Twinkies, Ding Dongs Maker Hostess Liquidates Following Failure To Resolve Labor Union Animosity

Tyler Durden's picture

Hostess Brands, the company better known as the maker of Butternut, Ding Dongs, Dolly Madison, Drake's, Home Pride, Ho Hos, Hostess, Merita, Nature's Pride, and of course Wonder Bread and Twinkies, and which previously survived one multi-year Chapter 11 bankruptcy process, when it operated as Interstate Bakeries, has just made a splash at the NY Southern Bankruptcy court, for the last time, with a liquidation filing. The reason: insurmountable (and unfundable) difference in the firm's collective bargaining agreements and pension obligations, which resulted in a crippling strike that basically shut down the company. In other words, Twinkies may well survive the nuclear apocalypse, but there was one weakest link: the company making them, was unable to survive empowered labor unions who thought they had all the negotiating leverage...  until they led their bankrupt employer right off liquidation cliff. Will attention now turn to that another broke government entity, the Pension Benefit Guarantee Corp (PBGC), which will have to step in to resuscitate some 18,000 pension plans which suddenly vaporized after labor unions took their "negotiating" freedom a step too far.

From the filing:

Beginning on October 21, 2012, the Debtors began implementing the modifications to the CBAs. On November 7, 2012, the Debtors began to receive strike notices from various local unions affiliated with the BCT. On November 8, 2012, the Debtors received a strike notice from the IUOE. Between November 9 and November 13, 2012, various local unions affiliated with the BCT commenced strikes at 12 of the Debtors' bakeries. At another 12 bakeries, picket lines were set up by striking BCT workers, and certain BCT and other unionized workers at those bakeries chose to honor the picket lines by not reporting for work. As a result, production was significantly disrupted at the 24 bakeries impacted by the Strikes; however, many of the impacted bakeries remained operational to varying degrees due to management filling in for production workers and, in some plants, high numbers of employees crossing picket lines.

 

Since the strikes (the "Strikes") were commenced, the Debtors have urged striking employees to return to work. Unfortunately, at this time, thousands of the Debtors' employees continue to participate in or honor the Strikes. As a result, a sufficient number of the Debtors' baking facilities have become inoperable, and the Debtors are no longer able to fulfill customer orders or sell product at their retail stores. Because of the material impairment of the Debtors' business operations, the Debtors will soon lose access to the funding necessary to operate their businesses, and the Debtors will have triggered certain remedial provisions of the final DIP Order. As a result, the Debtors are beginning to take steps to wind down their business  operations, including the relief requested in this Motion.

In other words, the labor unions representing 18,000 workers fought the company, and the unions won... A very pyrrhic victory. Sadly, they are all now out of a job as the unionized victory just happened to lead to the terminal winddown of their employer.

As to the future of the iconic brands, fear not: Hostess' numerous brands will be bought in a stalking horse auction by willing private buyers, however completely free and clear of all legacy labor and pension agreements which ultimately led to the company's liquidation.

Now if only Hostess had raised taxes... (because they tried cutting spending, and liquidation followed).

Finally, those 18,500 new initial jobless claims next week? Sandy's fault.

Full winddown motion:

 

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ToNYC's picture

Lots of John Galts selected a toxic food for extinction. The crime was not doing it sooner.

myptofvu's picture

I'm trying to call my union rep to see if I can get some of my dues money back, but he's not answering the phone!

Monedas's picture

Finally .... a relevant thread !    Tylers got gravitas !

Zap Powerz's picture

It is my professional opinion that there is no political or peaceful way to liberate mankind in general and American citizens in particular.  The choice is clear:  submit to collectivism or wage war for your freedom. If you think the political process can successfully return us to our founding principles then I must assume you have been heavily indoctrinated in US public schools.

GetZeeGold's picture

 

 

Bam Bam killed twinkies......how is that even possible?

SilverIsKing's picture

That's even worse than killing off Big Bird.

GetZeeGold's picture

 

 

They handed Bush a shotgun on the set of NPR.....what did they think was going to happen?

GetZeeGold's picture

 

 

Naw, Cheney diesn't shoot birds.....no sport in it.

krispkritter's picture

You do realize Big Bird is a guy in a chicken suit right? ;)

GetZeeGold's picture

 

 

Huh....never made the connection.

 

tickhound's picture

RISE ABOVE!  FOR THE TWINKIES!

peekcrackers's picture

I cant say those  GMO chemical tasting cakes were good for much ..not sad to see them go .

 

JPM Hater001's picture

Meh, big bird and twinkies are part of a balanced diet.

LongSoupLine's picture

Biggest take-away?...

 

 

This should have been the fucking model for GM!

Fuck you Bernanke, Geithner and Obama.

New England Patriot's picture

Offering some price relief on corn and corn sweeteners...

fonzannoon's picture

This all could have been averted if Hostess brands just raised everyone's real estate taxes.....sad.

 

GeezerGeek's picture

Or simply passed along an Obamacare surcharge to customers.

KidHorn's picture

Maybe some of the strikers will get lucky and land a job with whoever buys the factories. At a lower wage and reduced benefits.

