Reporting Sean Bennett
SACRAMENTO (CBS13/AP) – Hostess Brands says it is going out of business, closing plants that make Twinkies and Wonder Bread and laying off all of its 18,500 workers including several hundred in Sacramento.
The Irving, Texas, company says a nationwide worker strike crippled its ability to make and deliver its products at several locations.
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.
Hostess posted a statement on a corporate website Friday morning, saying “The Company determined on the night of Nov. 15 that an insufficient number of employees had returned to work to enable the restoration of normal operations.”
“I gave my heart and soul to this company, and now they’re going to try to take everything from us,” said one Sacramento employee.
Workers have been on the picket lines at the Hostess plant on Arden Way since this weekend.
Union members rejected a contract offer in September that contained pay cuts and increased health insurance costs.
“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.
He added that all employees will eventually lose their jobs, “some sooner than others.”
The privately held company filed for Chapter 11 protection in January, its second trip through bankruptcy court in less than a decade.
The company also said, “The wind-down means the closure of 33 bakeries, 565 distribution centers, approximately 5,500 delivery routes and 570 bakery outlet stores throughout the United States.”
This isn’t the first time labor negotiations have gone bad, but could this type of gridlock end up killing more decades-old businesses in the future?
“We need more jobs, not less jobs; and this is a direct impact on Sacramento’s economy,” labor law attorney Matt Ruggles said.
Ruggles represents companies in labor cases, and says the closing of Hostess shows unions don’t always protect their workers.
“The next time the Bakers Union declares to strike, people will take it seriously, but at what cost? The cost this time was every single person,” he said.
Ruggles warns that other companies with union labor could be in the same position as the bakery giant.
“Any employer that faces a union has a very real possibility of being in protracted negotiations, being forced to go through litigation that’s expensive and time consuming,” he said.
But union representatives say they’re just an easy target of who to blame for the company’s shortcomings. If hostess had evolved their brand and business to be more competitive, union representatives argue they wouldn’t be so strapped for cash in the first place.