Hostess Mediation Fails, Liquidation To Proceed; Furious Laid Off Workers Now Turn On Labor Union

Tyler Durden's picture

Last week, when discussing the next steps for the company, and specifically the hope that mediation may resolve the epic animosity between management and workers, we stated that "What makes a mediation improbable is that the antagonism between the feuding sides has certainly hit a level of no return: "Several unions also objected to the company's plans, saying they made "a mockery" of laws protecting collective bargaining agreements in bankruptcy. The Teamsters, which represents 7,900 Hostess workers, said the company's plan would improperly cut the ability of remaining workers to use sick days and vacation." Sure enough, moments ago we learned that mediation has now failed and the liquidation may proceed. And since in America nobody understands that proper sequence of events involved in a bankruptcy liquidation, where the valuable parts always end up being acquired by someone, in this case the Twinkie brand and recipe, let the pointless Ebay bidding wars over twinkies continue. As for what really happens next, if indeed Bimbo is prohibited from acquiring the assets in the Stalking Horse auction due to anti-trust limitations, then the buyer will almost certainly be a "financial", i.e., another PE firm, whose coming means the end of any hopes and dreams of preserving union status at fresh start Hostess, or whatever the new firm will be named.

From the WSJ:

Hostess Brands Inc. said Tuesday night it would proceed with liquidation plans after mediation fails.

Earlier Tuesday, the head of the bakers union whose strike precipitated Hostess liquidation plans didn't attend a last-ditch mediation session and wasn't hopeful about its prospects, he said.

"I'm not too optimistic about this mediation," Frank Hurt, president of the Bakery, Confectionery, Tobacco Workers and Grain Millers International Union, said when reached earlier Tuesday afternoon in Columbus, Ohio. He said he couldn't get to New York, where the session was taking place; instead, he said, the union's secretary-treasurer was attending.

 

The mediation came at a judge's suggestion after the Twinkie maker said Friday that a week-long strike by the bakers left the company no choice but to seek a bankruptcy judge's approval for liquidation.

 

The judge, Robert Drain, urged mediation, citing among other things the hope for saving some 18,500 jobs. The company filed for bankruptcy protection for the second time in January.

 

The judge indicated Monday that if mediation wasn't successful, Hostess could return to court Wednesday to pursue its liquidation plan.

 

Doug Mansky, a Hostess driver in Detroit and a member of the International Brotherhood of Teamsters, was in the process of moving to a cheaper condominium on Tuesday, after his union had agreed to an 8% pay cut that he said would shave $200 a week from his income. After Judge Drain cleared Hostess to impose the same new labor terms on the bakers union, they went on strike.

 

"I hope things work out. I'm going to be 49 and trying to find a job in a market that's terrible," Mr. Mansky said.

Sadly, the reality of learning just how bad the labor market truly is, all smoke and mirrors of a recovery aside, will now have to be experienced by not only Mr. Manksy but 18,499 of his fellow co-workers, who may have been duped into hoping by their union that by holding out a hardline stance, they would gain something.

They have now lost everything. And not too unexpectedly, the workers are now turning on the Union!

[S]ome Hostess workers in another union awaiting the
mediation results criticized Mr. Hurt, the 20-year president of the
bakers union, who defended his decisions and actions during the
company's bankruptcy process.

 

Scott Quenneville, a Hostess truck driver represented by the Teamsters, said he feels his colleagues were misled by Mr. Hurt into believing that a buyer would swoop in for the company. Mr. Hurt on Sunday said he thought there was a good chance a buyer would emerge who would give union members their jobs back.

 

"Frank misled a lot of people. He was not going to settle for anything less than closing the company down, because they didn't want that 8% pay cut," said Mr. Quenneville. "If you don't want the job, leave the job. Why ruin 18,000 jobs?"

 

"I didn't mislead anybody on anything," Mr. Hurt said. He said he didn't tell workers preparing to strike that a buyer for Hostess was definitely waiting in the wings.

 

Mr. Hurt said, "I don't want anybody to think that anybody is guaranteeing anyone anything, but we did know that there were people taking a look at this company."

This would be a truly fantastic drama, if people's lives were not at stake. And no, not one former Hostess worker will retain their job at the new company: that much is certain.

As we said, if only people had a basic understanding of how bankruptcy truly worked, and what the real state of the economy was, then Hostess' workers may have had a chance and some amicable comrpomise would have been possible.

