Hostess, Maker of Twinkies, Bankrupt

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Many reporters are enjoying their puns about the “expiration of Twinkies,” but one thing no one is happy about are the thousands of jobs and lives wrapped up in the bankruptcy of Hostess.

When a brand as iconic as Hostess, makers of Twinkies, Ding Dongs and Wonder Bread, files for bankruptcy and around 18,000 employees are to be laid off people start to wonder why?  What caused this company to go under.

According to a recent report by NBC, Hostess CEO Gregory F. Rayburn is blaming a union strike.

“We deeply regret the necessity of today’s decision, but we do not have the financial resources to weather an extended nationwide strike,” Rayburn said while announcing the decision to file bankruptcy. “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.”

Hostess had apparently already reached a contract agreement with the International Brotherhood of Teamsters (the largest of the unions working with Hostess), but failed to secure a contract with the second-biggest union, the Bakery, Confectionery, Tobacco Workers and Grain Millers International Union (BCTGM).

The contract offered to BCTGM reportedly cut both wages and benefits.  A release from BCTGM stated that:

“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.”

This is the second time that Hostess has filed for Chapter 11 protection in the last ten years.  Both times, the company will be citing the increasing costs of pension and medical care for employees.  The company has argued that it should be let out of its agreements with workers, and that workers should concede to take less than they were promised to help the company.

While there is no buyer set to take Hostess in its entirety, most experts believe that the most well known brands will be purchased.  You probably shouldn’t waste your time standing in line for the last Twinkie, as it will most likely be bought and run by a different company.

With the unions and the CEO putting the blame squarely on each other, it seems more likely that both parties played a part in the demise of Hostess.

A recent article on MSNBC's website points out that the company is well known, even iconic, but has not evolved with the modern market place.

In that article, Timothy Ramey, an analyst at D.A. Davidson & Co., was interviewed about what has happened at Hostess.  Ramey is one of the experts who does not believe that even the more well known brands from Hostess will survive.  He was quoted as saying:

“It’s iconic, but in the same way that the great Studebakers are iconic.  I’d be surprised if the Twinkies brand isn’t gone for good.”

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Written by admin on Tuesday, November 20th, 2012 at 4:25 pm and is filed under Bankruptcy News and Events. You can follow any responses to this entry through the RSS 2.0 feed. Both comments and pings are currently closed.

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