Death of a Twinkie: Hostess Brands to close

[downtown]

Full story is here, but here is the tl;dr verisonL http://www.chicagotribune.com/busin...mission-to-liquidate-20121116,0,3175964.story

Hostess Brands Inc., the bankrupt maker of Twinkies and Wonder Bread, said it had sought court permission to go out of business after failing to get wage and benefit cuts from thousands of its striking bakery workers.

Hostess said a national strike by members of the Bakery, Confectionery, Tobacco Workers and Grain Millers International Union that began last week had crippled its ability to produce and deliver products at several facilities.

Hostess Chief Executive Gregory Rayburn said in an interview on CNBC Friday morning that Hostess could not avoid liquidation, even if members of its bakers' union ended their strike immediately and went back to work.

The liquidation of the company will mean that most of its 18,500 employees will lose their jobs, Hostess said on Friday.

In the Chicago area, Hostess employs about 300 workers making CupCakes, HoHos and Honey Buns in Schiller Park. Hostess also has a bakery in Hodgkins, where 325 workers make Beefsteak, Butternut, Home Pride, Nature’s Pride and Wonder breads.

The 82-year-old company said it took the decision to shut down after determining that not enough employees had returned to work by a deadline on Thursday.

The company, which filed for bankruptcy in January for the second time since 2004, said it had filed a motion with U.S. Bankruptcy Judge Robert Drain in White Plains, New York, for permission to shut down and sell assets.

Irving, Texas-based Hostess has 565 distribution centers and 570 bakery outlet stores, as well as the 33 bakeries. Its brands include Wonder, Nature's Pride, Dolly Madison, Drake's, Butternut, Home Pride and Merita, but it is probably best known for Twinkies -- basically a cream-filled sponge cake.

"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," Rayburn added.

Union President Frank Hurt said on Thursday that the crisis at the company was the "result of nearly a decade of financial and operational mismanagement" and that management was trying to make union workers the scapegoats for a plan by Wall Street investors to sell Hostess

Hostess workers had been on strike these past two weeks to protest further pay cuts (~20-25% I believe), and the company said it did not have the cash to survive an elongated strike. The company had declared bankruptcy in 2004 and hasn't been on stable ground for over a decade, perhaps as growing concern over how unhealthy their products are curbed demand a bit.

Some where saying that Hostess planned on taking the entire operation to private equity anyway, or liquidating the whole organization, and the strike was a cover. Others say that the bakers (hell, lets call them what they really are...chemists), being blue-collar workers, had no leverage anyway and their greed doomed the firm.

What do you think? Do you think any of these brands will be picked up and marketed by other firms? Will you miss any of these products (I mean seriously, I don't know anybody who actually bought a Twinkie in years)?

I know I'll try to make some phone calls to Hostess employees over the next 2 weeks to offer them new jobs, but I'm not sure how quickly others will be able to find new gigs...

 

[Bugfatty300]

I haven't even heard the anyone mention Twinkies since the last time I watched Ghostbusters.

 

[BvBPL]

Any company that cuts wages by 20% is seriously flawed. That action represents either extraordinarily poor planning or exceptional callousness towards one's employees.

 

[Patroklos]

Zombie Land?

In any case, labor striking themselves out of a job and lagging brand value has a predictable result. You can blame health conciousness as a cause of declining brand value (which I am sure had an effect), but I also blame the reemergence of local bakeries and especially the internal super market bakeries and brands. I have not bought a aisle stocked baked good in years, and why would you when there are fresh backed ones right there?

I am sure several of their more popular snack item brands will be sold off as part of the bankruptcy, Twinkies and HoHos being two I would bet on. Granted, I assume whomever buys them will produce them in limited volume as a novelty vice a flagship product.

 

[timtofly]

How to dissolve a union?

 

[rugbyLEAGUEfan]

I remember as a kid a lot of the comic books were imports direct from the USA. Many had a full page Twinkies ad at the back. I thought they looked like the most exotic, delicious treat ever.

When I first visited the States, my first task was to get a Twinky. It was one of my greatest disappointments.

 

[Cheezy the Wiz]

Meh, good riddance to the products as far as I'm concerned. Gross all the way around. The issue for me isn't the loss of the company, it's the way management has behaved.

Zombie Land?

In any case, labor striking themselves out of a job and lagging brand value has a predictable result. You can blame health conciousness as a cause of declining brand value (which I am sure had an effect), but I also blame the reemergence of local bakeries and especially the internal super market bakeries and brands. I have not bought a aisle stocked baked good in years, and why would you when there are fresh backed ones right there?