Then again, if people in America actually understood economics and simple finance, then the "Ohio outcome", and many others, would have likely been quite different.

Now we can only hope we were not correct about the ultimate outcome too: namely that the US government will effectively hijack the bankruptcy process, and in doing so "bailout" a junk food maker, just so 18k votes can be preserved at the expense of creditors and making yet another mockery of the bankruptcy process, and property rights in the US.

Then again, this is precisely what the Union was likely hoping for all along, because once the government starts bailing everyone out, just where does it draw the line?

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Vampyroteuthis infernalis's picture

Let's see, $200/0.08 equals $2400 per week. Add that up per year, it is 6 figures. A driver makes 6 figures? Time to walk the streets buddy.

kaiserhoff's picture

For want of a twinkie, his condo is lost.  Poetic justice.

ACP's picture

That also means a bunch more subprime loans go belly-up, which of course, comes right back to screw the taxpayers. We never win, dammit!

Plus, who can fight zombies without twinkies?!?

economics9698's picture

"Then again, if people in America actually understood economics and simple finance, then the "Ohio outcome", and many others, would have likely been quite different."

The papers I read in economics are completely hilarious.  The Federal Reserve sets prices so people are protected, government gave us our living standard, if it wasn’t for government we would kill babies and push grandma over the cliff.  Capitalism bad, government is our savior.

Unions are responsible for the middle class. 

They are completely clueless and brainwashed.  It does give me a healthy respect for the power of indoctrination methods; it gets worse as the years go by.

The textbooks are economic gibberish bullshit fairy tales.

On the bright side I am old enough to where I do not give a shit and tell them the truth.  I force them to read ZH.

Curt W's picture

If people undertood economics we would not have such wild swings in growth and contraction.

UP Forester's picture

If people understood modern economics they'd kill economists and go back to barter.

EnslavethechildrenforBen's picture

People simply would not accept a piece of paper for payment unless it's value was specified as an exact quanity of animal, vegetable or mineral. Also, there would be no such thing as interest on a loan, That would again be punishable by death like it used to be

Slightly Insane's picture

"Enslavethe child"

"Interest is necessary, prudent, and part of a healthy society".  If interest is zero (as it is now), what is the "time value of money"?   There is a giant moral hazard here, and it punishes savers.  If the dollar pay's no interest, and there's a shit ton of downside risk, (like today) why leave it in the bank?  Why not convert it to a commodity, which is at least a store of value?  Why would a bank ever make a loan if there was no usuary?  (The credit cards .... unsecured loans ... get between something like 16-20% .....)

Hugh_Jorgan's picture

 "I didn't mislead anybody on anything," Mr. Hurt said. He said he didn't tell workers preparing to strike that a buyer for Hostess was definitely waiting in the wings.

Well, let's imagine potential buyers looking at Hostess. One look at the Labor Union encumberances that would be part of the deal was all they needed to say "eh... no thanks, let em' go under".

A Nanny Moose's picture

Light Paul Krugman a fire, keep him warm for the night.....

NoDebt's picture

If people understood modern economics they'd stop blindly paying dues into a union that doesn't have their best interests as priority #1.

Unions have LONG since become just another layer of control over workers.  So instead of one master to deal with (management), they have two.

For God's sake, the whole fucking country is running on the give-back program right now.  If you keep playing by the "usual rules of engagement" you're going to get results like these.  Management just voted themselves a "severance package" when they saw the end was nigh.  And, by the way, I will bet my ass the union leadership did as well.

If the rank and file wanted a REAL say in things I would recommend they tell the union to fuck themselves on their dues and instead use them to buy an equity position in the company, if not buy it outright and run it themselves.  Hell, they do all the work anyway, right?  So it shouldn't be a stretch to run a fucking Twinkie factory successfully on their own.

Couldn't have turned out any worse for them than it did this way.  Certain death or chance to live.  If my back is against the wall (AND BOTH SIDES GODDAM WELL KNEW THEIR BACKS WERE AGAINST THE WALL FOR A LONG TIME), I'll take that shot.  They chose to walk willfully into the slaughter house.

SokPOTUS's picture

LOL! ZH Post-of-the-Year Candidate!

Rusty Shorts's picture

...anybody here remember a little company named "Polaroid"???

 

https://www.youtube.com/watch?v=ys26c5Euyck

Raymond K Hessel's picture

My corp fin professor was hired by Polaroid to help them find value in their company.  

