Hostess Brands Moves Ahead With Lay-Offs as Iconic Brands Go On the Block

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As expected, following the failure of a court-ordered mediation at the 11th hour, Hostess Brands is moving ahead with liquidating the 82-year-old company and its assets, and laying off about 15,000 of its 18,500 employees. According to the company’s statement today following the preliminary court hearing today:

Hostess Brands is winding down the Company after a nationwide strike initiated by the BCTGM that commenced on November 9th crippled its operations at a time when the Company lacked the financial resources to survive a significant labor action.

Among other provisions, the Court order allows Hostess Brands to return excess ingredients and packaging; provides liquidity through an amended debtor-in-possession financing agreement and consensual use of cash collateral; and authorizes the Company to implement a non-executive employee retention plan to ensure the Company has the necessary personnel to implement the wind down.

Hostess Brands said it intends to retain approximately 3,200 employees to assist with the initial phase of the wind down. Employee headcount is expected to decrease by 94% within the first 16 weeks of the wind down. The entire process is expected to be completed in one year.

The wind down was necessitated by an inflated cost structure that put the Company at a profound competitive disadvantage. The biggest component of the Company’s costs was its collective bargaining agreements that covered 15,000 of 18,500 employees.[more]

A company lawyer told the judge today that liquidating the company presents “once in a lifetime opportunity for our competitors to get iconic brands” including Wonder bread, Twinkies, Dolly Madison, Hostess CupCakes, Ding Dongs, Ho Hos and Drake’s Devil Dogs.

The final court hearing is next week. The Teamsters Union, which covered about 6,700 of Hostess workers, responded in a statement

We estimate the liquidation process will occur over the next six months as the company sells off assets. “For our 6,700 Teamster Hostess members, our union will be focusing its efforts on ensuring that they receive what they are owed in the form of wages for hours worked accrued benefits. We will also make sure our members understand their options and assist them in filing for unemployment benefits and connecting them with local labor councils and agencies that offer other out-of-work assistance. “This is truly a sad day for thousands of families affected by the closing of this company. I want to assure our members that despite this outcome, they do not stand alone and their union will continue to work on their behalf to help them find new employment.” 

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