UPDATE UPDATE 11/20/2012 – The union refuses to budge, so now Hostess has the go ahead to close the doors. Hey union boys, still think your representation gives a crap about you?
Update 11/19/2012 – A bankruptcy court judge is putting the approval for Hostess to liquidate it’s assets on hold. The update follows the original story below.
Originally posted 11/17/2012
Texas (The Gaslamp Post) – The Texas based company responsible for such classic American goodies as Tweenkies, Ho-Hos, and the good, old-fashioned Wonderbread announced this week that they are going out of business. Hostess, the famed producer of the iconic snacks has been struggling due to economic conditions and stated that this recent strike by union employees had crippled it’s operations.
The company had reportedly filed for chapter 11 bankruptcy in January, this coming as the second time in a decade that they have had to do so. On Friday they filed a motion in U.S. Bankruptcy Court to completely mothball the entire operation.
After reaching an agreement with The International Brotherhood of Teamsters, the biggest union representing Hostess workers, the second largest decided to strike. Thousands of workers represented by the Bakery, Confectionery, Tobacco Workers and Grain Millers International Union, reportedly upset with having to take a pay cut and a decrease to their other benefits, refused the concessions offered by Hostess and walked off the job.
In total, those workers represented 30 percent of the company’s total workforce.
The company said that unless the workers returned to work and normal operations restored by 5:00 pm Thursday, they would close the doors for good.
On Friday, Hostess CEO Gregory F. Rayburn said in a statement, “We deeply regret the necessity of today’s decision, but we do not have the financial resources to weather an extended nationwide strike. 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.”
Some workers reportedly crossed the picket lines and returned to their post, but it wasn’t enough to get the output to where it needed to be. Now 5500 delivery routes, 570 bakery outlet stores, 565 distribution centers, and 33 bakeries nationwide are gone – evaporated.
In a public statement released by the union in regards to the decision to shut down they said; “despite Greg Rayburn’s insulting and disingenuous statements of the last several months, the truth is that Hostess workers and the union have absolutely no responsibility for the failure of this company. That responsibility rests squarely on the shoulders of the company’s decision makers.”
Mr. Rayburn responded to this statement by saying, “[he’s been] pretty straightforward in all the town hall meetings I’ve done at our plants to say that in this situation I think there is blame that goes around for everyone.”
When asked if this move was a last ditch effort in order to get the union to concede, he said that “it’s over, this is it.”
AFL-CIO President Richard Trumka decided to weigh in on the issue Friday. In his public statement he said, “what’s happening with Hostess Brands is a microcosm of what’s wrong with America, as Bain-style Wall Street vultures make themselves rich by making America poor,” Trumka said in a public statement. “Crony capitalism and consistently poor management drove Hostess into the ground, but its workers are paying the price.”
Apparently Mr. Trumka isn’t 100% clear on what crony capitalism is. Perhaps rather than focusing on Hostess, he should take a look at the green energy stimulus and the insider trading which sent Martha Stewart to jail, but was perfectly legal when Nancy Pelosi and Harry Reid did it.
Trumka said that the policies of American business were “wrecking America”.
“These workers, who consistently make great products Americans love and have offered multiple concessions, want their company to succeed,” said Trumka. “They have bravely taken a stand against the corporate race-to-the-bottom. And now they and their communities are suffering the tragedy of a needless layoff. This is wrong. It has to stop. It’s wrecking America.”
“The strike impacted us in terms of cash flow,” said Hostess CEO, Rayburn. “The plants were operating well below 50 percent capacity and customers were not getting products.”
General secretary-treasurer for the Teamsters, Mr. Ken Hall said that they obtained a consultant to look into the finances of Hostess and discovered how badly the company was doing. It was for this reason that the Teamsters backed off of the company and agreed to their terms.
“We believed there was a pathway for this company to return to profitability,” Hall said, noting that the liquidation could’ve been prevented if the bakery union had agreed some concessions as well.
Although Hall agreed that it was unlikely anyone would buy the entire company, he said “people are going to look for some fire sale prices” for some of the brands. For now, he expects Hostess products will be on shelves for another week or so.
“Frankly it’s tragic, particularly at this this time of year with the holidays around the corner,” Hall said, noting that his 6,700 members at Hostess were now out of a job.
A worker at an east Connecticut plant arrived to work Friday, only to be informed that he no longer had a job. “They (the union) screwed us big time,” he said.
UPDATE 11/19/2012 – A bankruptcy court judge in White Plains, New York has temporarily put off the closure and liquidation of the assets of Hostess today after finding that the company and union representatives had not gone through a critical step in the process.
Discovering that neither the company nor the union had gone through the necessary mediation process, the judge decided to put things on hold. Attorneys for the union were told to ask their clients if they would agree to future mediation, before any further action would be taken.
UPDATE UPDATE 11/19/2012 – The labor union has agreed to mediation. If the mediation results in an agreement, then 18,000+ jobs will be saved.