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:

 

Comment viewing options

Select your preferred way to display the comments and click "Save settings" to activate your changes.
AnAnonymous's picture

As management we constantly try to create a better work environment (new cafeteria with free food, new lockers rooms, new uniforms, employee recognition days etc) and it is all a waste of time.
_____________________________________

Absolute waste of time. It reads more like 'american' attempts by the 'american' management to justify their management positions (something had to be done in order to fill those management work hours) than attempts to better the work environment.

Typical 'american' attitude, as 'americans' run a business of extorting the weak, farming the poor.

This kind of 'american' initiatives only have one goal: help the so called helper.

And you will find it anywhere there are 'americans', public or private sector, charity or for profit businesses etc

This is how you spur consumption in an 'american' environment.

Pig Brotha's picture

If you weren't such a large American penis envying Chink I would respond to you...

Metalredneck's picture

One of my friends makes those Hobart dishwashers.  He gets $14.75/hr.

Pig Brotha's picture

He must feel great knowing that a person that just pushes the rack of dishes in the machine and pulls them out when completed is making more than double the salary of the person that helped build the machines. BTW out of the 7 hours dishwashers work a day (sorry we don't do 8 hour days in NYC) he might actually work 2 or 3 hours. And no you can't assign different work during down time, his title is dishwasher and that is all he will do. Yep we are most definitively ready to compete on the world market...

Alpha Monkey's picture

I've never had a union job, unless you count military service, which to me is just a giant fucking union.  However, I have had a few non-union jobs.  I'd have to say, listening to the way you talk about being a manager and remembering the way my managers were, it seems to me like there is a huge failure on the side of management.  I have yet to meet a truly competent manager that wasn't just another self serving POS like you sound to be.  Oooh, I see you're trying to make it sound like you are the good guy, getting new cafeterias, lockers, etc. but last time I checked, that wasn't the sole job of a manager.  Managers are meant to be leaders, and as such, they are meant to be able to connect with people and inspire them towards a common goal.  Most of what I've seen has been using things like, "we got you a new coffee maker, so now you should be 20% more effecient and productive.... we need to justify this cost somehow, or we'll have to start cutting back on labor..."  Leadership isn't meant to just wipe asses and then hold that asswiping over someone as a reason for them to work harder.  It surely sounds to me like you have an Us vs Them mentality instead of a leadership mentality.  If you are the common example of what passes for leadership in your company, then it's no wonder you can have a 90% occupancy rate and still barely be able to keep the doors open.

It all comes down to entitlement.  You feel entitled to worker loyalty, when you have done shit to earn it, and the workers feel entitled to higher wages when they are working their asses off to support the poor leadership taking the biggest peices of the pie.  I see there's a lot of plus signs on your name.  I wonder how many of them consider themselves proper leaders, when in fact they are nothing more than glorified slave drivers with no real backbone or intelectual creativity that's required to connect with people and produce real results.  It's easy to flail a whip around.

I'm glad you posted that racist comment in response to a response of your post, it makes understanding your small mind that much easier.  You don't deserve to be a manager, and there's no way you should consider yourself a leader.

Pig Brotha's picture

It all comes down to entitlement.  You feel entitled to worker loyalty, when you have done shit to earn it,

Apparently you do not read/comprehend English very well. As I stated I have been on both sides on the union/management scenario meaning that I started in the union (even the military union) many years ago and worked my way up to executive management. Iv'e learned leadership through a concept of "leadership by example" and most of my team are loyal to me and the property. However there is a hardcore 25 - 30% of the union staff that don't give a fuck, you try operating a business when 30% of your staff are not even trying. As far as inspiring people, I have over 10 men in the field currently that I have assisted in moving from hourly wage earners to middle and upper management, something they never thought  possible. I help manage over 1000 employees at my property, all within the confines of the collect bargaining agreement so leadership is not a luxury it is a necessity. And as far as I feeling entitled to worker loyalty I don't feel entitled, I earn loyalty. You apparently are living in a far different world than I, where managers are not held accountable. In my 14 years at my current property we've had 9 general managers, each held accountable for their lack of performance. I assure you a commensurate amount of  union members have not been terminated during this time.

Regarding my "racist comment", man the fuck up bitch. This is fight club.

waterhorse's picture

lol on ripping the other poster for "entitlement."  People who live in glass houses...

Pumpkin's picture

Well Fuck!  Now the shit has hit the fan!  No more fucking twinkies?

Professor Fate's picture

It's a victory for M & M's (Michael and Michelle).  Let all rejoice with another anti-obesity victory for the komrades.  The children shall survive on cabbage smoothies (under 16 ounces of course)

FrankDrakman's picture

I can hear Bambam now:

"That Twinkie you're eating? You didn't bake that."

