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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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.

"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."

"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.”"

"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):


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...

Eagle Keeper's picture

This is actually part of Michelle's master plan to end obesity....   

lostcause's picture

 Don't worry! They will start making Twinkies in China very soon!

monad's picture

Soy-lent Green Twinkies

rsnoble's picture

Don't worry the new owners will soon face Obama card-check and be unionized as well. LOL.

I only know one Hostess employee and he is a real fucking dick so guess what asshole? Enjoy tent city.  And no, I don't feel that way about all of them.  He probably wouldn't be such a bad guy if he didn't have an overly flirtatious 20 yo daughter and that's as much as I care to say on that.

This case represents the ultimate in stupidity.  I'm sure many of the employees might realize this when they are dumped into an economy that have people fighting over $8hr jobs when they probably coulda made twice that with severly reduced benefits.

On the one hand there is no mistake that companies are greedy and will rape you pay wise as much as they can in most cases which is where unions come in.  On the other hand if you should choose this route let it be known that your set of skills are basically worthless in a free market so therefore your job will always be at risk despite whatever "security" bullshit the union touts.  The only way to really have security is having people offer you a good wage because you are really worth it and you can write your own ticket.

Speaking of security, here's a video that I watch often just as a reminder of our fragile being:


Chaos_Theory's picture

Dateline February 15th, 2013--Reuters

After months of deliberations and stalled legal action by the Obama Administration to block Hostess's attempt to liquidate their company, the Department of Labor has announced that the U.S. government has seized the assets of the bankrupt company and will resume business operations in March.  All 18,000 union members who were in limbo will receive back wages, as well as taxpayer guarantees for 150% of their pension obligations.  Additionally, those workers will immediately switch to a public union status and are allowed to enact brilliant government employee initiatives like "Earned Day Off" programs in which workers work an extra hour each day to receive every other Friday off, receive 30-days of paid leave per year, plus all Federal holidays, and placed in the same healthcare program options as all other government workers.  The new government-run Hostess company will change their name to Obama's Glorious Sweet Goodness Treats to reflect the new status and enhance the brand name.  Such iconic brands as Twinkies will only have a color modification...Ding Dongs and Ho Hos will remain the same, with the exception that Ho Hos will be much larger and pop out mini Ho Hos every few minutes. 

Additionally, the International Brotherhood of the Teamsters union has negotiated a new contract with the Obama's Glorious Sweet Goodness Treats company and will receive new benefits such as 150% wage increases, pensions that include taxpayer-funded Malibu mansions, and will be allowed to violently gangbang the firstborn daughter of all private sector taxpayers (however, those women will receive "free" birth control, so it's a win-win).

All hail the glorious leader...FORWARD!

Stuck on Zero's picture

Labor unions are amazingly suicidal.  They strike against companies that hire union labor.  They do not picket or protest or try to shut down companies that export jobs or hire illegal aliens. They do not protest subsidized imports and unfair trading practices that have destroyed their membership.  Nut cases.


Bagbalm's picture

Don't worry about the union leaders. They represent plenty of other shops and aren't going to be out of work.

This is what happens when the first union guy leaves the shop floor and becomes a professional thugster.

NEOSERF's picture

In a nation where fully a third of its population is obese where a Twinkie maker goes bankrupt tells you how bad it is.  USPS, FHA, Hostess, American Airlines, Solyndra and countless others which are teetering on insolvency shows how bad things really are.

monopoly's picture

To blame management for all the failures is ludicrous. Not taking their side but the facts are corporations and America cannot afford these pensions and health benefits anymore. Consumers are looking for value, we do not want to pay more so less revenue. Pensions and health benefits in most industries are now archaic.These benefits are from another era that does not exist. It has to change and the unions do not understand the dynamics at play. All about union power, and it has to stop. No matter if it is Hostess or the U.S. Govt. We cannot afford to continue on this track. When will the unions figure that out? And of course there has been corporate and CEO theft. But to post that it is the CEOs fault to liquidate a company. Nope, does not compute.

ebworthen's picture

"These benefits are from another era that does not exist."

You mean that era where people could afford to go to the Doctor and retire at 65?

Absinthe Minded's picture

The privately owned company I work for was bought by Owens Corning. We had the best benefits imaginable, I thought. $75 a week for a family plan that covered everything with no copays. Now with OC we have the typical crappy health plan every one else has been used to. Sorry, but it sucks.Out of pocket used to be $3600 now it's $8500. Now I know why people strike. My small private company could afford great benefits, they should get better with the purchasing power of a huge corporation. Nope, just another top heavy shitty corporation. Everything we do now has to go through a bunch of dumb ass engineers who have to put their two cents in to justify their existence. Talk about half witted, slow moving, red tape bound beauracracy. This company is a joke. God help us.

NEOSERF's picture

Bring it on...18,000 unemployed workers means I have to work an extra 3 hours a week to support you but good work on shutting down those plants...hope you can get a Starbucks job making those little pastries.

Crtrvlt's picture

right and this has nothing to do with the fact that their revenues have fallen  from about 2.8 bln in 2008 to 2 bln now or the fact that their margins have collpased because of rising input costs


either way, less fat people and the life of medicare just fell a little more

Monedas's picture

The Hostess, Dolly Madison, wanted his Ding Dong .... all she got was a Twinkie !  She was one mad woman !

Mad Mad Woman's picture

Hostess was Bain-ed. Insurmountable debt piled on by owners: private equity firms & hedge funds. Owners loaded up the debt & cashed out millions of dollars and put the money right into their own pockets. Hostess was Bain-ed!!

surf0766's picture

"Workers of the world unit isn't just a slogan anymore it is a way we are going to have to do business." /s


Asswipes !