Hostess no more?

Factories nationwide begin immediate shutdown, including 3 Illinois plants

November 16, 2012

Niala Boodhoo and Associated Press and Caroline O'Donovan

Outside the Hostess production facility in Schiller Park - the birthplace of Twinkies more than eight decades ago - bakery workers who have been on a picket line for more than a week said they weren't surprised to hear the company was shutting down.

"It's basically what we expected," said Valorie Smith, who has worked for Hostess for more than 27 years. Smith said she knows the company blamed her union for the shut down - as did other unions at the plant, which include the Teamsters.

But she and the workers said their union wasn't treated as well as others were, and it was their right to speak out.

"We have the right to stand out here and fight for what we believe in," she said, as a few other workers around her nodded in agreement. "It’s our money and our wages."

Smith makes about $18 an hour, but said the company was asking workers to take an 8 percent pay cut. Since Hostess filed for bankrupty protection in January, she said the company had cut hours of many workers without notice. And, she said she lost her pension.

"I don’t have it anymore," she said angrily. Smith is a few years away from retirement. "They said. 'call it a loss'. So call Hostess a loss. I don’t care."

Hostess, the maker of Twinkies and Wonder Bread, said Friday it was going out of business, closing plants, laying off its 18,500 workers and putting its brands up for sale. Those layoffs will include the more than 700 bakery employees who work at plants in Hodgkins, Peoria and Schiller Park in Illinois. 

The Irving, Texas, company said a nationwide bakery worker strike crippled its ability to make and deliver its products. 

The privately held company filed for Chapter 11 protection in January, its second trip through bankruptcy court in less than a decade. Hostess had warned employees that it would file a motion in U.S. Bankruptcy Court to unwind its business and sell assets if plant operations didn't return to normal levels by Thursday evening. 

Thousands of members of the Bakery, Confectionery, Tobacco Workers and Grain Millers International Union went on strike last week after rejecting in September a contract offer that cut wages and benefits. But workers across the country did choose to break the strike. Spokesman Tom Bercker said, "The company was certainly thankful for that there were a lot of employees who made a decision that they wanted to work, and I know crossing picket lines is certainly not an easy thing to do." 

But ultimately, Hostess said, they simply could no longer afford to keep the factories open. 

"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," CEO Gregory F. Rayburn said in a letter to employees posted on the company website.

Becker said all of those iconic brands will be for sale as the company tries to maximize value for shareholders. He said Hostess is hopeful that products like Ding Dongs, Ho Ho's and Dolly Madison will survive the bankruptcy, but Becker was unable to speculate on which companies might be interested in buying those brands.

For now, stores will sell the remainder of what's on the shelves as factories immediately start shutting down. "We're looking at days, instead of weeks," Becker said. All Hostess employees will ultimately be layed off, "some sooner than others."

Hostess, founded in 1930, was fighting battles beyond labor costs. Competition is increasing in the snack space and Americans are increasingly conscious about healthy eating. Hostess also makes Dolly Madison, Drake's and Nature's Pride snacks.

Morningstar analyst Erin Lash said given the booming snack business, it is likely that many of the company's most iconic brands - including Twinkies and Wonder Bread - will be bought.

"I think it’s very possible that the Twinkies name will live on," said Lash, adding that it wasn't clear which factories would remain open.