The Great Recession has altered the consumer landscape, forcing such familiar retailers as Borders, Circuit City and The Sharper Image into bankruptcy. And anyone who’s tried to buy a Twinkie in the last few weeks knows that 2012 was another tough year on household names.
Slowly but surely, though, things are looking up. Based on the latest available bankruptcy figures, 2012 was on pace to have the fewest new bankruptcies of any year since the crisis began in 2008, according to the American Bankruptcy Institute. But even as analysts project a stronger economy in 2013, last year’s most brutal bankruptcies leave uncertain futures for some workers and brands.
Hostess Without the Mostess
Photo: Ezra Wolfe
Hostess Brands Inc. sent snack lovers clamoring for the last Ding-Dong after announcing in November that it would shut down and liquidate its brands. Its bankruptcy was inevitable after the Bakery, Confectionery, Tobacco and Grain Millers Union went on strike and let the ovens go cold.
The shutdown will ultimately put all 18,500 Hostess employees out of work, although about 3,200 will stay on as the company winds down. Hostess also closed 33 bakeries, 565 distribution centers and 570 bakery outlet stores.
The sale of Hostess’ iconic brands has attracted several bidders, so it’s only a matter of time before they’re back on grocery shelves. But the brand family might get broken up in the process; the Associated Press reports that there’s one likely buyer for the namesake Hostess brands, while a separate buyer is eyeing the company’s line of Drake’s cakes.
Kodak’s Moment Nearly Over
After decades of dominance in the photography industry, Eastman Kodak Co. fell on hard times and eventually filed for bankruptcy last year. Though it plans to emerge from Chapter 11 in 2013, it will do so as a leaner enterprise with only three divisions. Kodak eliminated its inkjet printer line and is selling its consumer film, photo kiosk and commercial scanner divisions, adopting a new focus on commercial printing and packaging. It is also selling off several digital imaging patents to a group of licensees that includes Apple, Google and Facebook.
Kodak laid off 3,900 workers throughout its restructuring, mostly in the company’s Rochester, New York headquarters. In November, a bankruptcy court judge allowed Kodak to stop paying health benefits to 56,000 retirees and dependents.
Betsey Johnson in Bargain Bin
Less than a decade ago, designer Betsey Johnson was plotting the expansion of her fashion empire. But right when her new boutiques started popping up in chic shopping districts nationwide, the Great Recession started gnawing away at women’s budgets for high-end clothes.
Johnson’s namesake company soon defaulted on a $48 million loan, from which it was rescued in 2010 by shoe mogul Steve Madden. Struggling sales reached the breaking point last April, when Betsey Johnson filed for bankruptcy and began the process of closing its 63 stores and laying off some 350 employees.
But the brand seems poised to survive, as Steve Madden plans on introducing a lower-priced department store line of fashions and a new Betsey Johnson fragrance. Betsey and her daughter, fashion designed Lulu Johnson, are also the focus of a new reality show set to debut this year on Style Network.
American Airlines Charts New Course
Once the market leader, American Airlines spent 2012 restructuring in bankruptcy after struggling to keep pace with its consolidated competition. A 2008 merger between Northwest and Delta was soon followed by the merging of Continental and United, and now American Airlines may need a merger in order to survive.
American Airlines is looking to exit bankruptcy this year, and its executives have repeatedly claimed that they expect the airline to remain independent. But the labor unions that support the airline’s workers are backing a potential merger with US Airways, which is eager to join forces. The unions argue that a merger would provide greater long-term job security for their workers.
To date, American Airlines has laid off around 13,000 employees under bankruptcy and will likely shed even more if the merger takes place.
Not So Sunny in San Bernardino
Companies aren’t the only ones throwing in the towel. The City of San Bernardino, California filed for bankruptcy in July, claiming more than $1 billion in liabilities and more than 10,000 creditors. The city declared a fiscal emergency in an effort to bypass a requirement that it enter mediation with its creditors before filing for bankruptcy.
CalPERS, California’s state retirement system and San Bernardino’s largest creditor, tried to fight the city’s bankruptcy filing, calling it “a sham” and an attempt to “buy time.” CalPERS’ motion was eventually denied, but city officials may still need to answer to allegations that San Bernardino issued $2 million in cash-outs to city employees in the weeks leading up to the bankruptcy filing.
What 2012 business bankruptcies worry you the most? Let us know in the comments section below.