lazy. They don't have a job, because oh yeah there aren't jobs. These businesses were bled out by greedy ceo's and mismanaged. They did business without investing back into the businesses. Which is exactly the way the republicans have governed over the last forty years. They took the money and ran and left the 47% to clean up the mess.........As long as Indiana republican voters stick thier heads in the sand, and repeat the same dumb stuff, the problem will grow worse. Indiana is short 17 billion in the budget they did not pay into state retirement funds. there is no rich surplus folks.
    • Bobo
      The unions are Bobo's
      • Hostess Workers Screw Themsleves
        I resent the fact a that those of us who are working will be paying their unemployment when they could have been working. I hope we see an end to over-extending unemployment benefits. When they are extended Indiana borrows those $$ from the Federal Pool and then raises taxes on businesses to pay it back. This is prevents hiring and expansion. I know...I pay this tax and it limits how many I can hire, how I advertise, etc, etc.
        • Union bosses
          Interesting, after reading all the comments the one that struck me was the first comment about the whole deal. Making claims that management has the golden parachute...ha, these folks may be taken care off but what most fail to see this is one other industry brought down by the Unions, I used to live in Michigan still have a home there but no job, my company with 560 employees with plants in 27 countries gone. Manufacturing is dying in America,and they are dying at the hands of the liberals who believe you and I didn't build it. Trust me 82 years ago Obama wasn't there to build hostess. We are going to see more and more plant closing the closer we get to January 01, 2012. Defense contractors are next remember the "Obama Admin" asked the defense contractor not to announce unitl after the election as required by law, 60 days before reducing staff. The Obama Admin, stated they would pay any and all legal bills resulting from any fallout of the announcement, when did you and I the taxpayer get on the hook for some more shananigans, as soon as the lemmings lined up to pull the lever for Obama. Enjoy those day old Twinkies...great example for your kids, better to have a job and some insurance than have no job and no future aspirations of helping your family stay secure during these trying times, maybe the Union will make your house payment as well, might as well turn your truck into the bank...absolutely pitiful.
        • ???
          What exactly does that mean? In case you didn't notice, the Unions were dumb enough to support Obama.
        • Where is Tim Durham when you need him?
          If innocent Tim weren't incarcerated he could be spending all those "loans" on more twinkies. Hold 'em behind the goal posts and watch him work off those calories!
        • Wha?
          Dave W, in order for that to work the unions would need to put a management team in place that has a track record of being successful at turning not profitable businesses into profitable businesses. There aren't very many of those guys that can do that and because the supply of those type of guys is small, then their price tag will be high. That will be difficult for the unions to swallow. Some one will come in and buy the brand, which would just be the name Hostess but probably not the assets. I can see a company that is already in that industry with the infrastructure in place ready to start making those products. They would buy the rights to the name Hostess and the recipes for all the items under the Hostess name. The use existing plants to begin the production. They could hire some of those that lost their jobs, but it would be a small number depending on who steps in to buy.
          • Real Tragedy
            Sorry Dave W. For the unions to buy and make profitable they would have to give their workers that pay cut or start them at a way lower rate. Union bosses do not know how to opperate a business based on sales. They only know forced memberships, thuggery, intimidation, and dishonesty. Makes for perfrect politicians but lousy businessmen unless you count organized crime as a legitimate business...
          • 47%
            Think some of the hostess union employees are part of the 47% Romney referred to.
            • Tragic situation
              That CEO is too calm not to have his own golden parachute in place. I suggest the Baker's Union and the Teamsters get together and buy the company at bankruptcy sale prices. Then put everyone back to work. Only find a way to make the place profitable.I suggest also that everyone's wages be a flat salary plus commission reward for making it profitable. We cam sit and ring our hands all day. Salvaging things and putting people back to work makes a lot more sense. Maybe the government could step in and make it happen like they have bailed out so many others. The idea is not greed, the idea is to give people their lives back.
              • What the Market Will Bear
                I don't think professional athletes are worth what they get paid either, but that's just the way it is. The CEO has the right because he's the CEO (duh! Business 101!)$32 a hour to make a Twinkie??? LOL! Thank the Lord Indiana passed Right to Work.
                • Think People!
                  It is absolutely plain stupid for any of you people to try to blame this on management. Defined benefit pension plans are a thing of the past -- everyone has 401-(k)'s now, except for teachers and government workers. They are unsustainable, period. Without that going away, no buyer would even look at a company like Hostess. And as long as the union is there, the pension stays put. So let's do the math: 92% of 5000 UNION workers (that's 4600) voted to reject the contract. Out of a workforce of 18,500, that's 24.8%. So then less than one fouth of the workforce took the other 13,900 non-union people down with them. Even the Teamsters bought off on the deal. Maybe the future teamsters were in high school math class while the bakers were out in the parking lot getting stoned. I think it's time to reverse the dynamic. The non-union 13,900 need to start looking for the union people and start intimidating and threatening them. I do know this: if I ever found out that an applicant for employment at my company had ever willingly been in a union, he/she would not ever work for me. By the way, I am a CEO of a small company. We are struggling and every one of us, including me, took a 10% pay cut. We're all still here. Unions are WORTHLESS!!!
                • Curious
                  I would love to know how the Teamsters feel about the Bakers union now. The Teamsters had agreed to the concessions in the new contract because some pay is better than none. This could actually pit one union against another. Also, why were there two unions to begin with? Seems like that would have eventually caused issues at some point.
                  • Aren't Unions Great
                    5,000 people don't like a company policy, so they bu 18,500 out of work
                  • Shelf Life
                    No worries. Twinkies can last on your shelf for 25 years.
                  • Marine57
                    However, if the CEO was paid one million dollars per year, he was making $500 per hour. Would it be right for that CEO to tell a worker that he is not worth $32 per hour?
                    • Wow...
                      It all sounds so easy sitting at your computer criticizing business executives. Hey Kay, gather investors to buy the company, try to work with union folks that choose only to be one tool in the tool box instead of efficient cross utilization or combinations of duties, then price point your product against non-US made snack foods. Oh and for the new product line, make sure to get an extra hundred million for marketing campaigns from the union scared investment groups. Just saying....
                    • Sorry MDB
                      Sometimes negotiations just prolong the inevitable. Unlike the government, most businesses, unless stolen tax dollars are used to bail it out, are required to be profitable. Otherwise they must cut operating expenses. $32/hr for some isiot to push an ON button on an automated line is pay way above the skill level. Just going to business scholl doesnt automaticly qualify you to kiss the unions butt. Real businessmen understand that you have no operate in a positive cash flow mode.
