Parasite Kills the Host(ess)

By Lloyd the Idiot

Hostess Brands, already in a bankruptcy reorganization, filed a motion yesterday to convert its bankruptcy proceeding from a reorgainzation to a liquidation because a small labor union would not compromise on key labor issues that would have kept the struggling baker afloat. 

Enjoy your Christmas season, dear members of the Bakery, Confectionery, Tobacco Workers and Grain Millers International Union.


Comments

  • Dan says:

    I think you missed the mark here. I believe the Bakery, Confectionary, Tobacco Workers and Grain Millers International Union was amenable to some of the concessions that the company sought. Pretty sure it’s the Teamsters who you want to direct your Faux News inspired rage toward.

    And while I think it might be fair to say the Teamsters weren’t being realistic here it is more than a little slanted to make this another simplistic “union thugs bad, capitalist good” silly misrepresentation. You have two hedge funds involved here who care about nothing but their internal rate of return and a private equity firm that failed miserably in their effort to turn the company around.

    Oh, and surprise, surprise they loaded the company up with a huge and unsustainable level of debt. Where have we heard this story before? But not to worry. They paid themselves some very healthy management fees out of those borrowed funds. So the people who really matter will be okay.

    Seriously, did you dig into this at all beyond Fox News. Because you know that they aren’t going to present anything beyond the one sided “it’s all the union’s fault” angle. That would be a level of complexity that would give their core audience a terrible headache.

    There are some larger issues here that might be interesting to delve into. Ones that liberals and conservatives might find pretty important and might find substantial areas of agreement on. Ones involving why we don’t make stuff in America anymore. And why such a huge segment of our economy now involves people pushing around money and making themselves very rich while producing nothing and contributing nothing to the nation.

    But I guess it’s more fun to mindlessly bash unions. Unions now represent only 7% of the private workforce in this country. But they are magically the only party responsible for this company’s woes and the woes of the entire country.

    Right!

    You just keep mainlining Fox and don’t bother to scratch even an inch below the surface. The folks who are playing us all for suckers will really appreciate that.

  • Dan says:

    I will miss the Twinkies though.

  • Did you even read the article???? It’s coming directly from the company that it couldn’t weather a strike from the BCTW. They had resolved issues with the Teamsters.

    Direct cause and effect – and blaming it on Fox News is not making it go away. How many other articles do you want?

    How about this from, gasp, MSNBC:

    “The move to liquidate comes after thousands of members of the Bakery, Confectionery, Tobacco Workers and Grain Millers International Union went on strike last week after rejecting the latest contract offer. The bakers union represents about 30 percent of the company’s workforce. A representative for the bakers union did not return a call seeking comment.

    Although many workers decided to cross picket lines this week, Hostess said it wasn’t enough to keep operations at normal levels; three plants were closed earlier this week. Hostess CEO Gregory Rayburn said Hostess was already operating on thin margins and that the strike was a final blow.

    “The strike impacted us in terms of cash flow. The plants were operating well below 50 percent capacity and customers were not getting products,” he said.

    The company had reached a contract agreement with its largest union, the International Brotherhood of Teamsters, which this week urged the bakery union to hold a secret ballot on whether to continue striking.”

  • Al Nevarez says:

    Does this really make sense to you? Do you really believe that this huge corporation was taken down because some of its workers refused to take yet another pay cut? Maybe these union members read the same writing on the wall that investors did when Hostess executives gave themselves a huge raise just before filing Chapter 11: http://online.wsj.com/article/SB10001424052702304072004577323993512506050.html

    Typical of how out of touch your party is. You celebrate the loss of 18,000 American jobs because evil union members refused to take an 8% pay cut. If only these lazy Americans would learn to work for a dollar a day like they do in China, then we could REALLY be competitive.

  • Joe Budzinski says:

    You can always tell the union man in the unemployment line because he still has his self-righteousness.

    On a positive note, there will now be room on the store shelves for baked goods produced by non-union shops, we can hope. Extrapolate this scenario to all of America, and it’s a bright future.

