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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Fri, 11/16/2012 - 10:43 | 2987578 Eagle Keeper
Eagle Keeper's picture

I see this as the visible start of a major inflation cycle. The input costs are now catching up to their maximum that could be absorbed before raising end prices to consumers. Gvt has done a pretty good job so far of masking the enevitible. Sure, wages got to start going up soon but mfg's margin has been so thin for so long they either need to raise prices or shut their doors. Either way results in the same outcome, especially for the first to drop. Hold on to your hats, inflation is about to shift into a higher gear and there's no reverse...

Fri, 11/16/2012 - 10:45 | 2987584 QE49er
QE49er's picture

This may be the Archduke Ferdinand moment of WWIII

Fri, 11/16/2012 - 10:45 | 2987585 surf0766
surf0766's picture

Now all the walmart workers will walk out Black Friday. Fire them all. Someone else will do the job

Fri, 11/16/2012 - 10:46 | 2987590 Eagle Keeper
Eagle Keeper's picture

Self check...

 

Fri, 11/16/2012 - 11:02 | 2987661 semperfi
semperfi's picture

its time for all the TAXPAYERS to walk out and send a message to the parasites that says FUCK YOU

Fri, 11/16/2012 - 10:47 | 2987587 Bastiat
Bastiat's picture

   Unions will send a local on a kamikaze strike to preserve the collective national bargaining power.   Concessions are contagious. 

 

Fri, 11/16/2012 - 10:45 | 2987588 Mad Mad Woman
Fri, 11/16/2012 - 13:48 | 2988602 Matt
Matt's picture

404 - broken link. 

Fri, 11/16/2012 - 10:45 | 2987589 edifice
edifice's picture

Like Woody Harrelson in "Zombieland," all I want is a Twinkie.

 

Not really.

Fri, 11/16/2012 - 10:46 | 2987592 Monedas
Monedas's picture

If I knew this was coming .... I would have voted for Romney !

Fri, 11/16/2012 - 11:00 | 2987645 Chaos_Theory
Chaos_Theory's picture

All Robot would have done is ensure the bones were picked clear, and production costs lowered by the miracle of offshoring.  That would still leave you with 18,000 less American jobs, toxic sweet products, and little Chinese pubes packed into my Ding Dongs!

The REAL horror is the irony of what this does to the great American Dream....by which I mean the dream of living in your mancave for two-years on the unemployment insurance dime, while doing nothing but mastering COD Back Ops II, drinking cheap American beer, smoking Colorado's finest, and eating too many Ding Dongs and Twinkies

Who says the American Dream isn't dead?  Liars...that's who. 

Fri, 11/16/2012 - 10:48 | 2987599 icanhasbailout
icanhasbailout's picture

If the workers don't lynch their union leaders, then they deserved what they got.

Fri, 11/16/2012 - 11:00 | 2987652 semperfi
semperfi's picture

Hope & Change  vs.  Rope & Chains

 

Fri, 11/16/2012 - 10:50 | 2987608 2discern
2discern's picture

A moment of silence is in order. Twinkies will live forever in the hearts (and stomachs) of true Americans.

Fri, 11/16/2012 - 10:52 | 2987616 dark pools of soros
dark pools of soros's picture

ZIRP: the poison pill for pensions... thus unions...    don't think this isn't part of the plan

collateral damage of defunct companies be damned

 

 

Fri, 11/16/2012 - 10:54 | 2987624 hampsterwheel
hampsterwheel's picture

Come on people, you have to start thinking like the system - this will not be allowed to stand - there is no free market - companies cannot simply fire people or raise prices, what are you thinking.....

Here is what will happen - the Judge will throw out the case - the board of Directors will be replaced and the Union will get its demands and everyone will go back to work -

You seriously don't think the system will allow a default of anykind - Greece cannot get out, nor can the twinkie -

Fri, 11/16/2012 - 13:55 | 2988632 Matt
Matt's picture

Are there hundreds of billions of dollars in Credit Default Swaps for Hostess? If not, then they are certainly allowed to be liquidated.