                      • Convenient Story
                        It seems like management is using the unions as an excuse for failure. Perhaps they could have expanded their product line to adjust to the changing eating habits of Americans. Perhaps they could have analyzed their sales, optimized their shipping, tested different marketing strategies. These are all ideas that would come from executive management. Where is their accountability for the failure of this company?
                        • BLAME
                          IT'S ALL BUSH'S FAULT!!
                          • The last of the Shadeland plants.
                            Thirty years ago it was Ford, Eastgate, Western Electric, Chrysler, Jenn-Air, and Hostess. Except the Kroger Bakery and Dairy operations the rest are all gone.
                          • The other side of the story
                            I "was" a non-union employee at Hostess Brands until this happened. The BCTGM and the striking workers are only telling the media one side of the situation so here is some of the other... Yes the company stopped paying into the MEP (multi employer pension) fund last fall, but since I've been in the workforce, going on 3 decades, I have rarely seen any company even offer a pension fund option. Usually it's just a 401k. Hostess offered the 401k to employees but it would not start for a couple years. These people expected the company to totally bankroll their "retirement". Many would retire after reaching the criteria then move along and work elsewhere. Yes the company was instituting an 8% 1st year pay cut, but everyone was getting the cut. I was not happy about it so I began looking for another job instead of sabotaging the one I had without having another to fall back on. These idiots will tell you they would rather make zero than $14/hr, which would have been the wages with the cut. Yes the company increased insurance costs, but the union doesn''t tell you that the employees contribution is in line with all other employers these days. Previously, the union workers only had to pay a few dollars a week for coverage which was a great deal for them but times have changed and they were lucky to have had it at that cost for so long. Most of the employees were lazy and entitled. They would sit in the break room and get paid if their machine was down for any reason. The sanitation crew would sit outside all day long preaching about how the company is stupid and failing without realizing that they have a hand in it by sitting there not doing their jobs and collecting pay. This was a set up job by the International Union from the word go. At the local information meetings prior to the strike, the International rep flatly stated that the strike purpose was to cause liquidation. They did not want any demands met because they wanted the company to go under. They sold this to the highly uneducated workforce by claiming a buyer was waiting. What buyer would want to buy the unions outrageous demands and have to deal with a militant workforce that would rather force a company under than work for more than fair wages/benefits? None I tell you. Someone will buy the branding, someone may even buy some of the facilities, but do not think that a company will want this workforce. These fools were suckered. The ones who weren't suckered were threatened and intimidated by union officials if they support their agenda. These people instead of peacefully exercising their right to strike, instead committed violence and threatened violence of the peple who were showing up to work. What kind of person would bring their small children to a picketline and have them stand in the entrance trying to prevent a tractor trailer from entering? Are these the kind of employees anyone would want? Nope. Soon these people will regret their actions, if they haven't already. Most openly spoke about collecting 99 weeks of unemployment and going on goverment subsidies instead of working a job. By the way, all of those who did not cross in my state will be denied unemployment because they refused work. Why would the union do this to it's employees? Well it wanted to set a precedent to other companies not to expect concessions during negotiations. They sacraficed 18,000+ jobs at Hostess for this. The union did not even go to the bargaining table, instead it agreed to accept the negotiations of the Teamsters in the matter. The BCTGM then would not even return phone calls from the company to even discuss the situation. The plan was in place and the sold it to the mostly G.E.D. educated workforce. Call me a company man or whatever else you like, but the facts are the facts. Hostess management in thepast screwed things up but this was the last chance to try and pull itself together. The BCTGM just had other ideas. I will survive and move along. I have a college degree and a work record of performing my job even if I was unhappy about my wages/benefits. I guess this was just a thinning of the herd because alot of these fools who already live paycheck to paycheck will lose what little they have now and expect the rest of our taxes to support their lazy dumba$$es. The company should have asked Judge Drain to void the contract and then terminate the employees who did not return. The employees who were working (new hires and temps) were better employees and made better product.
                          • Union Destroys Co.
                            The union is responsible for the demise of this company. Now the union at Hostess just like the UAW that forced the shutdown of the GM Stamping plant in Indy will have all of its members out of a job. But don't worry, Obama will give you all another handout as usual. Unions are just a parasite; time for them all to be gove!
                          • Two Camps? Really?
                            Not sure what IU Business School had to do with a Nation-Wide strike but whatever. There is a third option. Maybe the company was telling the truth and they could not continue to operate without concessions. The workers will find jobs? Well, maybe. Probably at a lower pay rate then they would have made if they had stayed at Hostess though. A lot of the older workers may never find a job again in this economy. I'm sure Comrade Obama will take care of them though, after all, they helped to re-elect him. And look at it one the bright side; now they qualify to get an Obamaphone!
                          • unions
                            See it just does to show that unions suck and should be done away. No more unions... Look how many people lost their jobs because they are so stern. Instead of taking a pay cut and keeping your job its better to not have a job and show those people who's boss. Who is the big winner here? I say unions get over it and stop.
                          • Serves Unions right
                            The company very publically filed bankruptcy earlier this spring. Yet, the union workers would rather everyone lose their jobs than take a paycut like the rest of the US has had to do over the past couple of years. I think an 8% reduction sounds pretty good compared to a 20% as many have received! But, I guess the profitable parts will be sold off and the companies that pick that up will need to hire, but this will only be a fraction of the 18,500 that are losing their jobs because of this.
                          • They had to burn the village to save it
                            So sad; too funny. CEO Rayburn would rather close shop than negotiate any further? Sounds fishy. There seems to be two camps: 1) That Hostess had received offers for the profitable parts of the company and decided to bail. Thought: If this is true, these facts will come out in the near future. 2) Leadership was incapable of effective union negotiations, preferring the nuclear option. Thought: IU has a really good business school from which they could benefit. My guess, though, is that the board was just worn down, tired and wanted their golden parachutes. The workers will find other jobs but I'm not sure the Hostess leadership will need any.