Vince Clortho's picture

$$Billions for Bank$ta$ but not a penny for Twinkies.

wagthetails's picture

time for a Twinkies summit.  although Michelle might take issue with that. 

This is only the beginning i fear.  the end will be the eventual insurmountable gov't divide...then the people strike.

semperfi's picture

how about the "producers", the "taxpayers" strike - where do I sign up?

Let The Wurlitzer Play's picture

Taxpayers Unite - It not just a slogan anymore.

 

Fix It Again Timmy's picture

Bakers' Union - bringing a dull, 1" knife to a gun fight.  Seriously, is this a good environment in which to lose your jobs?  It's not like you have indispensable skills that require 8 - 10 years of post-high school education.  Have your union-employed advisors lost their jobs?  Rule #1 - don't be a dumb shit.  Rule #2 - repeat rule #1.  I used to work for the International Brotherhood of Firemen & Oilers - there are times to play your hand and times to fold 'em.

Sig Sauer's picture

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

Priceless

semperfi's picture

nope - still Bush'es fault

astoriajoe's picture

Surely the unions will purchase the assets and restore this faded brand to its former glory! Amiright or what?

goodrich4bk's picture

Most posters here have the mistaken belief that the workers just fucked themselves.  Maybe, but I'll bet dollars to twinkies that a buyer will be found, that the assets will be sold free and clear of all creditor claims (including legacy pension debt) and that NEWCO will hire back most of these workers for the same pay and benefits they were last offered.  The difference will be that NEWCO will be in a much better financial position without all of the vendor debt and DIP financiing, most of which is bloated "professional" fees during their Chapter 11.  As for their pensions, their payout from PBGC will probably be the same, and perhaps even better, than the illusory deal they were offered by a hopelessly insolvent company.

No, my friends, the idiots here were the shareholders who allowed management to strip the company of all value through incompetence and grossly excessive Chapter 11 proceedings.

Tyler Durden's picture

There will certainly be Stalking Horse bidders for the brand names, IP and the factories (the only real assets), and certainly free of legacy liabilities. But there is absolutely no stipulation that says a new buyer will need to retain the existing workforce or unions for NewCo.

The question of whether the PBGC will make whole the union is however very much open, as noted in the post, for the simple reason that yet another festering nest of insolvency will have to be exposed for everyone to see now that this liquidation will be headline news for weeks.

hardcleareye's picture

While I agree that there are no guarantees of rehire of existing labor force.  Unless you physically move the production plants, you will be hiring workers from a "local pool", you of course will rehire the experienced workers that are NOT union flag wavers..... hence breaking the union.

The asset may not be the factories, depending on maintenance and investment into the infrastructure, at the end of the day the facilities may be a net liability(decommissioning cost, environmental clean up of the sites, the production equipment has very little resale value).  Your real asset is your brand names, patents and trademarks.

TrulyStupid's picture

Oh great.... now my ding-dong and twinkie will have chinese writing on the package...but I'lll still be able to get em at Wal-Mart.

d edwards's picture

Yeah, Chinese writing and God only knows what kind of toxic materials in it.

emersonreturn's picture

...toxic materials in it.

 

same as it ever was...

d edwards's picture

Yeah, Chinese writing and God only knows what kind of toxic materials in it.

TrumpXVI's picture

Jeez, the union killed the goose that laid the golden ding dong.

d edwards's picture

Twinkies are golden, Ding Dongs are chocolate. :-)

nick howdy's picture

Go ahead and blame the union for everything not the PE firm..Ripplewood and the Hostess CEOs.

http://www.huffingtonpost.com/2012/11/12/hostess-closing-bakeries_n_2119...

"At that time, the union says, workers' concessions were diverted from their intended purposes and instead "went to executive bonuses and payouts to the hedge funds that own Hostess Brands." Hostess' then-CEO received a 300% raise, according to union claims."

http://www.nypost.com/p/news/business/hostess_bakers_set_to_strike_9xGp5...

"Bakery Union Head Frank Hurt said in September that Hostess is a company “that is controlled by Wall Street private equity and hedge-fund firms, whose sole objective is to maximize their own returns, not rebuild a company for the long haul.”"

http://online.wsj.com/article/SB1000142405270230407200457732399351250605...

"Creditors Say Hostess pay is Questionable"

Let's just see what the CEO's and the PE firm walk away with at the end of all this...

 

goodrich4bk's picture

Bingo, Nick.

The pay and benefit concessions demanded were between 27 and 33%.  How many of us here with families and a mortgage would voluntarily accept that so that management can receive a 300% wage increase?  And those who would do so, have you no pride?  Who else do you so willingly bend over for?