I am sure several of their more popular snack item brands will be sold off as part of the bankruptcy, Twinkies and HoHos being two I would bet on. Granted, I assume whomever buys them will produce them in limited volume as a novelty vice a flagship product.

Labor can't strike itself out of the job. It is always management's decision to torpedo things, whether it's the workers or the company itself. The company could survive a strike, it just wouldn't be able to pay executive salaries to its executives. But that's not an option for the ruling class, is it? They would rather let the little guy starve and make unions out to be bad guys, than do the right thing. They are the ones who need a pay cut, not the workers who actually make the company go.

 

[hobbsyoyo]

I could see Wonderbread being picked up.

Are ho-ho's the little chocolate cakes with creme in the middle? If so, I hope those are picked up or copied. Don't really care about twinkies though.

 

[downtown]

Labor can't strike itself out of the job. It is always management's decision to torpedo things, whether it's the workers or the company itself. The company could survive a strike, it just wouldn't be able to pay executive salaries to its executives. But that's not an option for the ruling class, is it? They would rather let the little guy starve and make unions out to be bad guys, than do the right thing. They are the ones who need a pay cut, not the workers who actually make the company go.

I don't think this is a labor or management thing here, just a company problem. If production is shut down, Hostess could cut salaries of their entire executive team to zero and they'd still be out of money in less than a week. Unlike their CPG Competitors, they don't have a cash reserve. I worked for a CPG consulting firm last year, and we studied Hostess a lot....they had been losing market share to firms like Bimbo in cities, and suburban marketshare had fallen once people realized that Twinkies will in fact, kill you.

I'm not confident that the firm would have existed in its current form in 2015 even without a strike. I don't blame people for not taking a huge pay cut laying down...but I'm not sure "greed" is the issue here on either side.

 

[Patroklos]

Labor can't strike itself out of the job. It is always management's decision to torpedo things, whether it's the workers or the company itself. The company could survive a strike, it just wouldn't be able to pay executive salaries to its executives. But that's not an option for the ruling class, is it? They would rather let the little guy starve and make unions out to be bad guys, than do the right thing. They are the ones who need a pay cut, not the workers who actually make the company go.

Labor understands the profit motive, and that the profit motive is what caused the owners to start and maintain the business thus creating their jobs in the first place.

They understand that, thus when they intentionally jeopardize it they are at fault. It can go the other way too, where management jeopardizes the profit motive of labor, but that's not the case here.

It can also be the case, like at Hostess, where the whole buisness model is no longer valid and nothing management or labor does will save it. In this case labor could have taken a pay cut to delay the inevitable, but apparently they preferred unemployment.

 

[Cheezy the Wiz]

Labor understands the profit motive, and that the profit motive is what caused the owners to start and maintain the business thus creating their jobs in the first place.

They understand that, thus when they intentionally jeopardize it they are at fault. It can go the other way too, where management jeopardizes the profit motive of labor, but that's not the case here.

It can also be the case, like at Hostess, where the whole buisness model is no longer valid and nothing management or labor does will save it. In this case labor could have taken a pay cut to delay the inevitable, but apparently they preferred unemployment.

I see. So labor should always supinely accept their low wages, lest the managers' salaries be threatened and they torpedo the company. It's amazing how a patriot like you rushes to defend people who act so callously in self-interest, and tell their countrymen to piss off in the name of profit.

 

[Ajidica]

As long as Swiss Rolls are still being made (the little chocolate cake thing with creme rolled up) I'm happy, but I hope that these people are able to find jobs quickly.

 

[Cheezy the Wiz]

I don't think this is a labor or management thing here, just a company problem. If production is shut down, Hostess could cut salaries of their entire executive team to zero and they'd still be out of money in less than a week. Unlike their CPG Competitors, they don't have a cash reserve. I worked for a CPG consulting firm last year, and we studied Hostess a lot....they had been losing market share to firms like Bimbo in cities, and suburban marketshare had fallen once people realized that Twinkies will in fact, kill you.

I'm not confident that the firm would have existed in its current form in 2015 even without a strike. I don't blame people for not taking a huge pay cut laying down...but I'm not sure "greed" is the issue here on either side.

It's entirely possible that, even with greatly reduced salaries across the board, the company still wouldn't make enough to stay afloat. But I strongly suspect that this is not the case, as they fired everyone, and then sold the company. It looks like they didn't even try to make it work for their people, they just said "well screw it, we aren't dipping into our salaries to help out our staff for a few more months/years." The executives still make bank on this. I think the union leader quoted in the article is right, that this is being used as another chance to demonize organized labor in the popular eye.