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                            1. Now if he'd just stay there...

                            2. Daniel - what about the many US citizens who do NOT follow what the Bible teaches? The Hindus, Jews, Muslims and others who are all American citizens entitled to all rights as Americans?? This issue has NOTHING to do with "What the Bible says..." Keep all Churches separate from State! Pence's ongoing idiocy continues to make Indiana look like a backwards, homophobic state in the eyes of our nation. Can't we move on to bigger issues - like educating our kids?

                            3. 1. IBJ should link to the referenced report. We are in the age of electronic media...not sharing information is lazy. Here is a link http://www.in.gov/gov/files/Blue_Ribbon_Panel_Report_July_9_2014.pdf 2. The article should provide more clarity about the make-up of this panel. The commenters are making this item out to be partisan, it does not appear the panel is partisan. Here is a list of the panel which appears to be balanced with different SME to add different perspectives http://www.in.gov/activecalendar/EventList.aspx?view=EventDetails&eventidn=138116?formation_id=189603 3. It suggests a by-pass, I do not see where this report suggests another "loop". 4. Henry, based on your kneejerk reaction, we would be better off if you moved to another state unless your post was meant as sarcasm in which case I say Well Done. 5. The article and report actually indicates need to improve rail and port infrastructure in direct contradiction to Shayla commentary. Specifically, recommendation is to consider passenger rail projects... 6. People have a voice with their elected officials. These are suggestions and do not represent "crony capitalism", etc. The report needs to be analyzed and the legislature can decide on priorities and spending. Don't like it, then vote in a new legislature but quit artificially creating issues where there are none! People need to sift through the politics and provide constructive criticism to the process rather than making uninformed comments in a public forum based on misinformation. IBJ should work harder to correct the record in these forums when blatant errors or misrepresentations are made.

                            4. Joe ... Marriage is defined in the Bible ... it is mentioned in the Bible often. Marriage is not mentioned once in the US or Indiana Constitution ...

                            5. Daniel - Educate me please: what does the Bible have to do with laws? If the government wasn't in the business of marriage to begin with, then it wouldn't have to "define" marriage at all. Marriage could be left as a personal, religious, or otherwise unregulated action, with no ties to taxes, legal status, etc. Then people could marry whomever they want, and all this silliness would go away. Remember to vote Libertarian in November.

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