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Hostess to close, lay off 18,500 after 'crippling' union fight

A small union's stubbornness in contract talks with Hostess is being blamed for the shutdown of one of America's snack food icons, the loss of 18,500 jobs just before the holiday season and much-needed tax revenue from hundreds of plants and shops across the country.

The privately-held company had reached a deal with the Teamsters, but a smaller union representing bakery workers refused to agree to concessions, prompting the mass layoffs and closing down of hundreds of plants, bakeries and delivery routes. That prompted harsh words from both the company and from Teamsters officials.

"We deeply regret the necessity of today's decision, but we do not have the financial resources to weather an extended nationwide strike," Chief Executive Gregory Rayburn said in a statement. "Hostess Brands will move promptly to lay off most of its 18,500-member workforce and focus on selling its assets to the highest bidders."

The company said it will continue to ship out its well-known products until inventory runs out.

The national strike by members of the Bakery, Confectionary, Tobacco Workers and Grain Millers International Union (BCTGM) that began last week decimated the 82-year-old company’s ability to produce and deliver products at roughly 12 of its 33 plants. The company announced earlier in the week that the ax would fall on Friday if the strikers didn’t get back to work, but the union didn’t blink. BCTGM President Frank Hurt said Thursday that the crisis was the "result of nearly a decade of financial and operational mismanagement" and charged management was scapegoating workers to allow the Wall Street investors who own Hostess to sell.

Calls seeking comment from Hurt were not returned early Friday.

Marty Zimmerman, secretary-treasurer for BCTGM Local 85, told Fox40 from a Sacramento picket line early Friday that workers had been at “wits end” with Hostess brass.

“Well, the mindset is we’re standing strong, absolutely,” Zimmerman told the station. “I mean, they’ve taken our pensions away, we’ve had seven CEOs in the last 10 years; this company has been so mismanaged. Really, we’re at our wits end and enough is enough”

The Irving, Texas-based company had already reached an agreement on pay and benefit cuts with its largest union, the International Brotherhood of Teamsters. On Thursday, Teamsters officials blasted the smaller union for not seeking a “solution” in the process or to engage in negotiations.

“The BCTGM chose a different path, as is their prerogative, to not substantively look for a solution or engage in the process,” the statement read. “BCTGM members were told there were better solutions than the final offer, although Judge Drain stated in his decision in bankruptcy court that no such solutions exist. Without complete information, BCTGM members voted by voice votes in union halls. The BCTGM reported that over 90 percent rejected the final offer and three of its units ratified the final offer.”

In a letter to employees posted on the company’s website, Rayburn said all employees would eventually lose their jobs, some sooner than others.

"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," Rayburn’s letter read. “As you know, for many months the Company has been working with our unions, lenders and other stakeholders to reach a consensual resolution to legacy costs and labor contracts. Despite everyone’s considerable efforts to move Hostess out of its restructuring, when we began implementing the Company’s last, best and final offer, the Bakers Union chose to stage a crippling strike.”

Because the company is privately held, its financials were not available. But has struggled for several years, with some blaming America’s increasing appetite for healthier fare. The company sought concessions from employees, but instead got a costly strike that further crippled it, according to officials, who told a federal bankruptcy court it would lose up to $9.5 million from Nov. 9 to Nov. 19 in lost sales and increased costs. The company has cancelled all orders in process and said any baked goods currently in transit would be returned to shippers.

“These losses and other factors, including increased vendor payment terms contraction, have resulted in a significant weakening of the debtors’ cash position and, if continued, would soon result in the debtors completely running out of cash,” the filing read.

Hostess will now sell its popular brands like Ding Dongs, Ho Ho’s and Sno Balls, along with the closure of 565 distribution centers, 570 bakery outlet stores and roughly 5,550 delivery routes.

Lenders have agreed to allow Hostess to continue to access $75 million in financing put in place at the start of the bankruptcy cases to fund the sale and wind-down process, subject to U.S. Bankruptcy Court approval.

BCTGM workers began striking at some Hostess production facilities without notifying Teamsters officials on Nov. 9, the Teamsters said.

“This unannounced action put Teamster members in the difficult position of facing picket lines without knowing their right to honor such a line without being disciplined,” the statement continued.

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