Thus, it looks like no more Twinkies for consumers. The union won, and the employees lost.
Twinkie Maker Hostess to Close is a sad ending to the story of Hostess.
The bakers union played hardball to the end, the company wasn't bluffing, and now perhaps 18,500 employees will lose their jobs. Companies that don't earn profits don't stay in business. Employees who won't work for what companies can afford to pay them lose their jobs. Period.
Maybe the bakers union could come up with the money needed to buy the company now. Then they could pay employees twice as much as they were making working for Hostess. Or even three times as much. Now all they need to do is find investors willing to lose their money.
Here's the breaking news story:
"Hostess Brands Inc., the maker of iconic treats such as Twinkies and traditional pantry staple Wonder Bread, is shuttering its plants and liquidating its 82-year-old business.
A victim of changing consumer tastes, high commodity costs and, most importantly, strained labor relations, Hostess ultimately was brought to its knees by a national strike orchestrated by its second-largest union.
Diana McKinley from the Seattle local 9 pickets on
Thursday at Hostess plant in Sacramento, Calif.
The work stoppage, launched Nov. 9 by the Bakery, Confectionery, Tobacco Workers and Grain Millers Union to protest a fresh labor contract, affected about two-thirds of Hostess's 36 plants. The strike was making it impossible for the Irving, Tex., company to continue producing its baked goods, Chief Executive Gregory Rayburn said.
The CEO, a restructuring professional who ascended to the top of the company after its former leader abruptly resigned earlier this year, said the liquidation will take months but require few workers.
"We deeply regret the necessity of today's decision, but we don't have the financial resources to weather an extended nationwide strike," Mr. Rayburn said in a statement Friday morning. He said the company will "promptly" lay off most of its 18,500 employees and focus on "selling its assets to the highest bidders."
Hostess's remaining inventory—loaves of bread and plastic packages of cream-filled desserts—probably will be sold in bulk to a discounter or big-box store. The company will attempt to sell its plants and its brands, "everything and anything that we can," Mr. Rayburn said in an interview Thursday afternoon, before the company had announced it would shut down.
The fate of the company's ubiquitous brands remains uncertain, set to be decided by a bankruptcy court auction run by Hostess's investment bankers, or perhaps determined by a group of liquidators. Mr. Rayburn has said he's unsure if all of the company's brands—there are about 30, from Drake's to Ding Dongs—will sell or how much they might fetch.
On the one hand, the names have decades of brand equity, and there is "pretty significant demand" for the products, according to Mr. Rayburn. Hostess has revenue of about $2 billion annually. But a competitor would have to ramp up production if it took on the Twinkies or Ding Dong brand and give up valuable shelf space already devoted to its own goods, Mr. Rayburn noted.
The specter of liquidation has loomed large since the bankruptcy case, Hostess's second in recent years, kicked off in January. From the start, the company has warned that labor cuts were its only chance to survive and said the only other possible outcome was a full shutdown of the business. Both Hostess and its largest union, the International Brotherhood of Teamsters, have long agreed a widespread strike would spell the end of the company. . . .
Months of negotiations, threats and labor trials ultimately brought all of Hostess's unions on board with a fresh collective-bargaining agreement. Some, like the Teamsters, gave their support willingly, though begrudgingly, while others, like the bakers union, were forced by a judge to accept the new deal.
The bakers union continued to attack the wage and benefit cuts and pension restrictions that form the heart of the new contract, even as Hostess shifted its focus to its reorganization plan, which was slated for an initial round of approval later this month.
"It's just way, way over the top," the bakers union's Mr. Hurt said of the labor contract in an interview Monday. The proposal garnered a near-unanimous rejection from members during a September vote. "It was an untenable proposal for our people," he said.
Mr. Rayburn earlier this week called on employees to return to work, vowing to pull the plug on the business if he couldn't get plants running again. As of Thursday morning, 13 plants were still operating below 50% capacity and three had been shut down—a sort of warning shot by the company that on Monday eliminated 627 jobs.
Mr. Rayburn blamed a host of factors, from years of mismanagement to a lack of capital investment to legacy labor costs, for the demise of the company, founded in 1927 as Schulze Baking Co.
"I think there's blame to go around everywhere," he said. "There's almost nowhere you can look that didn't play a role in the company ending up in this position.""
SUMMING UP
Cheer up, Twinkies fans. The brand has value, will be bought by someone and won't disappear.
The Twinkies brand will live on, even though Hostess and its 18,500 jobs won't.
The Bakers union will live on, too.
In fact, the bakers union "won" while its members who worked at Hostess will lose their jobs.
And so will all other Hostess employees lose their jobs, including members of the Teamsters union, management and non-striking employees.
And while we're at it, let's chalk up a loss for taxpayers as well, as the situation of the newly jobless folks will result in more government "assistance" for those people, even though by their union votes they have chosen not to work.
What a strange world this is.
But so it goes. What a shame.
Thanks. Bob.
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