    On another positive note, 18,000 angels just got their wings.

  • Joe Budzinski says:

    Al, they traded an 8% pay cut for a 100% pay cut. “Evil” is not the word that comes to mind.

  • The company will be liquidated, most of its brands and production assets will be sold to somebody else and people will be hired or re-hired to start making Twinkies again. Probably fewer workers, possibly non union, but at least a third of the jobs will be back in one form or another, so it is not a total loss for workers or investors.

    This saga is a good lesson in why workers and management need to first understand that they are bound together in the business to provide value to customers at a profit. It is not all about some big profit pie that can be assumed to always be there just because the company is “big” and fighting over slices of that pie. Without profit you can have no dividends, without dividends you attract no shareholders, without shareholders you cannot raise capital, without capital you cannot keep up with or stay ahead of the marketplace, if you can’t can’t compete in the market you cannot get your price or revenue, meaning you cannot attract the best talent or keep the production lines running, thus no workers.

    Incompetent management always looks to high labor costs because it is generally the largest chunk of overhead, especially now with ObamaNoCare rolling in, because that is much easier to blame than figuring out where they need to take the company and devising a strategy to do so. On the other hand workers, and especially unionized workers who tend to think of themselves as union members first and partners in the company second, often prefer to ignore the realities of the balance sheet and just assume that because the company is big the supply of money is endless, that management are all fat cats and anybody could do their job for a fraction of the pay.

    When both sides forget that ultimately they must be on the same side, company people attracting and keeping customers, they usually end up on the outside. Now is not the time for the unions to be griping about management not modernizing over the years and such… where were they back then if they were so smart? When did they go to management or directly to the board, or stand up at an annual meeting and say, “Hey, we think you guys are screwing the future of this company. We need to invest in new machinery, R&D and marketing, and this is what we are willing to pitch in.”

    There are well managed companies where the union leadership partners with management… I recall years ago the Delta unions actually giving a gift of an airliner to the company, but economies and markets are fluid and ever changing, and often as things begin to get tough for a company these battles over slices of a dwindling pie only serve to accelerate the demise and. as we have seen over the past few years and will see much more of over the next four, when big companies fail they tend to fail suddenly.

    Now that Don Obama shafted the senior secured creditors of GM, gave effective control of the company to the unions and dumped fifty billion of our tax dollars on them we’ll see how the union geniuses do on their own. I note those Volts are selling like buggy whips.

    All I know is that of the original 49.5 billion we were paid back 23 billion (which is all that was required to be paid back to the treasury) and we now own 500 million common shares we paid $26.4 billion for, about $53 per share, the current price is less than half that. With a 32% stake in the company our ability to unload that stock and get our money back without killing it in the process is essentially zero, even if we were in some alternate universe where GM stock actually did mange to get close to fifty per share again, which is why it will forever remain “Government Motors”.

  • Smith says:

    Hey T Doom,
    You dont need to write 1000 words to get the facts straight.

    Its everyones fault- like most problems in this country. While each side will claim whatever fits into their talking points (Don Obama!!! – your a regular Don Rickles. What happened to Comrade Obama?)

    http://www.theatlantic.com/business/archive/2012/11/whos-to-blame-for-the-hostess-bankruptcy-wall-street-unions-or-carbs/265357/

    Two weeks after this election, all I know from reading the comments section is “a northern Virginia republican viewpoint” lost bad in 2012 and will lose bad in 2016.

    Looking at you Budzinski and Lloyd. Bad Obama jokes arent gonna cut it anymore. Its grown-up time.

    Speaking of which, where did all the teleprompter jokes go?

  • Joe Budzinski says:

    Good Gentleman Smith, before I forget, some guy left a message that he has seven beers and half a pizza if your parents will let you go over there tonight.

    Now to address all the substantive points in your comment:

    - When were Teleprompters mentioned here? Because I missed it.

