250 area employees to be without work after Hostess shuts down
11/17/2012
Hostess filed a motion with the U.S. Bankruptcy Court seeking permission to close and sell off its brands and facilities, including this one in Northwood
Some 250 local bakery workers are faced with heading to the bread lines themselves as one of the country’s largest and most famous bakeries said Friday it would end operations and intends to sell its assets to the highest bidder.
Hostess Brands Inc. — maker of Wonder Bread, Ho-Ho’s, and the venerable Twinkie — followed through Friday on its threat to permanently shut all its plants if enough workers from its second-largest union didn’t stop striking and come back to work.
Hostess filed a motion with the U.S. Bankruptcy Court seeking permission to close and sell off its brands and facilities.
“We deeply regret the necessity of today’s decision, but we do not have the financial resources to weather an extended nationwide strike,” Gregory F. Rayburn, chief executive officer, said in a statement. “Hostess Brands will move promptly to lay off most of its 18,500-member work force and focus on selling its assets to the highest bidders.”
The closure affects two local production plants and three area factory outlet stores, not to mention local fans of the company’s products.
In Northwood, Hostess baked the Butternut, Wonder, and Nature’s Pride breads. Lance Ignon, a Hostess spokesman in New York, said the Northwood plant’s final production run was Friday morning and the plant is now officially closed.
Hostess said the plant had 158 employees. Northwood city officials said tax records from August showed total Hostess employment of 184 in the city. Hostess also operated Brown’s Bakery in Defiance; city officials there said it had about 190 employees.
About 110 production and maintenance workers at the Northwood plant have been striking since Nov. 9 after the Bakery, Confectionery, Tobacco Workers, and Grain Millers International Union overwhelmingly rejected a concessionary contract. In addition to pay cuts, employees said Hostess was taking away overtime and guarantees of eight-hour days and 40-hour weeks.
Friday, they said they didn’t regret striking, even if it cost them their jobs.
“I would not cross over and go against my union brothers,” said 11-year employee Jeff Hall. “We have to stand together or they’ll walk all over us.”
Workers had kept a 24-hour picket line outside the Wales Road factory since the strike began. They were still there Friday, although as the day wore on hope faded that reports of the liquidation were premature. Union officials said they were waiting for word from higher-ups before ending the strike.
Hostess Brands officials reported that 28 tires on 14 semitrailer rigs used for deliveries were vandalized, causing thousands of dollars in damage, police said. The damage, reported to Northwood police Friday afternoon, happened sometime between 6:30 p.m. Thursday and 7 a.m. Friday, said Sgt. Doug Hubaker. The rigs were parked near a maintenance building at 8701 Wales Rd. Each of the tires appeared to have been punctured with an ice pick, the sergeant said. Damage was estimated at $8,400.
“There’s no evidence that it is related to the strike, but it’s an awful strange coincidence,” Sergeant Hubaker said.
As of Friday night, police had no suspects.
Expected outcome
Though workers were upset by news of Hostess’ decision, they weren’t surprised. Officials with Local 19, which represented workers in both Defiance and Northwood, said they expected a prolonged strike would be the end of Hostess.
“We’ve been telling them all along,” said Stan LaBuda, a business agent for Local 19. “One of the reasons we didn’t strike sooner when the pension stopped is we recognized at that time that a strike could end this company. They just don’t have the capital to sustain it.”
Hostess had been able to secure a new contract agreement with the Teamsters, the company’s largest union. The Teamsters continued to work, something that irked some local bakers union members.
“If they went on strike, we’d honor theirs,” Albert Garcia said shortly after a Hostess truck passed the picket line with its horn blaring.
The number of Teamster-represented employees in Northwood could not be determined. Calls to officials with Teamsters Local 20 were not returned Friday.
Mr. Garcia, a union steward and 14-year employee, said some might blame the union for Hostess’ closure, but the strike wasn’t the reason the company went out of business.
“It’s just mismanagement,” he said. “You go out of bankruptcy one time and go right back in, how’s that our fault? They didn’t know what they were doing.”
Hostess, whose roster of brands dates as far back as 1888, hadn’t invested heavily in marketing or innovation in recent years as it struggled with debt and management changes. The company took small stabs at keeping up with Americans’ movement toward more healthful foods, such as the introduction of its 100-calorie packs of cupcakes. But the efforts did little to change its image as a purveyor of empty calories.
