Hostess Brands, the bankrupt maker of Twinkies snack cakes and Wonder Bread, is seeking a US court’s permission to go out of business after failing to get wage and benefit cuts from thousands of its striking bakery workers.
The 82-year-old Hostess, which has about $2.5 billion (Dh9.1 billion) in sales and is one of the largest wholesale bakers and distributors of breads and snack cakes in the United States, filed the request with the US Bankruptcy Court in New York early Friday morning. A hearing on the matter is set for Monday.
The Irving, Texas-based company said the liquidation would mean that most of its 18,500 employees would lose their jobs. Hostess immediately suspended operations at all of its 33 plants across the US as it moves to start selling assets.
“We’ll be selling the brands and as much of the infrastructure as we can,” said company spokesman Lance Ignon. “There is value in the brands. But some bakeries will never open again as bakeries.”
Ignon said the company made final deliveries on Friday of products made on Thursday night. Hostess’s top-selling products are its chocolate cupcakes, Twinkies cakes and its powdered sugar and frosted “Donettes.”
Hostess products, particularly the golden, cream-filled Twinkies cakes, are deeply ingrained in American pop culture and have long been packed in school children’s lunch boxes. Entrepreneurs on auction site eBay Inc were asking as much as $100 for a box of 10 Twinkies on Friday morning.
Raj Patel, owner of Sarah’s Market in Cambridge, Massachusetts, said he was sorry to see the company go out of business.
“It’s been around for ages,” said Patel, 40. “A lot of people are familiar with the brand and it’s going to be tough for some people to do without.”
Hostess blamed heavy debt and burdensome wage and pension obligations for its financial woes. It said a strike by members of the Bakery, Confectionery, Tobacco Workers and Grain Millers International Union (BCTGM), which began November 9, was part of a long series of battles between labour and management that contributed to the company’s inability to restructure its finances and produce and deliver products at several facilities.
But union officials and line workers said union workers had already agreed to a series of concessions over the years and the company had failed to invest in brand marketing and modernization of plants and trucks and had focused instead on enriching owners such as private equity firm Ripplewood Holdings and hedge funds Silver Point Capital and Monarch Alternative Capital.
Officials at the three firms declined to comment.
“Our members decided... they were not going to agree to another round of outrageous wage and benefit cuts and give up their pension only to see yet another management team fail and Wall Street vulture capitalists and ‘restructuring specialists’ walk away with untold millions of dollars,” said BCTGM International Union President Frank Hurt.
=“The people who are running this company are not interested in making bread,” said Roger Harrison, 56, who bags buns at the Hostess plant in Lenexa, Kansas, and has been with the company for 35 years.
“They are not in the baking industry; they are just interested in the money,” Harrison said.
The company had started implementing an 8 per cent pay cut, a 20 per cent increase in healthcare costs, and changes to pension and workday provisions when workers went on strike on November 9. Hostess had given employees a deadline to return to work on Thursday, but the union held firm, saying it had already given far more in concessions than workers could bear and that it would not bend further.
“The union has been the death of this company,” said a human resources manager who recently left Hostess.
Hostess’s battle with its workforce has brewed for years. Formerly known as Interstate Bakeries Corp (IBC), the company for decades was based in Kansas City, Missouri. It filed for bankruptcy in September 2004 and emerged in 2009 with a host of employee concessions from various unions.
A source with knowledge of the situation who spoke on condition of anonymity said the company was well positioned when it emerged from bankruptcy in 2009, but the recession, a spike in commodity prices and consolidation of major competitors reshaped the landscape and forced more restructuring.