 

[downtown]

It can also be the case, like at Hostess, where the whole buisness model is no longer valid and nothing management or labor does will save it. In this case labor could have taken a pay cut to delay the inevitable, but apparently they preferred unemployment.

I think that might have actually been in their best interests, to be honest. Most of the production facilities are located in the Great Lakes, where there is a proliferation of other CPG food production firms. They have a better chance of striking out on their own, being unemployed for a few months and then finding a similar job at a higher wage than just sticking with a doomed firm at a low wage.

 

[downtown]

It's entirely possible that, even with greatly reduced salaries across the board, the company still wouldn't make enough to stay afloat. But I strongly suspect that this is not the case, as they fired everyone, and then sold the company. It looks like they didn't even try to make it work for their people, they just said "well screw it, we aren't dipping into our salaries to help out our staff for a few more months/years." The executives still make bank on this. I think the union leader quoted in the article is right, that this is being used as another chance to demonize organized labor in the popular eye.

I just don't think that's true, that's what the 2004 bankruptcy was all about. In all honesty, I think they probably should have sought out a private equity firm back in 2004 to try and salvage the company (even if that meant job losses), rather than try to continue their business model.

I don't think there is any evidence that executive salaries were a driving factor here, given the beating they were taking in the marketplace. I'll prob know later today, once I make a few phone calls to middle management/upper management to find out what they were making.

 

[Patroklos]

I think that might have actually been in their best interests, to be honest. Most of the production facilities are located in the Great Lakes, where there is a proliferation of other CPG food production firms. They have a better chance of striking out on their own, being unemployed for a few months and then finding a similar job at a higher wage than just sticking with a doomed firm at a low wage.

They didn't need to strike to do that.

It may end up better for some of them. CPG or other firms will undoubtedly pick up some of the facilities and brands and assume some of the Hostess market share with their superior model. But I bet that is less than half of those who lost their jobs.

They obviously thought staying with Hostess and striking was beneficial to them or they wouldn't have done it.

 

[warpus]

Nope, I won't miss any of these products. I've had twinkies before and they're alright, I wouldn't go out of my way to get them. None of the other brands I've ever tried, and I don't like wonderbread/toast type bread, so I would never buy that either.

 

[Patroklos]

I see. So labor should always supinely accept their low wages, lest the managers' salaries be threatened and they torpedo the company. It's amazing how a patriot like you rushes to defend people who act so callously in self-interest, and tell their countrymen to piss off in the name of profit.

The managers own the company, the point of the company is to profit them. In order for the company to profit them they require labor that has a market price. When labor overprices the product they provide they lose like any other product. When management won't pay a competitive market price they lose their labor (the fact that labor decided to strike instead of move on means this was not the case). There is, however, the requirement for both sides to remain profitable, which means there is a floor and a ceiling to how high labor wages can be an a floor to how low profits can be.

They are also free to go sell their labor to someone else for a higher price. Apparently all of them have been forced to do this now due to their labor unions leadership.

 

[Cheezy the Wiz]

The managers own the company, the point of the company is to profit them. In order for the company to profit them they require labor that has a market price. When labor overprices the product they provide they lose like any other product. When management won't pay a competitive market price they lose their labor (the fact that labor decided to strike instead of move on means this was not the case). There is, however, the requirement for both sides to remain profitable, which means there is a floor and a ceiling to how high labor wages can be an a floor to how low profits can be.

They are also free to go sell their labor to someone else for a higher price. Apparently all of them have been forced to do this now due to their labor unions leadership.

You've said nothing new for this conversation. You think workers should accept lower wages instead of management accepting lower wages. I get it. Stop trying to pretend this is "logical" and see it for the heartless profiteering that it is.

It is labor's duty to defend the wages of their members. Just because they got fired doesn't mean the fight wasn't worth fighting. As I tire of saying, it was management who chose to fire the workers. The workers didn't quit out of protest.

Face it. This is a fantastic example of how your precious capitalism only works in the favor of the business owners, and no one else.

 

[Patroklos]

No, it is a fantastic example of how your tired ideology fails to explain real world events (as it always has).

Its also an example of how you show you understand reality, but consciously choose to ignore it in favor of your favorite fantasy.

The simple fact is labor knew all about the companies financial realities and chose a course that guaranteed the all too predictable result. Maybe they even expected that result, knowing nothing would save them, but they still mounted their strike with their eyes open.