Mr. Rayburn said Friday that sales volume was flat to slightly down in recent years. He said the company booked about $2.5 billion in revenue a year.
Hostess’ problems ran far deeper than changing tastes, however. In January, the company filed for Chapter 11 bankruptcy protection for the second time in less than a decade. Its predecessor company, Interstate Bakeries, filed for bankruptcy protection in 2004 and changed its name to Hostess after emerging in 2009.
Texas-based Hostess said it was saddled with costs related to its unionized work force. The company had been contributing $100 million a year in pension costs for workers; the new contract offer would have slashed that to $25 million a year and would have cut wages and reduced health benefits 17 percent.
Management missteps were another problem. Hostess came under fire this spring after it was revealed that nearly a dozen executives received pay increases of up to 80 percent last year even as the company was struggling. Although some of those executives later agreed to reduced salaries, others — including Brian Driscoll, the former chief executive officer — had left the company by the time the raises came to light.
Stocking up
As news of the closure spread Friday, it created a run on many of the company’s stores. At the Hostess outlet at 3818 Woodville Rd. in Northwood, it was the last roundup for Twinkie the Kid.
Boxes of the cream-filled golden sponge cakes were gone well before 3 p.m., leaving some customers disappointed and wondering if they’d taste another Twinkie anytime soon.
“I came all the way from Gibsonburg just to get some [Twinkies]. That’s what I wanted. My kids love them in their lunches,” Diana Valencia said as she walked out of the store carrying bags of other Hostess products.
Instead of her desired Twinkies, Ms. Valencia had to settle for about two dozen boxes of Hostess Zingers, Donettes, and Mini-Cupcakes. “I picked up what I could get,” she said.
Likewise, Dan Root of Toledo was on a quest for Twinkies but also left disappointed. “I was going through what they had for a while, and ended up with Hostess Cupcakes and orange Snowballs. This is unbelievable,” he said.
Hostess products were also in high demand Friday at Sautter’s 5-Star Market in Sylvania.
“Hostess products on the shelf are disappearing. We’re almost out of their products. People are getting that one last Twinkie in,” owner Jim Sautter said early in the afternoon.
A Wonder Bread delivery driver made a delivery to the store Friday morning but wasn’t sure if there would be more, Mr. Sautter added.
Mr. Sautter said he believes both Hostess and Wonder Bread will return to grocery shelves.
“They’ll be back. Someone will buy the brand name and they’ll be back for sure. And I would think Wonder Bread will be back as well,” he said. The Northwood bakery is a good modern facility, he added, and is likely going to be purchased and operating again.
At Walt Churchill’s Supermarket in Perrysburg, store manager Darlene Carmona said Friday that a run on Hostess products had not begun yet, but it probably would.
“We’ve had a few people buy the Hostess items. They’re sad to see it go,” Ms. Carmona said. “One woman bought a bunch of cupcakes. She told me we were out of Ding Dongs.”
Ms. Carmona said the store’s bread deliveryman told her the last delivery date would be Tuesday. But the availability of any more cake products was unknown.
“We have just one rack of single snacks. I know some of our employees grabbed some of those when they heard the news,” she said. “My husband even called me asking me to get some Twinkies and Zingers. He said, ‘They make Zingers, don’t they? What are we going to do if we don’t have any Zingers?’ ”
A Hostess spokesman said the outlet stores would stay open until all products are gone, but most should be closed over the next week.
Plant’s future
There is hope locally that the Northwood plant will find a new owner and resume operations.
The plant opened in 1998 and cost $27.8 million to build. Its age and proximity to major highways should make it an attractive property.
“If they do indeed shut it down and it becomes available for another company, we’ll do whatever we can to foster the growth ... of another business in that building,” Northwood city administrator Bob Anderson said.
Mr. Anderson said the city had not been in communication with anyone from the company regarding the closure, but he had hoped the dispute would be resolved. Although the bakery wasn’t Northwood’s largest employer, it was among the largest.
“Obviously the income tax income to the city is secondary to the jobs, but I think it’s going to be about $125,000 [per year] when it’s all said and done.”
Mr. LaBuda said he believes someone will purchase the bakery and resume production, likely seeking employees with experience there.
The Blade's news services contributed to this report.
Contact Tyrel Linkhorn at: tlinkhorn@theblade.com or 419-724-6134.