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Twinkie’s demise

Hostess, the maker of iconic fast-food brands like Twinkies and Ding Dongs, is going out of business and laying off 18,500 workers.

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Senior executives at Hostess could see million dollar pay day as the company begins its wind-down plan.

Federal bankruptcy judge Robert D. Drain gave final approval to Hostess Brands’ plans to wind itself down and sell famous brands like Twinkies, Ho Hos, and Ding Dongs to help pay creditors.

Despite criticism, the approved plan also includes a pay out up to $1.8 million in bonuses to 19 senior executives.

Hostess Brand moved to close itself down after failing to reach an agreement with the union representing its bakery employees, who had gone on strike as a result of a new labor contract which lowered their pay.

Lionel
11/25/12

Lionel: A eulogium for the Twinkie

Farewell to the prototype of artificial deadly snack cakes. Godspeed.

NEW YORK — Management at Hostess Brandsand leaders of the Bakery Workers union may agree on only one thing heading into mediation Tuesday — neither expected to be there.The results of the mediation, scheduled for 1 p.m. Tuesday., will determine if the company and its 18,500 jobs can be saved.
If not, Tuesday’s session will prove to be only a slight detour on the way to liquidation for the maker of such iconic products as Twinkies, Wonder Bread and Drake’s snacks.The mediation session was essentially ordered by U.S. Bankruptcy Court Judge Robert Drain, who will also oversee the meeting. He said he wanted to try to do everything he could to try to find a deal before he ruled on the company’s motion to liquidate.

The Bakers Union and Hostess have agreed to mediation, raising hopes that the Twinkie might be saved.

“My desire to do this is prompted primarily by the possibility of the loss of 18,000 jobs,” he said during the hearing Monday afternoon.

Related: Don’t expect a different outcome for Hostess

Hostess is on the brink of closing after years of losses and a strike started on Nov. 9 by the Bakery Workers, which represents 5,000 workers at the company. The union insists that membership voted 90% against the concessions imposed on them by the company as part of its bankruptcy, concessions other workers agreed to accept.

The Bakery Workers union held the votes on the concessions during public meetings at union halls. But the Teamsters union let its 6,700 members vote using a secret ballot, and members voted 53% to accept the concessions. Last week, as the company threatened liquidation, the Teamsters asked that the Bakery Workers hold a secret ballot vote on the concessions, in the hopes that the bakers might be more willing to accept management’s terms in private to avoid a shutdown.

On Monday after the mediation was ordered, the Teamsters union said it would do everything it could to help the two sides reach a deal to save the company

“We are hopeful that the bakers’ union and the management team can find common ground during this mediation and avert liquidation,” said Teamsters General Secretary-Treasurer Ken Hall. “It is in the best interest of all parties involved that we remember what is at stake — the future of 18,500 workers and their families. This is not only about a brand or a product, it is also about real people that just want to work hard every day to provide for their families.”

Exclusive: Sun Capital wants to buy Hostess

If the company goes into liquidation, its brands and recipes will be sold off to raise funds to pay its creditors. On Monday, private equity firm Sun Capital Partners told Fortune that it wants to buy Hostess as a going concern. It would reopen the shuttered factories, and keep the Hostess workers and their unions. But it’s not clear Sun Capital’s offer would top those of other bidders who would simply produce the product with the bidders’ existing staff and facilities, leaving the Hostess workers out of luck.

Company attorneys told Drain Monday that the strike had already cost it too much money to restart operations.

Experts say it is extremely rare for a bankruptcy judge to refuse to sign off on a company’s motion to liquidate. Heidi Sorvino, a bankruptcy attorney at Hodgson Russ in New York, said companies typically have close to an absolute right to liquidate. And Drain is set to rule on the company’s liquidation motion Wednesday morning if there isn’t progress made in mediation Tuesday afternoon.

Related: The day the Twinkies died – What the Web said

Labor experts say that saving the company will be a long shot.

“I would not be overly hopeful,” said Ann Hodges, a labor law professor at the University of Richmond. “There was a real lack of trust by both parties. The company is ready to go to liquidation. The union is willing to push the company into liquidation. Why would there be anything different now?”

But some of the employees said Tuesday they are hoping for an 11th hour reprieve.

“I’m glad the judge kind of told them to try to work things out,” said Alex Dolah, a Bronx, NY driver with seven years at the company. “I really don’t want to get my hopes up. I have to look for a job, and think about what I’m going to do if they don’t work it out. But inside of me, I’ve got my hopes up.”

The Bakers Union and Hostess have agreed to mediation, raising hopes that the Twinkie might be saved.

Reports of the Twinkie’s demise may have been exaggerated,

The Bakers Union and Hostess have agreed to mediation, reports CNBC. That means production of the all-American treat has not been suspended, the network reports.

Judge Robert Drain of the U.S. Bankruptcy Court in White Plains pushed mediation at a hearing where Hostess was seeking permission to liquidate its assets. The closure has imperiled 18,500 jobs.

Mediation will begin on Tuesday and the court hearing has been postponed to Wednesday, Reuters reports.

Hostess carries an iconic line of products, including Twinkies, Ho Hos, Wonder Bread and other brands.

More developments soon.

