Hostess to close all plants, fire thousands of workers

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.