Hostess Shutdown Imminent if Strike Continues

Hostess Brands Inc. will seek to liquidate the entire company if “enough” striking workers don’t return to work by 4 p.m. Thursday, the company said Wednesday.

Hostess, maker of such iconic brands as Wonder Bread, Twinkies and Ding Dongs, is responding to a strike that began Friday by the Bakery, Confectionery, Tobacco Workers and Grain Millers Union.

No bargaining talks were scheduled for Wednesday or today.

The company, based in Kansas City for many years when it was known as Interstate Bakeries, is in its second bankruptcy reorganization in eight years. It listed assets of $982 million against liabilities of $1.43 billion. A reorganization plan was filed Oct. 10.

“We simply do not have the financial resources to survive an ongoing national strike,” said Gregory F. Rayburn, the company’s chief executive.

Union members countered that liquidation might have been the company’s intent for months.

Liquidation would cause the loss of nearly 18,000 jobs around the country, Rayburn said. That would include more than 200 jobs at a bread and bun bakery in
Lenexa where workers walked out Friday afternoon.

The company, now based in Irving, Texas, did not specify how many returning workers would be “enough” to avoid liquidation.

“It is now up to Hostess’ BCTGM represented employees and Frank Hurt, their international president, to decide if they want to call off the strike and save this company, or cause massive financial harm to thousands of employees and their families,” Rayburn said in a release.

The walkouts began after bakery union employees rejected a unilaterally imposed contract that included wage and benefits cuts of 27 percent to 32 percent.

Hurt, the union president, said the strike was necessary because workers were “not willing to take draconian wage and benefit cuts on top of the significant concessions they made in 2004 and give up their pension so that the Wall Street vulture capitalists in control of this company can walk away with millions of dollars.”

Hurt said in a statement published on the union’s website that previous concessions that were supposed to go toward capital investment, product development, plant improvement and new equipment were “squandered in executive bonuses, payouts to Wall Street investors and payments to high-priced attorneys and consultants.”

Hostess requested a bankruptcy hearing on the liquidation motion for Monday.

If the U.S. bankruptcy judge in New York grants the motion, the company said it “will begin to close all of its operations” as early as Tuesday.

“The closures will include the termination of all employees except small, temporary crews to clean, secure and prepare facilities and other assets for sale,” the company said.

Meanwhile, Hostess posted on its site that 24 of its 36 bakeries continued to produce products since the strike began because of work by supervisors and union members who crossed picket lines. Hostess had 55 bakeries when it filed for its first bankruptcy.

As of Wednesday evening, a company spokesman said, most of the bakeries were operating below capacity and 13 were operating “far under capacity.” The company did not identify specific plants.

On Wednesday, more than 570 employees crossed the picket lines nationally, the spokesman said.

The company noted that its largest union, the International Brotherhood of Teamsters, had agreed in September to concessions and was continuing to deliver products.

Earlier this week the company said it intended to permanently close its bakeries in St. Louis, Seattle and Cincinnati, eliminating more than 600 jobs.

Hostess announced those closings in response to the strike, but the reorganization plan filed in October indicated the company’s intent to close five plants.

Union officials said bankruptcy filings months ago indicated that the company intended to shutter nine plants.

St. Louis Mayor Francis Slay was quoted in an interview Tuesday that he was “told months ago they were planning on closing the site in St. Louis … and there was no indication at that time it had anything to do with the strike the workers were waging.”

Hostess officials claimed that union leaders had misinformed workers that a buyer would step in to keep the Hostess plants running.

But the Hostess bankruptcy filings said there was “significant overcapacity in the baking industry” and its plants fell short of industry standards for efficiency.

The possible demise of Hostess would leave two large bakery enterprises, Bimbo and Flowers, each operating with many bread and snack cake brand names in the United States.

Industry observers said some Hostess properties — especially its more profitable snack cake and modern bread bakeries — would have buyers, but whether or not jobs would be preserved is unknown.

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