The Clinton Herald, Clinton, Iowa

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November 16, 2012

Hostess asks permission to liquidate company

NEW YORK — Twinkies may last forever, but the same can’t be said for the company that makes the cream-filled sponge cake. Hostess Brands Inc., the company that makes Twinkies and Wonder Bread, has asked a judge for permission to go out of business and lay off 18,500.

The company is blaming its decision to shut down on a labor strike by members of the Bakery, Confectionary, Tobacco Workers and Grain Millers International Union, but Americans’ appetite for junk food has been waning in recent years. The company has filed for bankruptcy twice this decade, the last time in January.

“We deeply regret the necessity of today’s decision, but we do not have the financial resources to weather an extended nationwide strike,“ Gregory F. Rayburn, Hostess’ chief executive, said in a statement.

Many businesses have faced labor unrest in the recovery from the recession as they try to dial back benefits and wages and unions resist. In 2011, for example, there were 19 major strikes and lockouts involving more than 1,000 workers, according to the Bureau of Labor Statistics, up from 11 in 2010. The 2011 strikes accounted for 1.02 million lost workdays.

The union said in a statement that Hostess made unreasonable demands, including wage and benefit cuts of around 30 percent for workers, while top executives of the company received large pay increases.

“The crisis facing Hostess Brands is the result of nearly a decade of financial and operational mismanagement that resulted in two bankruptcies, mountains of debt, declining sales and lost market share,“ said union President Frank Hurt. “The Wall Street investors who took over the company after the last bankruptcy attempted to resolve the mess by attacking the company’s most valuable asset - its workers.“

Hostess, based in Irving, Texas, has 565 distribution centers around the country, as well as 33 bakeries and 570 bakery outlets. The union says 24 production facilities are currently on strike.

It said it had filed a motion with U.S. Bankruptcy Judge Robert Drain in White Plains, N.Y., for permission to shut down and sell assets.

The company’s brands include Twinkies, Drake’s and Nature’s Pride. It also makes Wonder bread, which was America’s first sliced bread, according to the company’s website.

It plans to sell its assets to the highest bidders.

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