Hostess Brands, maker of the popular products such as Twinkies and Ho Hos, announced Friday that the 82-year old company will begin winding down operations and begin liquidating its assets. The decision comes a week after the labor unions went on strike in protest to a new labor contract.
Most of Hostess’ 18,500 employees will be laid off as the company moves to shut down its 33 bakeries and 565 distribution centers.
“We deeply regret the necessity of today’s decision, but we do not have the financial resources to weather an extended nationwide strike,” Gregory F. Rayburn, Hostess’ chief executive, said in a statement.
In an interview with CNBC on Friday Rayburn said that the financial impact of the strike was too severe and that even if the workers had a change of heart now, it would be too late to save the company. Though the striking union only represented a third of Hostess’ employees, the cumulative effect on production made some retailers decide not to carry the product due to unstable supply.
The company had warned employees that if a deal could not be reached by Thursday at 5 p.m. the company would file a motion in shutter its operations and sell its brands.
“I don’t know if they thought that was a bluff,” Rayburn said on CNBC.
In a statement released by The Bakery, Confectionary, Tobacco Workers and Grain Millers International Union, the union blamed the company’s woes on an unreasonable agreement with management. The statement was released before Friday’s announcement of the shutdown, but since Hostess had given the union a deadline, the statement was written knowing the shutdown decision was impeding.
“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,” said union President Frank Hurt. “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.”
Hostess Brands filed for Chapter 11 back in January 2012. Since then, the company has tried to cut costs by making cuts in labor and reducing payments to pension holders. The strike was in response to a contract that union claimed would have cut wage and benefits by 27-32%, while increasing compensation to top executives.
It is unlikely that today’s announcement means the end of Twinkies and other iconic products. As part of the liquidation process, Hostess will auction off its factory and bakery assets as well as auction off its brand names.
Despite the ray of hope, Rayburn stated that the union was misleading workers when they suggested that a buyer for the operations was already waiting in the wings.
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The move shuts down one of the nation’s oldest and largest producers of baked goods. Founded in 1930, it produces such well-known brands, aside from Twinkies, as Ding-Dongs, Ho Ho’s, Sno Balls and Donettes, not to mention Wonder bread, which the company says is the best-selling white bread in the United States.
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Hostess Brands — the maker of such iconic baked goods as Twinkies, Drake’s Devil Dogs and Wonder Bread — announced Friday that it is asking a federal bankruptcy court for permission to close its operations, blaming a strike by bakers protesting a new contract imposed on them.