No Twinkies, but Wonder Bread, Jos. Louis and some other favourites live on in Canada:

http://www.theglobeandmail.com/globe-investor/snack-giant-hostess-shutte...

Fri, 11/16/2012 - 10:59 | 2987649 killallthefiat
killallthefiat's picture

Sometimes I read interesting news articles to the kids.  This morning I read this one and my 9 year old daughter. She said, recognizing the value of scarcity, "We better go get some today."  From the mouths of babes, the Ben Bernank could learn a thing or two.

Fri, 11/16/2012 - 11:03 | 2987663 chenn
chenn's picture

Well, at leat now we know what the end of the Mayan calendar represents.  No more twinkies.

Fri, 11/16/2012 - 11:04 | 2987670 j0nx
j0nx's picture

I would gladly accept being shitcanned as an ordinary worker if it meant that the greedy board and executives were also out on the street looking for a new job with that big black mark on their resume. GL finding a job as another executive if you came from Hostess. The airlines ought to be doing the same thing. No more fucking austerity for the average worker until senior corporate executive pay comes in line to 20x average worker pay where it belongs. This blaming unions shit for the failings of companies needs to stop. Corporate greed and asset stripping at the senior level is what causes these companies to fail and the union demands are just a convenient excuse. The simple fact is that the wall street types/corporate execs want everyone else but them to accept austerity and the workers have had enough. Burn the mofo down. Do it to all companies that play by these rules.

Fri, 11/16/2012 - 11:08 | 2987685 Seasmoke
Seasmoke's picture

the higher up the ladder, the harder the fall

Fri, 11/16/2012 - 11:09 | 2987682 Monedas
Monedas's picture

Who's happy ?  Bloomberg and Michelle are happy ! Knock on wood !   Get ready for brown rice snack cakes filled with creamed spinach !

Fri, 11/16/2012 - 11:09 | 2987699 Dr. Venkman
Dr. Venkman's picture

Your Honor -- the Debtors' counsel, Debtors' Co-Counsel, Creditors Committee Counsel and Co-Counsel, Counsel to Secured Creditors/DIP Lender, Financial Advisors to the Debtors, Financial Advisors to the Creditors Committee, etc. are shocked that the plan were worked on for 10 months lasted a mere 25 days. Please consider this an emergency motion to increase the carveout for professional fees lest we attorneys be forced to feed our families with the Debtors unsold inventory. Life in the SDNY is expensive.

Fri, 11/16/2012 - 11:11 | 2987702 EverythingsSuper
EverythingsSuper's picture

This is actually a GOOD thing! Hostess made some of the most unhealthy, GMO food in the USA. And Wonder bread?!?! I mean common, only Americans can eat something that resembles tasteless soft cotton mush made with from GMO Dwarf wheat that causes addiction (google it). I'll take my German pumpernickel or my Latvian real dark, yeast bread ANY time over any twinkie crap.

Fri, 11/16/2012 - 11:11 | 2987705 Frank N. Beans
Frank N. Beans's picture

this leaves the door open for another company to come out with their own Twinkie knock-off.  Just don't call them Twinks. 

 

Fri, 11/16/2012 - 11:13 | 2987717 hero HNL
hero HNL's picture

Is the company seriously going away???????

 

I really enjoyed them since I was a kid......will miss them a lot.

 

 

hero

Fri, 11/16/2012 - 11:22 | 2987747 resaci
resaci's picture

 

 

 

Life in the UAW (probably any big union)

 

 

  • 20% - conscientious hard workers
  • 60% - follow the leader - don't ask me to think
  • 20% - USELESS FUCK-OFFS (most union reps from this group)

Union reps spend their time bailing out the 20% FUCK-OFFS

Management spends their time dumping ALL THE WORK on the 20% - conscientious hard workers until they TURN INTO THE OTHER 80%

 

Fri, 11/16/2012 - 11:22 | 2987754 gwar5
gwar5's picture

Don't be a ding dong. Hoard twinkies before they're gone.