He told them point blank that the best thing they could do for shareholders was to sell the PP&E, distribute the cash to shareholders, and to shut down the company.

This was years and years ago.

The Proletariat's picture

They fucked up....they should've put high fructose corn syrup on their film.

Michaelwiseguy's picture

The proliferation of Unions is a response to the shrinking US wage/job pie.  Unions are trying to put out a forest fire with a garden hose.  The USA will rot in hell before Americans figure out what the real problem is, and I will laugh my ass off watching it go to Hades.

 

You can't have job creation in the USA because factories that produce consumer products were removed from the country.

The Money Math for Job Creation doesn't work due to Globalization and the Federal Reserve Corporation.

Globalization = American Wage Arbitrage = Lower Worker Pay

Federal Reserve Corporation = Private Company that Manufactures Paper Money and Sets its Value

dark pools of soros's picture

more and more fools are believing workers shouldn't get paid anything instead of wondering what the hell happen to this country..

Popo's picture

Who said workers shouldn't get paid? That's absurd. They should get paid exactly what the market should bear. Why do you believe they should be paid more than the market should bear? And who should cover that cost?

dark pools of soros's picture

and what the fuck controls management compensation?  unicorns?

 

"As the company was preparing to file for bankruptcy earlier this year, the then CEO of Hostess was awarded a 300 percent raise (from approximately $750,000 to $2,550,000) and at least nine other top executives of the company received massive pay raises. One such executive received a pay increase from $500,000 to $900,000 and another received one taking his salary from $375,000 to $656,256."

 

Bastiat's picture

 

"and what the fuck controls management compensation? unicorns?"

Ostensibly Boards of directors but actually management.

dark pools of soros's picture

sounds like market forces in play there right??   right off a cliff

centerline's picture

+1.  Outstanding way of putting it.  The forces at this juncture are what they are.  Right or wrong.  And they lead us to next inevitable change.  Cause and effect.

James_Cole's picture

The management did such a poor job with this company - that should be the story.

Workers kept up their end of the bargain doing more work for substantially less pay over the years racking up some very profitable seasons. The useless management blew this.

Not focussing on poor management performance is actually worse for everyone. Articles like the stream of nonesense coming out of the WSJ over this particular case highlight the fact.

Management can simply bank on advantageous labour conditions to increase their profits but this weakens their brands. If instead management was expected to actually, oh I don't know, do their jobs (including innovation and responding to market demands) their companies wouldn't have to constantly declare bankruptcy / get gov loans / play financial games etc.

But much better to just blame the people least responsible! 

Bananamerican's picture

"much better to just blame the people least responsible!"

I STILL meet wingers who tout the "housing crash caused by government FORCING banks to give poor people home loans" line....the invisible hand of wall street propaganda...

"Who said workers shouldn't get paid? They should get paid exactly what the market should bear"

Apparently, the Market can bear Foxconn, Maquiladores and much worse.

No one on this board ever seems to imagine they or theirs pulling a rickshaw some day...."we'll all be dead", right? 

Ident 7777 economy's picture

We know why you're a Banana American now; you're not paying attention to what actually happened, like 96% of Amerika ...

James-Morrison's picture

Zounds, Scooby!

US implodes and we are playing with our Twinkies.

-- Shaggy

 

Temporalist's picture

Well stock holders and also the consmuers have a say and the consumer has the greatest say ultimately but good luck making them care about anything that matters.

Augustus's picture

Whatever management has for compensation is meaningless.

If a truckdriver delivering Twinkies gets $125,000, as reported in the article, then what should the person make who figures out how to pay the driver that much for dropping off junk food?

The union president didn't attend the arbitration meeting because he likely was at a job interview.  Wanted to get the jump on the suckers waiting around for news.  Surely this guy will be on the government payroll in a few weeks.

WillyGroper's picture

Where did you get the $125K figure? I don't think so.

tricycle's picture

He got it by using math.  The driver claimed that the 8% cut would cost him $200/week.  200/.08 means he makes $2500/week. Allowing for 2 weeks vacation that's $125k a year.

James_Cole's picture

"He got it by using math.  The driver claimed that the 8% cut would cost him $200/week.  200/.08 means he makes $2500/week. Allowing for 2 weeks vacation that's $125k a year."

Common sense tells me this $125,000 figure for a driver is unlikely, or at least rare.  

The truth of this story - not presented in the WSJ article - is that there was never much possibility in Hostess continuing as a company, from the beginning they wanted to sell it.