JPM Hater001's picture

Failure is a powerful lesson.

MachoMan's picture

The illusory war between capital and labor has been dead for decades, at best.  [the real war was won by capital before it started].

youngman's picture

That would be the first question I would have on the application

GetZeeGold's picture

 

 

Good thing Stalin stepped in and stopped them.....that was close.

bigfire's picture

Huh?  Whoever buys the brand will be just buying the brand.  The product will be made elsewhere.  Those precious contract and pension that Union won't yield on are gone.

Overfed's picture

Yep. And they'll open a new state of the art facility in a (probably Southern) right to work state.

In fact, find the right to work state closest to the biggest corn producer in the US, and that is probably where the new bakery will be.

Matt's picture

 You Get Nothing! You LOSE! Good Day Sir! Gene Wilder:

http://www.youtube.com/watch?v=HaoySOGlZ_U

slyhill's picture

Not to mention those pesky pensioners...

drumpoint's picture

Twinkie defense is gone! What now?

JonNadler's picture

you can' eat.....twinkies?

Silverhog's picture

What will Trolls eat now?

Slightly Insane's picture

Ever heard of Cannibalism?  Once they eat the Host(ess), and there is no more, then they have only thmselves to consume.

gaoptimize's picture

Important lesson to unions at the bridge to the second Obama term.

three chord sloth's picture

I want to support private sector unions... I really do. I think it is important to have some kind of way to push money from the C level of corporations out to the workers, but is this the best we can do? Do all of them need to be math illiterate..? Is that some kind of law or something..?

And worse, every time one of these labor actions blow up in the face of the private sector workers, it only increases the odds that the public sector will remain unionized... and that is a systemic poison.

Nikao7's picture

As a Union Industrial Painter I couldn't agree more.

New England Patriot's picture

I don't have a problem with unions. If people want to bargain collectively, they should be free to do so. But if the company (or local/state/federal government) wants to hire workers for less, they should also be a liberty to do so.

 

Collective bargaining usually only works in the case of a rare or unique skillset, or through intimidation.

Turin Turambar's picture

I agree with freedom of association.  If a group of people decide to voluntarily get together for a specific purpose, then they have the liberty to do so.  Go ahead and unionize if you like.  Similarly, the employer has the right to fire any and all for whatever reason he decides or no reason at all.  A respect for liberty and property rights would put a stop to these ridiculous coercive shakedowns.

Turin Turambar's picture

This is for those who would negatively rate my comment regarding free association:

 

You have a right to a job. It's called SELF-EMPLOYMENT. If you VOLUNTARILY decide to work for somebody other than yourself and agree to the terms of their employment offer, that's the limit of what you should legally and morally expect from your employer - nothing more, nothing less.  Of course, you are free to attempt to renegotiate at any point in time, and similarly, your employer is free to replace you if he so chooses at any point in time.

GeezerGeek's picture

Your attitude is so ninteenth century! The Federal government no longer believes in or defends those kinds of rights. Next thing I know, you'll be suggesting that businesses should be free to decide with whom they will do business. I guess you never read the Executive Order that changed the meaning of the Constitution's Commerce Clause (regulate interstate commerce) to this: "the government can micromanage all commercial and private behavior".

That said, I do agree with you. It's how things should be, not how they are.

MachoMan's picture

This is the inevitable conclusion to collective bargaining (and, oddly, the inevitable conclusion to virtually any control over employees...  or citizens for that matter).  It's the same cycle, over and over again.  Just bouncing between the poles like pinballs.

Oppressive medium of control>resentment>activism>collective bargaining>capitulation and mitigation of degree of oppressiveness>emboldenment>additional collective bargaining>crippling of desired return on capital>withdrawal or liquidation of capital>repeat.

This doesn't even account for "natural" causes of business destruction, e.g. resource constraints.  Which, oddly enough, track the same pattern...

Saro's picture

The perfect response. 

The position of the government on unions (like so many things) should be that it has no position on unions.  Let the chips fall where they may.

PrintingPress's picture

The unions don't have anything to worry about.  They are getting paid from other competitors to close down these guys so they can be bought on the cheap.  Then the union bosses will move to another shop.  It's all the suckers that actually do work and rely on hourly wages that get fucked... but you know we all need some "collective bargaining" I'm sure they all collectively came together and said let's blow up our jobs!  Maybe they were afraid the mexicans and illegals were going to take them away from them. 

Orly's picture

Exactly!  That'll teach them wetbacks coming in here to do my job for less!

DOT's picture

A while back my company was preparing to move onto a job when the place blew-up. It was necessary to use dynamite to remove non-union labor from over the border (Wisconsin).Wonder if use of explosives was covered during apprenticeship.

ArkansasAngie's picture

Jobs?  We don't need no stinkin jobs.  We've got Washington to provide us with spending money.  And ... besides ... everybody knows you don't have to pay your mortgage when you lose your job.

I'd like sprinkles on my cake and ice cream please.

 

And you want me to pay for this?

BigInJapan's picture

Fuck unions.
Better yet, stand back and watch as they fuck themselves.