 

Sad to see this happening. Hostess started during the Depression, now it's gotten too tough. Employees are hitting Wal-Mart next. At least WMT saves the average family $3000. Gov can't do that.

 

Fri, 11/16/2012 - 11:27 | 2987782 Monedas
Monedas's picture

Meats, sweets and treats .... advanced Anglo brains don't need all that Slavic fiber and German animal feed !

Fri, 11/16/2012 - 11:28 | 2987785 KCMLO
KCMLO's picture

I have a good friend nearing retirement age that was one hit by this.  I don't know much about the company and how they operated but I did get to see first hand what they did to him:

1.  Admittedly he was decently well paid when he was even able to work, made about $20 an hour loading trucks.  However, the union constatnly blocked him from being able to work full hours. 

2.  His exact position opened up at a bakery within a mile of his house, since the union required more senior people to have first dibs on the job he had to quietly train 3 (THREE!) more senior employees trying to take the position.  Each of the three were unable to perform the duties of the position.  Namely this would be mental math, inventory, and loading trucks for delivery.  That astonished me.

3.  At every step of the way the union was constantly obstructive.  I never once heard him complain about the company, not a single time, it was always the union.

4.  The union even kept them in the dark about these proceedings and that they were heading over the cliff.  His word from the union as of 48 hours ago "We're still negotiating."

Fri, 11/16/2012 - 11:35 | 2987817 indio007
indio007's picture

Unions are hardly the problem. The problem is they changed their product and it sux. Not to mention charging 2 times as much as their competitors for an inferior product.

 

Hotess cupcakes are all dried out and barly taste like chocolate. Twinkies are bland as shit and the frosting isn't fluffy anymore. It's more like paste. 

Fri, 11/16/2012 - 12:12 | 2987994 Monedas
Monedas's picture

Maybe union bosses could start up their own snack company .... non-union shop, of course !  LOL   (Unions are) Proletarian, brain dead Zimbabwian Socialist filth !  

Fri, 11/16/2012 - 12:43 | 2988232 De minimus
De minimus's picture

Duuuuh.... Maybe because they are union.....?

I'm sure that the company's objective was to provide a substandard product, at twice the price of the competition, so it would sit on the shelves and not sell. That sounds like a money making strategy to me!

Why don't you shove that other free foot in your mouth while you're at it.

Perhaps you should re-educate yourself since apparently the first attempt didn't take. Hint: Read old books published before the 1930's and then ease into the modern ones.

Fri, 11/16/2012 - 19:59 | 2990110 indio007
indio007's picture

Denial is more than a river in Egypt.

Fri, 11/16/2012 - 12:21 | 2988093 monad
monad's picture

Monday: Michelle ate 12 servings of Twinkies.

Wednesday: The Royal pulse is normal again.

Thursday: Twinkies will no longer be made. The responsible parties will be punished accordingly.

 

Fri, 11/16/2012 - 21:49 | 2990455 Pinocchio
Pinocchio's picture

How pissed off are the guys in Colorado and Washington.... HORRIBLE timing.... Right after they approve recreational marijuana use.....

Sun, 11/25/2012 - 07:20 | 3009522 wandybrad
wandybrad's picture

nions are hardly the problem. The problem is they changed their product and it sux. Not to mention charging 2 times as much as their competitors for an inferior product.
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Sat, 11/17/2012 - 11:24 | 2991533 monad
monad's picture

They can take our Twinkies, but they'll never take our Cheetohs! CHEEEETOOOOOOHS!!!!!!!!!!!!!!!

Mon, 11/19/2012 - 03:56 | 2995298 cgagw
cgagw's picture

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