Not to mention Hostess has been HORRENDOUSLY managed for a long time. The union wages have been slashed a few times in the past decade.

But sure, blame the workers, not the moronic management (the latter group actually raising their pay exhorbitantly as the company collapsed). 

http://www.forbes.com/sites/helaineolen/2012/11/16/who-killed-hostess-br...

"Hostess has been sold at least three times since the 1980s, racking up debt and shedding profitable assets along the way with each successive merger. The company filed for bankruptcy in 2004, and again in 2011. "

Abaco's picture

Plenty of union truck drivers make $125K per year.

redd_green's picture

Unlikely or rare?   Rare, yes, but, man, you have to readup on the Teamsters.     They are experts at extortion. 

WillyGroper's picture

Just scanned the article and yes public skooled. This bankruptcy is also taking down a friend that owns the industrial warehouse where their distribution center was. Totally anti-union until the devastation of the demographic was witnessed. The drivers did not make $125K in the midwest. I don't care what MurDICK's publication said.  

Umh's picture

Sounds like the management knew the company was likely to fold.

centerline's picture

This is nothing short of a disaster and a slap in the face.  Same as every other corporate story.  The greater good is gone.  It is now a game to stick the system as quick and hard as one can.  Make your millions - fuck the rest - and get out.  Legal?  Who the hell cares.  Just a matter of reward versus risk.  Where was that learned?  lol.

This is straight up what everyone deserves in letting "finance and business" folks have control.  I have spent a career fighting this and continue to do so.  But, I have a license to do so... yet the fuckers come in the back door, the front door, the fucking cracks in the floorboards.  Public safety be damned.  We are being overrun.  I won't lose outright but will be driven from my career in time on our current course... and my job is to protect all of you.  Sign of the times... and that of a dying system.

cranky-old-geezer's picture

 

 

and what the fuck controls management compensation?  unicorns?

You better give up that "fairness" fantasy, fairness doesn't exist. 

Yea management is gonna pad their pockets, they're greedy just like you union folks are, and they have a lot more say-so over their compensation.

It's just the way it is.  They're greedy.  You're greedy.  No difference.  They'll loot the company for all they can just like you will.

Companies don't exist for workers.  Companies exist for management.  Workers are just "human resources", viewed the same way as a copier or fax machine, a cost of doing business manangement will try to keep low as they can.

Don't like it?   Go start your own company.  Then you're management.  And you'll do just like they do, loot your company for alll you can, pay yourself the most you can get away with.

larz's picture

well said COG the system looks good on paper and everyone is a hero in good times but we all have a part in sinking the ship with our greed and avarice, everyone is guilty - some more than others.

Offthebeach's picture

What's the problem? The company's been a sinking ship, lost cause, a loser for decades. You think any manager worth salt is going to stick around for less money? You think that when your outpost is going to be overrun, mercenaries aren't going to hit you up, then and there for next years pay? You think Tom Brady is going to play for a loser team for less money?

That's what happens when you are in a bad state, you pay more for talent, by and large. Being a technology backwater, loser, a hundred union company it is hard to get or keep anyone who can think ahead.

Anyway, there's no shortage of bakeries, baked foods, so no problem. There is a shortage of jobs, but Obama, rules, taxes, regulations, fines, permits, licenses.and unicorns will have hordes of new business

ATM's picture

Seems low for a company that pays it's truck drivers $130,000 a year plus union benefits!

Michaelwiseguy's picture

American Citizens should be paid the same wages as illegal aliens. That's why they're pushing for amnesty for 12 million of them now.

No, make that, Americans should be paid the same as Chinese people living in Fucking China.

best of walstreetpro2 (greatest fuckin hits) - 1 of 3

http://www.youtube.com/watch?v=4k4xPUZRdC0

best of walstreetpro2 (greatest fuckin hits) - 2 of 3

http://www.youtube.com/watch?v=LyE1GoPtLyI

best of walstreetpro2 (greatest fuckin hits) - 3 of 3

http://www.youtube.com/watch?v=Qd0m_bN2qdY

Ident 7777 economy's picture

I see it now: Education via YouTube courtesy of MWG AKA "Michael"

Wannabee's picture

Same as Chinese? I'm all for it! Soon as someone quits making me comply with haz mat mandates, diversity / harassment training / safety training, workmens comp, EPA mandates, etc etc etc......