Bundled against the cold, more than a bakers' dozen of union bakers in
Northeast Philadelphia continued their strike against a company now trying to
sell itself out of business.
Hostess Brands Inc., maker of Twinkies, Wonder Bread, Ding Dongs, and Ho
Ho's, said Friday it would liquidate the company and put its brands up for
sale "to the highest bidders," its chief executive said.
Closing would mean the loss of 18,500 jobs nationally, including more
than 400 at a Hostess plant in Northeast Philadelphia and several depots
around the region.
"It's very sad," said Hostess CEO Gregory F. Rayburn, who had been hired
to turn the company around. "I don't want anybody to be out of work."
Despite $2.5 billion in sales, the company, now in its second bankruptcy
proceedings in a decade, has been in trouble for years. But the precipitating
event, at least according to the company, was the refusal of union bakers to
accept concessions and return to the job by 5 p.m. Thursday.
The Bakery, Confectionery, Tobacco Workers and Grain Millers
International Union went on strike at Hostess plants across the nation early
Saturday after rejecting a concessionary contract approved by a bankruptcy
judge last month. The same contract had been approved by the International
Brotherhood of Teamsters.
"I think, unfortunately, the leadership of [the bakers'] union led their
members to believe that there is a buyer in the wings, even though there is no
buyer," Rayburn said in an interview with CNBC.
He described the shutdown as a "consequence ... not a threat." He said
customers would quickly grow frustrated if they couldn't find their favorite
brands on store shelves.
"Of course, they are blaming the union," said Robert Ryder,
secretary-treasurer of Teamsters Local 463 in Fort Washington, which
represents 130 drivers, mechanics, and packers at the Northeast plant.
"You can't just keep fixing the company" by making the workers take cuts,
he said.
Rayburn said that besides union work rules and other employee costs,
"there is plenty of blame to go around," including poor management, debt, and
a lack of investment. Also, he said, the entire segment is too crowded.
"To stay in business as a condition of bankruptcy, they had to cut their
operating expenses immediately," hence, a push for quick union concessions,
said Robert Costello, who heads the $55 million Costello Asset Management fund
in Huntingdon Valley, and who is a former stock analyst who covered Tastykake
and other food makers.
But, he said, "It's a brand that's been under-managed for a long time.
I'm not blaming the unions. This was a fait accompli. You have a slow-growth
economy, and the weakest are the first to go when they have problems."
The debt from the previous bankruptcy meant the company had no money to
put into marketing -- and marketing is a must in the snack business, Costello
said. That's particularly the case as companies such as Bimbo Bakeries USA of
Horsham and Tastykake's owners, Flowers Foods of Georgia, are ramping up their
marketing budgets.
"When was the last time you saw a Hostess coupon?" Costello asked.
Bimbo, Flowers, and J&J Snack Foods Corp. in Pennsauken are potential
buyers for various Hostess brands, he said.