    Switching gears: You will find, as you mature and approach adulthood, that you will learn to form complex thoughts. When you reach this stage, you will begin the process known as “thinking for yourself,” which is a thing to be quite proud of indeed. Then, when you wander into discussions such as this one, you will be able to JOIN the discussion with your own arguments, rather than simply paste links to other people’s arguments.

    We know the latter behavior is all you are able to muster, because you are yet a boy, and we excuse it, because we are your friends. But out in the world, pasting links instead of proffering your own ideas in your own words is considered LAZINESS, and lazy people are, as a rule, ignored.

    And well the lazy should be ignored, if not also derided! Because a moment of time spent by a moderately industrious reader would reveal that a comment such as that above could only have been written by a fool: The article at the Atlantic only confirms what T. Doom wrote …. proving that you read neither.

    Not to cast aspersions, Good Gentleman Smith, because you are nothing if not a budding gentleman, and we your friends know that a statement like “its everyones fault” could only have been written by a boy who though dim seeks to shine someday, and of whose conversation we would say like the dog walking on two legs it is not done very well – but give the chap some credit, it’s amazing he does it at all!

  • Ed Myers says:

    Joe, your post seems to suggest an unnatural interest in young boys. But, wAs it necessary to do a verbal wedgie?

  • G.stone says:

    Lecturing Joe B. to think like a grown- up is in and of itself juvenile. Irony or stupidity ? I am going with stupidity.

    Having Al , the local union hack and apologists try to justify the unions position here is laughable. These dipshits went on strike pushing the company over the chapter 11 cliff while denying Al the little spongy cakes he requires to maintaine his lean look.

    A tragedy all the way around.

  • Al Nevarez says:

    Mr. Stone, staying classy as always. Can’t blame you for being bitter. After all, you failed miserably to “take your country back” and now all that’s left for you are cheap shots on the Internet. Whatever floats your boat, Stoney.

    Sure, I’ll defend the unions position, otherwise the cowardly finger pointing of greedy incompetent executives goes unchallenged. The CEO triples his salary in 2011 to 2.5 million, and other executives all get raises between 50% and 200%. Is this the merit pay Republicans are always talking about? Raises for driving the company into bankruptcy. You know, if you’re going to ask people to take an 8% pay cut, you really should set an example and cut your pay first, not triple your salary. The buck stops with the executives. The biggest flaw in American culture right now is that we are too ready to blame workers who stand up for themselves and excuse loser executives who give themselves raises while driving their companies into the ground.

  • Joe Budzinski says:

    Here is a statement from the president of the bakers’ union.

    http://www.bizjournals.com/dallas/news/2012/11/16/bakers-union-releases-statement-on.html?page=all

    In a nutshell: Everyone at the union headquarters still has a job, thanks to the utter fantasy worldview the headquarters staff has propagated among its members.

    My gosh, shame on them. If we wanted to do one positive thing to change America right now, it would be to educate unionized workers about the lies they are being fed by the leeches who live off their union dues. Union executives are the true greedy incompetents, issuing self righteous statements like the one linked above, letting their dues-paying members become collateral damage. Someone should open the workers’ eyes to what is really happening behind the curtain at union headquarters.

    Maybe that’s the campaign that needs to start now.

  • edmundburkenator says:

    Not that I’ve done a huge amount of study on this business space (I can’t remember the last time I bought a Hostess product), this looks like a typical business that is being discussed in a most typical political way.

    A company gets more and more competition, its product line falls behind. There are stupid management decisions and stupid labor decision and we finally get a liquidation — where someone else can come in a do a better job with the assets if the market will bear it.

    The pro-labor guys will blame management (and they have a point) and the pro-management guys will blame labor (and they have a point).

    This is a failure of both.

  • Joe Budzinski says:

    EB, I don’t disagree, though obviously the 5000 labor guys who put themselves and 13000 others out of work chose poorly, assuming they needed the paychecks.

    Whether they chose poorly on their own, or at the instigation of the union headquarters, is a question worth pursuing in the future, maybe.

