Hostess pulls plug on operations

Hostess pulls plug on operations

Hostess Brands announced today (16 November) that it is winding down after a strike "crippled" its operations.

The company confirmed that it has filed a motion with the US bankruptcy court asking permission to close its business and sell its assets. The fire sale will include Hostess' iconic brands such as Wonder Bread, Twinkies and Nature's Pride. The company will also be selling its bakeries, distribution centres, bakery outlet stores and other assets.

Bakery operations have been suspended at all plants, Hostess said. However, the company added that deliveries will continue for a time as it sells off already-baked products.

The board of directors moved to liquidate the business in order to "preserve and maximise the value of the estate" after the Bakery, Confectionery, Tobacco Workers and Grain Millers International Union (BCTGM) initiated a nationwide strike. Hostess said that the industrial action "crippled" its ability to manufacture and deliver products at multiple facilities.

The company had given striking workers an ultimatum asking them to return to work by 5pm yesterday or the company would be liquidated.

"Insufficient numbers of employees had returned to work to enable the restoration of normal operations," Hostess said.

BCTGM members had gone on strike to protest against an 8% cut in pay and the loss of benefits that, the union said, would reduce workers incomes by around 30%.

However, management insisted that the costs were necessary and that the company would go under if employees failed to accept concessions.

"Hostess Brands is unprofitable under its current cost structure, much of which is determined by union wages and pension costs. The offer to the BCTGM included wage, benefit and work rule concessions but also gave Hostess Brands' 12 unions a 25 percent ownership stake in the company, representation on its Board of Directors and $100m in reorganized Hostess Brands' debt," the company revealed today.

This offer remained unacceptable to the BCTGM union, who represents around one-third of Hostess' 18,000-strong workforce.

The Teamsters union, Hostess' largest union, did not go out on strike, although its members did respect BCTGM picket lines.

In a statement yesterday, the Teamsters union called on the BCTGM to hold a secret ballot to determine whether the strike should continue.

"It is difficult for Teamster members to believe that is what the BCTGM Hostess members ultimately wanted to accomplish [the liquidation of Hostess] when they went out on strike," the Teamsters said.

"We deeply regret the necessity of today's decision, but we do not have the financial resources to weather an extended nationwide strike," said Gregory Rayburn, Hostess chief executive officer. "Hostess Brands will move promptly to lay off most of its 18,500-member workforce and focus on selling its assets to the highest bidders."

The wind down means the closure of 33 bakeries, 565 distribution centres, approximately 5,500 delivery routes and 570 bakery outlet stores throughout the US.