BY STEFANO ESPOSITO ?and FranCine KNowles Staff Reporters November 16, 2012 7:51AM
Updated: November 17, 2012 2:09AM
Chuh-chuh.
That?s the sound the machine made when it sealed little packets of Twinkies, Ho Hos and cupcakes ? a sound that Valorie Smith heard every work day for 27 years and one she imagines will continue to echo somewhere in her mind.
?I was originally the cupcake girl, but then I got promoted to Ho Hos,? Smith said with sorrow-tinged pride Friday.
Each day, Smith, 50, sealed up thousands of snacks at Hostess? Schiller Park facility ? a plant that closed Friday, as the iconic (and oft-mocked) snack maker, Hostess Brands, announced it was going out of business. The company is laying off all of its 18,500 workers, including 1,415 in Illinois.
?It?s a very sad day because there?s lots of history there,? said Donald Woods, president of the Local 1 union that represents some 500 workers at Hostess plants in Schiller Park, Hodgkins and Peoria. ?We have members who?ve had 40 years there. ... Their dream was working there and retire there.?
Woods said he remains hopeful that another company might buy the soon-to-be-shuttered Hostess facilities.
?We know the Hostess brand is a name brand, a good brand,? Woods said. ?I think someone would purchase them in the near future; that?s our goal.?
The Irving, Texas, company says a nationwide worker strike crippled its ability to make and deliver its products at several locations.
Hostess had warned employees that it would file a motion in U.S. Bankruptcy Court to unwind its business and sell assets if plant operations didn?t return to normal levels by Thursday evening.
Hostess, which filed that motion Friday, said the delivery of products will continue and Hostess Brands retail stores will remain open for several days in order to sell already-baked products.
But the wind-down means the ultimate closure of 33 bakeries, 565 distribution centers, 570 bakery outlet stores and approximately 5,500 delivery routes.
Hostess said its debtor-in-possession lenders have agreed to allow the company to continue to have access to the $75 million financing facility put in place at the start of the bankruptcy cases to fund the sale and wind-down process.
The privately held company filed for Chapter 11 protection in January, its second trip through bankruptcy court in less than a decade
?We deeply regret the necessity of today?s decision, but we do not have the financial resources to weather an extended nationwide strike,? Hostess Brands Chief Executive Officer Gregory Rayburn said in a statement.
Thousands of its members of the Bakery, Confectionery, Tobacco Workers and Grain Millers International Union went on strike at Hostess Nov. 9 to protest cuts to wages and benefits under a new contract offer, which the union rejected in September. Union officials have said the company stopped contributing to workers? pensions last year.
Hostess said Friday that much of Hostess Brands is unprofitable under its current cost structure much of which is determined by union wages and pension costs. It said its offer included wage, benefit and work rule concessions, but also gave Hostess Brands? unions a 25 percent ownership stake in the company, representation on its board of directors and $100 million in reorganized Hostess Brands? debt.
The union said the company?s problems are of its own making.
?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,? the union said in a statement Thursday. ?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.
?Our members know that the plans all along of the Wall Street investors currently in control of this company did not include the operation of Hostess Brands any longer than it takes to sell the company in whole ? or in part ? in a way that will maximize the profits of these vulture capitalists regardless of the impact on the workforce.?
On Friday at the Schiller Park plant, Smith cradled a cup of coffee as she stood with about a dozen other Hostess workers, waiting for the official word of what they?d seen on the morning news -- that Hostess was going out of business.
Smith and the others hugged, as they joked about no longer having to rise before dawn to get to work in time for the 5 a.m. shift.
Smith said she won?t missing standing for 10 to 12 hours a day. ?I gave it my all here,? Smith said. ?It?s hard on your body. It breaks you down.?
Abdul Waheed, 64, was two hours into his shift loading cakes onto dollies and racks, when the boss came in and made an announcement.
?He just told the truth -- he said it?s no longer in existence, the company is liquidated,? said Waheed, a 31-year Hostess employee. The boss said, ??Finish off what you?re doing. I?m sorry it turned out like this,?? Waheed said.
Waheed, whose shipping union members weren?t on strike, said he has mixed feelings about punching in for the last time.
?At one time, this was a very good place to work -- it was still a very good place to work,? Waheed said. ?Income-wise, you could bring $700-800 home a week.?
Waheed said he rarely ate the cakes he stacked. ?Because I know what?s in them,? he said.
Hostess had already reached a contract agreement with its largest union, the International Brotherhood of Teamsters. The Teamsters had urged the smaller union to hold a secret ballot on whether to continue striking. Citing its financial experts who had access to the company?s books, the Teamsters had said that Hostess? warning of liquidation was ?not an empty threat or a negotiating tactic? but a certain outcome if workers continue striking.
The company, founded in 1930, had been fighting battles beyond labor costs. Competition is increasing in the snack space and Americans are increasingly conscious about healthy eating. Hostess also makes Dolly Madison, Drake?s and Nature?s Pride snacks.
Contributing: AP
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