Twinkie maker calling it quits over strike

Originally published Nov. 16, 2012.

Hostess Brands Inc. will puts its famous Twinkies, Wonder Bread and Ho-Hos up for sale, blaming the immediate shutdown of its bakeries on the refusal of a striking union to return to work by a 5 p.m. Thursday deadline.

Closing would mean the loss of 18,500 jobs, including hundreds at a Hostess plant in Northeast Philadelphia.

"Of course they are blaming the union," said Bob Ryder, who heads the International Brotherhood of Teamsters Local 463, a Fort Washington-based local that represents 130 drivers, mechanics and packers at the Northeast plant.

The company is in its second bankruptcy in ten years, Ryder said, along with a revolving door of chief executives. "You can't just keep fixing the company" by making the workers take cuts.

"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.

While Hostess' demise may have been long in the making, the decision to shut down came quickly on the heels of a work stoppage at 12:01 a.m. last Saturday, Nov. 10, when the company's other main union, the Bakery, Confectionery, Tobacco Workers and Grain Millers International Union, went off the job to protest wage and benefit cuts approved by a bankruptcy judge in October.

"I think the problem was that 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 in Huntingdon Valley, and a former stock analyst who covered Tastykake and other foodmakers.

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, he said. That's particularly the case as companies such as Bimbo Bakeries USA, of Horsham, and TastyKake's owners, Flowers Foods, are ramping up their marketing budgets.

"When was the last time you saw a Hostess coupon?" Costello asked.

In an interesting labor wrinkle, the Teamsters agreed with the concessions, although the bakers did not. On Thursday, the Teamsters pressed the bakers to put the concessions to a second vote.

"We're fighting for our pensions, we're fighting for our health care, we're fighting for our wages, we're fighting for our way of life," said Barry Fields, president and business manager of Local 6 of the bakers union. Local 6 represents 330 members at the Northeast Philadelphia plant.

Staff writers Linda Loyd and Joseph N. DiStefano contributed to this article.