Hostess to close, lay off 18,500 after 'crippling' union fight
November 16, 2012

A small union's stubbornness in contract talks with Hostess is being
blamed for the shutdown of one of America's snack food icons, the loss
of 18,500 jobs just before the holiday season and much-needed tax
revenue from hundreds of plants and shops across the country.

The privately-held company had reached a deal with the Teamsters, but
a smaller union representing bakery workers refused to agree to
concessions, prompting the mass layoffs and closing down of hundreds
of plants, bakeries and delivery routes. That prompted harsh words
from both the company and from Teamsters officials.

"We deeply regret the necessity of today's decision, but we do not
have the financial resources to weather an extended nationwide
strike," Chief Executive Gregory Rayburn said in a statement. "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 company said it will continue to ship out its well-known products
until inventory runs out.

The national strike by members of the Bakery, Confectionary, Tobacco
Workers and Grain Millers International Union (BCTGM) that began last
week decimated the 82-year-old company’s ability to produce and
deliver products at roughly 12 of its 33 plants. The company announced
earlier in the week that the ax would fall on Friday if the strikers
didn’t get back to work, but the union didn’t blink. BCTGM President
Frank Hurt said Thursday that the crisis was the "result of nearly a
decade of financial and operational mismanagement" and charged
management was scapegoating workers to allow the Wall Street investors
who own Hostess to sell.

Calls seeking comment from Hurt were not returned early Friday.

Marty Zimmerman, secretary-treasurer for BCTGM Local 85, told Fox40
from a Sacramento picket line early Friday that workers had been at
“wits end” with Hostess brass.

“Well, the mindset is we’re standing strong, absolutely,” Zimmerman
told the station. “I mean, they’ve taken our pensions away, we’ve had
seven CEOs in the last 10 years; this company has been so mismanaged.
Really, we’re at our wits end and enough is enough”

The Irving, Texas-based company had already reached an agreement on
pay and benefit cuts with its largest union, the International
Brotherhood of Teamsters. On Thursday, Teamsters officials blasted the
smaller union for not seeking a “solution” in the process or to engage
in negotiations.

“The BCTGM chose a different path, as is their prerogative, to not
substantively look for a solution or engage in the process,” the
statement read. “BCTGM members were told there were better solutions
than the final offer, although Judge Drain stated in his decision in
bankruptcy court that no such solutions exist. Without complete
information, BCTGM members voted by voice votes in union halls. The
BCTGM reported that over 90 percent rejected the final offer and three
of its units ratified the final offer.”

In a letter to employees posted on the company’s website, Rayburn said
all employees would eventually lose their jobs, some sooner than
others.

"Many people have worked incredibly long and hard to keep this from
happening, but now Hostess Brands has no other alternative than to
begin the process of winding down and preparing for the sale of our
iconic brands," Rayburn’s letter read. “As you know, for many months
the Company has been working with our unions, lenders and other
stakeholders to reach a consensual resolution to legacy costs and
labor contracts. Despite everyone’s considerable efforts to move
Hostess out of its restructuring, when we began implementing the
Company’s last, best and final offer, the Bakers Union chose to stage
a crippling strike.”

Because the company is privately held, its financials were not
available. But has struggled for several years, with some blaming
America’s increasing appetite for healthier fare. The company sought
concessions from employees, but instead got a costly strike that
further crippled it, according to officials, who told a federal
bankruptcy court it would lose up to $9.5 million from Nov. 9 to Nov.
19 in lost sales and increased costs. The company has cancelled all
orders in process and said any baked goods currently in transit would
be returned to shippers.

“These losses and other factors, including increased vendor payment
terms contraction, have resulted in a significant weakening of the
debtors’ cash position and, if continued, would soon result in the
debtors completely running out of cash,” the filing read.

Hostess will now sell its popular brands like Ding Dongs, Ho Ho’s and
Sno Balls, along with the closure of 565 distribution centers, 570
bakery outlet stores and roughly 5,550 delivery routes.

Lenders have agreed to allow Hostess to continue to access $75 million
in financing put in place at the start of the bankruptcy cases to fund
the sale and wind-down process, subject to U.S. Bankruptcy Court
approval.

BCTGM workers began striking at some Hostess production facilities
without notifying Teamsters officials on Nov. 9, the Teamsters said.

“This unannounced action put Teamster members in the difficult
position of facing picket lines without knowing their right to honor
such a line without being disciplined,” the statement continued.

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