    For the sake of everyone’s lower intestines, it’s probably good the ovens have stopped cooking.

  • edmundburkenator says:

    It’s a failure, but it is also an opportunity for someone to rethink the model. It’s also an opportunity for people to grind their axes.

    This is the free market (or whatever kind of market you want to call it), working. Our economy can absorb the scale of this kind of failure/creative destruction and continue growing.

    Here’s what is interesting:

    In the interim, some banker/hedge fund down the line may apply for government protection/insurance and some baker may apply for food stamps.

    Which one do you want to help? Both? Neither? One of them?

  • “The pro-labor guys will blame management (and they have a point) and the pro-management guys will blame labor (and they have a point).”

    EB, a rare occasion where we agree. As is so often the case with these dying entities that fail to keep up with the market, management to their great discredit sees the writing on the wall and starts to lard up their compensation in advance of expected unemployment and the workers, seeing that behavior assume it is because the company is actually doing better than they have been led to believe and they stick to their guns to their own demise.

    Americans need Twinkies far more than government mandated electric cars, so hopefully the assets will be acquired and put to use by better management teaming with better workers. One reason why it is better to acquire the education and experience to become a manager is that production is by far a more available and competitive commodity. You can source production from other regions or overseas but not management because good customer service and market intelligence, the reason good companies survive, requires management presence far more than localized production.

  • Cato the Elder says:

    “This is a failure of both”

    Exactly. This was a shitty company coasting on shitty products designed back in 1950.

    The union actually performed a service in delivering the coup de grâce. Look, I hate siding with the union but there’s only so many times you can ask the worker bees to take it in the ass, especially when the company is run by a crew of hapless dolts. The fact that they were willing to lose their jobs over it speaks volumes. Hostess was a truly horrid company. Good riddance. Working as intended.

  • Loudoun's Soul says:

    If I were the union, I would change tactics. Instead of asking for a pay increase or fighting a pay decrease, I would simply ask that worker compensation be pegged as a ratio of management’s compensation. Say, around the 12-15x ratio of the good old golden days of the fifties and sixties when America was strong and everyone knew their place.

    The Board and executives might then think twice before awarding outrageous compensation packages if everyone gets to share “the wealth” (if only because there isn’t enough wealth to share). Workers get to feel appreciated and have no need for labor actions. And, the extra money created through reasonable executive compensation can be reinvested in the business or paid out to shareholders (that is, the company’s actual owners) as dividends.

  • Erv Addison says:

    The Bakers may actually be the good guys here and the Teamsters the bad. Holman Jenkins at the WSJ scores some astute points here:

    “Under pressure on Monday from Judge Robert Drain to back down from their strike aimed at forcing the company to liquidate, the bakers themselves pointed to “what everyone in the baking industry knew: Hostess’s production costs were neither excessive nor out of line with the market but its distribution costs were—to the tune of between $80 million and $130 million annually.”

    “One could always ask about the wisdom of a labor-law structure that causes companies like Hostess to drag on for decades without adapting to their marketplaces. One might question whether the bakers are acting in true and brotherly solidarity. But given the circumstances that actually exist, the bakers might well prefer to hold back further concessions, let the company liquidate, and try their luck with a new owner or owners who might materialize for its bakery operations.’

    http://online.wsj.com/article/SB10001424127887324352004578130912150512612.html

  • Lest anyone blame the liquidation on management, look at the labor-side’s outrageous demands, designed to do nothing but increase the number of union-member jobs:

    “The work rules imposed in union contracts required Hostess, which makes Twinkies and Wonder Bread, to deliver these two products to stores in separate trucks. Moreover, truck drivers were not allowed to load either of these products into their trucks. And the people who did load Twinkies into trucks were not allowed to load Wonder Bread, and vice versa.”

    http://www.ocregister.com/opinion/unions-378204-union-
    labor.html

    Absolutely inane.

  • Linda B says:

    Excellent article, LLoyd. Especially the guy’s point re: federal workers unions.

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