Assume you're making $35k a year with a $1,500 nut for mortgage, taxes and insurance.  Would you agree to accept a 20% wage cut which will only serve to put you in foreclosure and your own bankruptcy?  Why bother?  Why not just sell the house now and move?  I know I'd rather take the quick death than the slow, and it is clear to me that Hostess' management was never in this for the long term.  They haven't changed their distribution or product in decades, nor have they done anything to adapt to increasingly negative customer sentiment concerning their product.  Management was in it just for the money, but some of the posters here apparently believe workers who made the same calculation and came to the same conclusion, ie., they would be better off financially from a failure than a success, are "stupid".

 

nick howdy's picture

Let's face it, the company was going down anyway and everyone knew it, there was no plan to save anything...Wonderbread, Twinkies, Ho Ho's are going out of style because people just aren't into eating artificial food anymore.

notbot's picture

Oh give me a break, Nick.  Some deals don't work out, but it's not the business model Liberals want to make you believe it is.  PE doesn't have a business model to pay a 30% premium to market price to buy a business and then drive it into the ground. 

Step 1: Pay a huge premium to market price and then drive a business into the ground.

Step 2: ???.  

Step 3: PROFIT!

What we need is to eliminate poison pills and staggered boards that insulate over-paid mgmt teams who are bad at running a business.  PE could be then be a proper check on all that if we didn't have so much crony capitalism.

 

nick howdy's picture

I'm certain Mitt Romney would agree with that.

hardcleareye's picture

Excellent post NC, as I read Tyler's article I couldn't help but wonder (no pun intended) what was really going on here....  I am sure with a little more digging there is more, much more, to this story.  I wonder if the union (or the workers) could purchase the assests in the liquidation filing...  after all you can't make this product overseas... welll.....I take that back, maybe you can.

Cathartes Aura's picture

"this product" being Twinkies?  doubtful "overseas" wants to eat the crap that amrkns were raised to believe is special - and has perhaps contributed size-ably to "amrkn culture" - Twinkie Defense anyone?

ebworthen's picture

nick howdy - thanks for the post.

This is the story of many American industries.

Bet most of management and ownership were MBA's who never worked a day on the floor.

nick howdy's picture

Just you wait, you are going to see this everywhere...These CEOs and PEs are going to do this everywhere as a fuck you to the working class...and its all government incentivised. This country will be one giant neo-fuedal sacrifice zone..

Cathartes Aura's picture

and the looting will continue to be defended by the co-dependents who identify with the looters. . .

thanks for the posts nick.

AnAnonymous's picture

Some 'Americans' lunch on Twinkies.

TheFourthStooge-ing's picture

Some Chinese citizenism citizens lunch on twice-cooked yak penis in a spicy ginger sauce an umbilical cord broth. Others just wok a dog.

Temporalist's picture

No, you misunderstood, I said talk the dog for a walk!

my puppy for prez's picture

I'm sorry to spam this thread, but in the spirit of a semi-humorous topic, I am linking to one of the funniest articles I have read in a long time.  I was crying till I laughed!  (The topic is disturbing, but this writer managed to point out the abject absurdity of this DHS "policy" in brilliant satirical style):

DHS AND FBI PRESENT:  YOU MIGHT BE A TERRORIST IF....HOTEL GUEST EDITION:

http://www.blacklistednews.com/The_DHS_And_FBI_Present%3A_You_Might_Be_A...

WARNING:  This is a non-beverage article for the safety of your keyboard!

forwardho's picture

Well worth the side trip. Thanks for beverage warning!

The Malamute Kid's picture

Why bash the unions?  are you opposed to workers getting a living wage?  This is not some govt workers union, its bakers. What ever happend to Solidarity in this country?  Maybe you want to set the country back to Lewis Sinclairs time.  No more Twinkies?  WTF!  Another American Icon bites the dust.

Alpha Monkey's picture

Someone forgot to give them the memo that people are becoming educated about stuffing shit down their faces.

ElvisDog's picture

Because 3 does not equal 4. If a company earns $3 in revenue per employee, and the employees say "we wont work unless you give us $4 in compensation because we think $4 is a living wage", then guess what? The company is forced into liquidation that's what. "Living wage" is like "pay your fair share". Who gets to say what a "living wage" is?

IridiumRebel's picture

Did you read the article? FAIL.

Absinthe Minded's picture

I've been an electrician for over 30 years now and I never worked for a union company, nor will I ever. You make your own worth. If you don't like what you're making ask for a raise or find another job. Don't depend on someone else to bitch for you. Oh yeah don't pull the I hope your happy making crap wages, I've done very well for my self.

Michigan's picture

Hostess should sue the unions.

hannah's picture

there werent 18,000 union...more like 7,000 wasnt it. union took everyone out...