By RACHEL LAKE (firstname.lastname@example.org)
Click here to friend Rachel on Facebook
Additional reporting from CANDICE CHOI and TOM MURPHY, Associated Press
8:16 PM EST, November 16, 2012
It's the end of an era for an iconic American brand, and the end of many jobs in the Michiana area. Friday was the last day of operations for the Hostess distribution center in South Bend.
Debbie Romeo is stocking up while she can.
"Just on the HoHos and the Ding Dongs and then tomorrow I'll probably come back and get some more," Romeo said.
565 Hostess distribution centers and 570 bakery outlets stores are shutting down. Nationwide, about 18,500 people will lose their jobs.
The company announced Friday that it's closing after one of its unions went on strike. Officials say delivery and production were crippled.
The union has made several statements saying management is to blame for the condition of the company, not the strike.
CEO Gregory Rayburn, who was hired as a restructuring expert, 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, with Twinkies alone generating $68 million so far this 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.
Hostess, based in Irving, Texas, said it was saddled with costs related to its unionized workforce. The company had been contributing $100 million a year in pension costs for workers; the new contract offer would've slashed that to $25 million a year, in addition to wage cuts and a 17 percent reduction in health benefits.
Management missteps were another problem. Hostess came under fire this spring after it was revealed that nearly a dozen executives received pay hikes of up to 80 percent last year even as the company was struggling. Although some of those executives later agree to reduced salaries, others — including former CEO Brian Driscoll — had left the company by the time the pay hikes came to light.
Then, last week, thousands of members of the Bakery, Confectionery, Tobacco Workers and Grain Millers International Union went on strike after rejecting the company's latest contract offer. The bakers union represents about 30 percent of the company's workforce.
By that time, the company had reached a contract agreement with its largest union, the International Brotherhood of Teamsters, which this week urged the bakery union to hold a secret ballot on whether to continue striking. Although many bakery workers decided to cross picket lines this week, Hostess said it wasn't enough to keep operations at normal levels.
The company filed a motion to liquidate Friday with U.S. Bankruptcy Court.
In a statement, the bakery union said Hostess failed because the six management teams over the past eight years weren't able to make it profitable — not because workers didn't make concessions.
"Despite a commitment from the company after the first bankruptcy that the resources derived from the workers' concessions would be plowed back into the company, this never materialized," the union said.
In a statement on the company website, CEO Rayburn said there would be "severe limits" on the assistance the company could offer workers because of the bankruptcy. The liquidation hearing will go before a bankruptcy judge Monday afternoon; Rayburn said he's confident the judge will approve the motion.
"The strike impacted us in terms of cash flow. The plants were operating well below 50 percent capacity and customers were not getting products," he said. "There's no other alternative."
Hostess will move to sell its assets to the highest bidder, possibly meaning new life for some of its more popular products.
Back at Home
When asked how long she's enjoyed Hostess Brands, Romeo chuckled and said "I'm 61. For as long as I can remember."
The manager at the Hostess distribution center on State Road 2 in St. Joseph County would not say how many people will lose their jobs locally, but he did say the center is responsible for 18 routes.
CNN and AP Reporters Stephen Singer and Ashley Heher contributed to this report.
Copyright © 2013, WSBT-TV