Unions kill twinkies

The makers of twinkies are going out of business after union workers went on strike. Apparently having no wages is better than lower wages.


We deeply regret the necessity of today’s decision, but we do not have the financial resources to weather an extended nationwide strike,” Hostess CEO Gregory F. Rayburn saidin announcing that the firm had filed a motion with the U.S. Bankruptcy Court to shutter its business. “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 Brands Inc. had earlier warned employees that it would file to unwind its business and sell off assets if plant operations didn’t return to normal levels by 5 p.m. Thursday. In announcing its decision, Hostess said its wind down would mean the closure of 33 bakeries, 565 distribution centers, approximately 5,500 delivery routes and 570 bakery outlet stores in the United States.

Hostess suspended bakery operations at all its factories and said its stores will remain open for several days to sell already-baked products.

The Irving, Texas-based company had already reached a contract agreement with its largest union, the International Brotherhood of Teamsters. But thousands of members in its second-biggest union went on strike late last week after rejecting in September a contract offer that cut wages and benefits. Officials for the Bakery, Confectionery, Tobacco Workers and Grain Millers International Union say the company stopped contributing to workers’ pensions last year.

A union representative did not immediately return a call from The Associated Press seeking comment on the company’s announcement.

In an interview with Fox Business, CEO Gregory Rayburn said many workers had already crossed picket lines this week to go back to work despite warnings by union leadership that they’d be fined.

“The problem is we don’t have enough crossing those lines to maintain normal production,” said Rayburn, who first joined Hostess earlier this year as a restructuring expert.

Hostess said that production at about a dozen of the company’s 33 plants had been seriously affected by the strike. Three plants were closed earlier this week.

The privately held company filed for Chapter 11 protection in January, its second trip through bankruptcy court in less than a decade. The company cited increasing pension and medical costs for employees as one of the drivers behind its latest filing. Hostess had argued that workers must make concessions for it to exit bankruptcy and improve its financial position.

8 thoughts on “Unions kill twinkies

  1. Bob Martin says:

    Why don’t they pay the workers what the workers need to live? Why blame them? Raise the price and raise the salaries. Easy.

  2. Matt Downing (@towerofmatt) says:

    Raising prices decreases demand, Econ 101. Unions have saddled companies and school systems with extremely high post-employment obligations to employees. Most of us are on 401(k) plans that are self-funded and sometimes enjoy an employer match. These union workers get pensions, health care, etc. after retiring and the cost of that is huge. That type of employment benefit package just isn’t sustainable anymore, especially not if the workers also demand higher salaries. It’s almost impossible to compete with those kinds of requirements if your competitors do not have similar requirements. Look at the UAW and the bankruptcies of the American car companies. Same story. It’s not as simple as raising the price, because consumers lose and demand goes down. If you raise the price, but the sales volume decreases, you’ve actually done nothing to boost your net income.

    The good news here is that someone will likely buy the Hostess brands, recipes, etc. and continue to make the products. They’d be silly not to with the amount of brand equity Hostess has built with its products over the years. They’ll be able to do it successfully because they will effectively get a clean slate without the union requirements and other cost problems that Hostess faced because they’ll only be buying the intellectual property/branding.

  3. Pierre-Yves St-Onge says:

    Reblogged this on "La Vitre Cassée" and commented:
    Les travailleurs syndiqués de Hostess n’ont pas avalé la possiblité d’une baisse de salaire de 8%, et se retrouvent sur le chômage quand la compagnie a fermé ses portes par manque de rentabilité. 18500 mises-à-pied!

  4. Pierre-Yves St-Onge says:

    Now if only we can find 18,500 people to give up looking for work, the unemployment rate will not be affected! We’re in recovery mode, people…

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s