Elvira Delgado, right, leads her fellow striking bakery workers on the picket line at the Hostess Bakery in Los Angeles. Hostess has asked a bankruptcy judge for permission to go out of business and lay off 18,500 workers, blaming the strike by members of the Bakery, Confectionary, Tobacco Workers and Grain Millers International Union. (Mark Boster, Los Angeles Times / November 16, 2012)

By Alana Semuels and Tiffany Hsu, Los Angeles Times — Twinkies may last forever, but the same can’t be said for Hostess Brands Inc., the company that makes the popular cream-filled spongecake.

Hostess has asked a bankruptcy judge for permission to go out of business and lay off 18,500 workers, blaming a strike by members of the Bakery, Confectionary, Tobacco Workers and Grain Millers International Union.

Quiz: The week in business

“We deeply regret the necessity of today’s decision, but we do not have the financial resources to weather an extended nationwide strike,” Hostess Chief Executive Gregory F. Rayburn said in a statement Friday.

The Irving, Texas, company, founded in 1930, runs 565 distribution centers around the country, as well as 33 bakeries and 570 bakery outlets, including several in Southern California. As of January there were two bakeries and seven retail stores in Los Angeles and Orange counties, employing 550 workers.

The union says 24 production facilities are on strike nationwide.

Hostess said it filed a motion with Bankruptcy Court Judge Robert Drain in White Plains, N.Y., to allow the company to shut down and sell its assets. The company, which also owns brands such as Drake’s, Nature’s Pride and Wonder Bread, is seeking a court hearing Monday.

The union accused Hostess in a statement of making unreasonable demands, including wage and benefit cuts of about 30% for workers, while top executives of the company received large pay raises. Hostess has filed for bankruptcy protection twice this decade, the last time in January.

“The crisis facing Hostess Brands is the result of nearly a decade of financial and operational mismanagement that resulted in two bankruptcies, mountains of debt, declining sales and lost market share,” said Frank Hurt, the union’s president. “The Wall Street investors who took over the company after the last bankruptcy attempted to resolve the mess by attacking the company’s most valuable asset — its workers.”

Many businesses have faced labor unrest in recession and subsequent recovery as unions resisted efforts to dial back benefits and wages. In 2011, for example, there were 19 major strikes and lockouts that each involved more than 1,000 workers, according to the Bureau of Labor Statistics. That’s up from 11 in 2010. The 2011 strikes accounted for 1.02 million lost workdays, three times the number of lost workdays the year before.

The Teamsters Union, which represents 6,700 workers at Hostess Brands plants, had settled an earlier labor dispute with the company.

“The Teamsters Union tried everything in its power during the company’s most recent financial difficulties to shape an outcome that would put Hostess on strong footing to be viable and preserve jobs,” Teamsters General Secretary-Treasurer Ken Hall said in a statement. “Unfortunately, the company’s operating and financial problems were so severe that it required steep concessions from a variety of stakeholders but not all stakeholders were willing to be constructive.”

The Hostess shutdown announcement sent shock waves through the country Friday, causing Americans to begin hoarding Ding Dongs and bemoaning their fading childhoods.

Jon Auspitz, president of Wham Closeout Foods, a food liquidator, said he expected that Hostess would sell its brands to another company and then unload equipment and leftover inventory in a “fire sale.” The brand is “very popular” among customers, he said.

Hostess products have a rich history in popular culture, but perhaps none more so than Twinkies, a favorite at county fairs — at least those Twinkies that are deep-fried — and long suspected by some consumers of having an infinite shelf life.

The snacks played an integral role in the 1979 trial of Dan White, who was accused of murdering San Francisco city Supervisor Harvey Milk and Mayor George Moscone. Reporters coined the term “Twinkie defense” for White’s argument that his actions were influenced by his depression. The defense attorneys argued that White’s diet of Twinkies and other sugary foods was evidence of his depression.

The brand, a vintage favorite, even had a starring role in the 2009 film “Zombieland,” in which Woody Harrelson‘s character Tallahassee barrels through hordes of the living dead looking for a Twinkie fix.

Recently, however, Hostess lost ground with customers. Sales of Twinkies slipped 0.8%, Ding Dongs fell 8.7% and Ho Hos tumbled 6.3% from May 2011 to May 2012, according to analysis from research group Mintel.

The company ceded its top position in the prepared cupcakes and brownies segment to McKee Foods, whose sales increased 1.8%, largely on the strength of its Little Debbie brand. Smaller rivals such as Bimbo Bakeries and Give and Go also poached customers from Hostess, as have private label offerings from grocery stores, according to Mintel.

And Americans’ appetite for junk food has been waning, as they increasingly look for healthful options with reduced fat, lower calorie counts and no sugar. Baby boomers and seniors, the demographics least likely to eat Hostess-style products, are growing in number, according to Mintel.

But that hasn’t stopped consumers from raiding store shelves to stock up on Twinkies and Ho Hos. A box of 10 Twinkies was for sale Friday on EBay for $50.

Supervalu Inc., which owns the Albertsons brand, reported a nationwide surge in customers purchasing Hostess products. Hostess delivers its goods directly to Supervalu stores, so the grocery chain doesn’t keep any extra inventory of the snacks in its warehouses.

“There has been an extremely noticeable gain compared to last year at this time,” spokesman Mike Siemienas said. “We are preparing for the fact that these Hostess products will not be in our stores in the future. They are available while supplies last.”

alana.semuels@latimes.com

tiffany.hsu@latimes.com

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