I made the decision to liquidate Hostess last night (Nov. 15). A number of factors have contributed to this. Hostess is 93 percent unionized, and its been formed by a number of acquisitions over the decades; a lot of old rules were just grandfathered into contracts from companies that no longer exist. There were all these crazy work rules, like one driver can only drive cake and the other can only drive bread. Hostess went through bankruptcy in 2004 and not enough work was done in that filing to deal with these issues.
I hear that the push toward healthier food is what did us in, but that hasnt affected us at all. Why do you have chocolate companies? How do you explain doughnut shops when doughnuts havent changed in 100 years? We were north of $2 billion a year in sales. They werent the problem, our cost structure was.
I came on board at Hostess in February, and I was stunned by how little had been accomplished. We managed to make a deal with the Teamsters but the bakers didnt support what theyd agreed to. I told them that if theres going to be a strike over the negotiations, we wont be able to withstand it and we have to liquidate. But I dont think they believed us. We had 36 Hostess plants when the strike started two weeks ago, but we immediately closed three, so we only had 33 left. Bakers were crossing the picket line in some numbers but not enough to keep things going. Last night I got the update: 11 plants still werent operating. After that I communicated with my board and made the decision. That was a difficult call to make. I had people on that call whod been working 20 hours a day at these plants, trying to make enough product to keep them on the shelves.
I look at this as a failure. Ive spent a lot of time wondering why we didnt make more progress. Im a turnaround guy, Im a pretty optimistic guy. I dont think this was the inevitable end. We had a shot at surviving, but we couldnt overcome the strike. We have potential buyers for our brands and well contact them, but I havent even thought about that yet. We sent everyone home from the plants. Thats 18,500 people out of work.
I hear that the push toward healthier food is what did us in, but that hasnt affected us at all. Why do you have chocolate companies? How do you explain doughnut shops when doughnuts havent changed in 100 years? We were north of $2 billion a year in sales. They werent the problem, our cost structure was.
I came on board at Hostess in February, and I was stunned by how little had been accomplished. We managed to make a deal with the Teamsters but the bakers didnt support what theyd agreed to. I told them that if theres going to be a strike over the negotiations, we wont be able to withstand it and we have to liquidate. But I dont think they believed us. We had 36 Hostess plants when the strike started two weeks ago, but we immediately closed three, so we only had 33 left. Bakers were crossing the picket line in some numbers but not enough to keep things going. Last night I got the update: 11 plants still werent operating. After that I communicated with my board and made the decision. That was a difficult call to make. I had people on that call whod been working 20 hours a day at these plants, trying to make enough product to keep them on the shelves.
I look at this as a failure. Ive spent a lot of time wondering why we didnt make more progress. Im a turnaround guy, Im a pretty optimistic guy. I dont think this was the inevitable end. We had a shot at surviving, but we couldnt overcome the strike. We have potential buyers for our brands and well contact them, but I havent even thought about that yet. We sent everyone home from the plants. Thats 18,500 people out of work.