Hostess Brands on November 16 filed a motion in federal bankruptcy court seeking permission to close down its business and liquidate its assets. The company had threatened to liquidate if a strike by its bakery workers continued past a 5:00 P.M., November 15 deadline. The deadline came and went; the bakery workers remained on strike, and the company began liquidation proceedings on Friday morning.
Hostess on Friday suspended operations at its 33 bakeries across the US; Workers at the 24 bakeries that have been on strike remained on strike.
On Saturday, November 16, Bloomberg reported that C.Dean Metropoulos & Co., a private equity firm that has saved other struggling US food and beverage brands from oblivion, is considering buying Hostess. Metropoulos owns Pabst Brewing Co. and purchased Chef Boyardee, Vlasic Pickles, and Bumble Bee Tuna when they were facing difficulties.
Before the November 15 deadline, strikers at one Hostess, according to USA Today, remained defiant in face of the news that Hostess planned to shut down its operations. “You have to take a stand for what you believe in,” said John Smith, who has worked for Hostess for 22 years, to USA Today. “They gave us a take-it-or-leave-it deal. We can’t take the financial abuse.”
Smith works at Hostess’ Indianapolis bakery where on Thursday afternoon about 45 workers walked the picket lines, and chanted, “No pension, no deal.”
In July 2011 before it filed for bankruptcy, Hostess unilaterally stopped making contributions totaling about $160 million to the workers’ pension fund.
After it filed for bankruptcy in January 2012, the company sought new labor agreements with its unions, including its two largest unions BCTGM, which represents bakery workers, and the Teamsters, which represents workers at its distribution centers.
After months of negotiations, it made a final offer that included an 8 percent wage cut, a 20 percent increase in worker health care costs, and work rule changes designed to eliminate jobs.
By a narrow margin, Teamster members voted to accept the final offer. BCTGM members, on the other hand, voted overwhelmingly to reject the offer, and the union began striking after Hostess began unilaterally implementing its final offer.
BCTGM leaders blamed Hostess’ financial troubles on mismanagement, and objected to the way that the company tried to dig itself out of its hole by shifting more costs to its workers.
“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 Frank Hurt, BCTGM president. “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.
“They sought to force the workers, who had already taken significant wage and benefit cuts, to absorb even greater cuts including the loss of their pension contributions. I have said consistently throughout this process that the BCTGM is a highly democratic organization and that our Hostess members themselves would determine their future. By an overwhelming majority, 92 percent, these workers rejected the company’s outrageous proposal, fully aware of the potential consequences.”
Teamster leaders said that they too were frustrated by Hostess’ mismanagement but that had hoped to work “constructively (with Hostess) to find a solution to preserve jobs.”
The Teamsters on Thursday issued a statement urging BCTGM to hold a secret ballot of BCTGM members at Hostess to determine if the workers want to continue their strike in light of the company’s announced intentions of winding down its operations.
If Hostess carries through with its liquidation plans it would mean the closure of 33 bakeries, 565 distribution centers, 550 outlet stores, and 5,500 delivery routes.
Hurt said that striking workers would be glad to return to work and help the company fight through its bankruptcy if Hostess rescinds “the horrendous wage and benefit reductions, including pension, and the restoration of the cuts that have already taken place.”