Strike leads CEO to shutter iconic snack maker Hostess

By Tom Murphy and Candice Choi, Associated Press Published: Nov 16, 2012 at 7:18 AM PDT Last Updated: Nov 16, 2012 at 10:43 AM PDT
Strike leads CEO to shutter iconic snack maker Hostess »Play Video
Hostess announced Friday it was going out of business. Here are a few of their well-known products. (Photo by Bill Roberson, KATU.com)

NEW YORK (AP) — Twinkies may not last forever after all.

Hostess Brands Inc., which makes Ding Dongs, Wonder Bread and other snacks, filed a motion Friday with U.S. Bankruptcy Court seeking permission to shutter its operations. The move comes after the company said striking workers across the country crippled its ability to maintain production.

The closing would mean the loss of about 18,500 jobs. The company said employees at its 33 factories were sent home and operations suspended Friday and its roughly 500 bakery outlet stores will stay open for several days to sell remaining products.

Hostess CEO Greg Rayburn said in an interview that there was no buyer waiting to buy the company. But without giving details, he said that there has been interest in some of its 30 brands, which include Dolly Madison, Drake's and Nature's Pride snacks.

Rayburn said the financial impact of the strike makes it too late to save the company even if workers have a change of heart. That's because the company was operating on thin margins and stalling production meant the loss of critical sales.

"The strike impacted us in terms of cash flow. The plants were operating well below 50 percent capacity and customers were not getting products," Rayburn said.

Hostess, based in Irving, Texas, filed for Chapter 11 protection in January, its second trip through bankruptcy court in less than a decade, as it struggled with increased competition, Americans' move toward healthier eating and the high pension, wage and medical costs related to its unionized workforce.

The move to liquidate comes after a long battle with its unions. Thousands of members of the Bakery, Confectionery, Tobacco Workers and Grain Millers International Union went on strike last week after rejecting a contract offer that slashed wages. The bakers union represents about 30 percent of the company's workforce.

Rayburn said the union's leadership had misled members into believing there was a buyer in the wings who would rescue the company. He said the union hadn't returned the company's calls for the past month.

A representative for the bakers union did not immediately return a call seeking comment.

Although many workers decided to cross picket lines this week, the company said it wasn't enough to keep operations at normal levels; three plants were closed earlier this week.

The company had reached a contract agreement with its largest union, the International Brotherhood of Teamsters. The Teamsters had urged the bakery union this week to hold a secret ballot on whether to continue striking.

Hostess has said the company is unprofitable under its current cost structure, in large part because of its union wages and pension costs. Rayburn said that sales volumes had been flat to slightly down leading up the bankruptcy filing. In a statement on the company website, he said all employees will eventually lose their jobs, "some sooner than others."

"Unfortunately, because we are in bankruptcy, there are severe limits on the assistance the (company) can offer you at this time," Rayburn wrote.

The liquidation hearing will go before a bankruptcy judge Monday afternoon. Rayburn said he's confident the judge will approve the motion.

"There's no other alternative," he said.

The move to liquidate was unwelcomed news to some customers.

Adil Ahmed, whose family still eats Hostess treats during the holidays, said he rushed to the supermarket Friday morning after hearing the news. Growing up in New Jersey, he said his Southeast Asian family bought Wonder Bread to dip in curries and loaded up on sweets from a nearby warehouse for the holidays.

"I have nephews and nieces — we have to pass on the tradition to the next generation," said Ahmed, a 25-year-old union worker in Baltimore. He bought four boxes of Twinkies and other snacks for a family get together this weekend.

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Follow Candice Choi at www.twitter.com/candicechoi

Copyright 2012 The Associated Press.