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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jballz's picture

They took 950 million from the pension fund. That will buy a couple of nice fuckin yachts. Of course mooring fees and gas may run 130k even before you pay for catering and such.

I DARE You supposed number crunchers to tally the total equity extraction since ripple wood LBO and post alongside the payroll cut.

This union bullshit is nothing but class warfare based propaganda and misdirection. Who built the motherfucking company...

dogbreath's picture

Fuck you.  You equate anyone argueing against union self enrichment as supporting management self enrichment.  Did i say fuck you.  There are lots of people who have to pay the inflated costs associated with the inflation of costs caused by unions.   The situation at Hostess was two sets of hands on the neck of the chicken trying to encourage increased egg production.   

nodhannum's picture

Then why doesn't the union buy the compay?  Then they can have endless raises, bonuses, 365 days of vacation per year...why it's just a cornucopia!

Waterfallsparkles's picture

As part of the pay cuts the Company offered (I believe) 25% of the Company to the Workers.

The Unions and Workers were short sighted.

Zgangsta's picture

I respectfully disagree.  The business acquiring the brand and recipie will not entail any new employee costs.  All of the costs associated will be in outfitting their factories to produce Twinkies.  As they will be starting from scratch, and will not be beholden to any of the old ways of doing things, they will jettison anything and everything not essential to creating something that looks like a Twinkie.

dark pools of soros's picture

here comes the Twinkie plantation

dtwn's picture

Ummm, the machinery doesn't go anywhere.  Those are assets that can be obtained during liquidation.  You have the factories in place, you just need cheaper labor costs.  Labor costs are often the most significant outlay for many companies (I think, I may be wrong on that, but too tired to check).  So, figure out what price people will pay for twinkies, calculate the capital investment required to pick up the liquidated assets, and then figure out the marginal cost of production and the labor costs needed to make a profit.  If Bimbo bought the assets, I suppose they could shift production to their current factories, but I don't know anything about production capacity.  Or they could retain the current infrastructure and then offer certain wages for the jobs.  I doubt the former employees will have moved on to other positions, and I would bet most of them could be back at their former positions making significantly less.  They're already trained and have no other options.  Plus I'm sure there are lots of unemployed young people that would be happy to drive a truck for $30k a year instead of $130K.  Wage deflation is going to happen as a necessary step of the market getting back to any sort of normalcy.

Zgangsta's picture

These companies have their own factories.  There's an overcapacity problem in the baking industry already.  Why would Bimbo buy unnecessary assets if they could cheaply export the procedure to their own unused factory resources?

Matt's picture

Exactly. And as mentioned by someone previously, some of these factories are quite old, may have asbestos in them, and have worn out and/or antiquated equipment. Cheaper to use a newer plant, or if need be, build a new plant, then to purchase and use these old factories.

nmewn's picture

Pretty much.

Everyones hung up on the markting brand, not the product. Meanwhile, Elmo's voice has been silenced...apparently he stuffed one too many twinkies down his throat.

What? ;-)

Ineverslice's picture


Elmo be in truble...

I dunno anything about his world these days, but, will be interested in hearing Santa's report shortly.

nmewn's picture

I really am laughing my ass off over this...the whole PBS, "touchy feely" meme.

Big Bird (a crony capitalist by any description) defended by the CnC (crony capitalist in chief) and now two guys coming FORWARD and pointing the accusatory finger at Elmo for pedophilia!

Who needs fantasy & escapism?...its all around us...ROTFLMAO!!!

lakecity55's picture

Jimmy Savile is not dead. He came back as Elmo.

Mary Wilbur's picture

I'm not that smart. What does SG&A mean? Thanks.

Taint Boil's picture



Hold on let me get that --> click here

Al Huxley's picture

Pfft!  Nice one - LMAO.  Sorry Mary, not laughing at you - Selling, General and Administrative Expenses.

BidnessMan's picture

Wow - a new way to insult a lazy person - Kudos!

akak's picture


I don't think that Twinkies as we know them will ever return.  Whomever acquires the trademark and recipe will no doubt endeavor to find a way to use cheaper methods and ingredients to manufacture them.

You mean it is possible to make Twinkies even more cheaply (read: crappy) than they already were?

P.T.Bull's picture

My thought exactly. I read an entire book on the making of a twinkie. There are no natural or healthy ingredients in twinkies. Its impossible to imagine that they can be any less quality than they are now. They will be cheaper to make due to mexican labor and mechanizing the plants, but no less quality.

mjcOH1's picture

You can get pretty good bulk rates on melamine-fortified creamy fillings in China.

knukles's picture

Monsanto will emerge as winning bidder having found the genetic modification to grow Twinkies on Kudzu vines.

andrewp111's picture

It will even be better if Monsanto can have the vines grow the plastic packaging around the Twinkies as well. That way a special breed of genetically engineered weasels can do the harvest and pack the Twinkies right into their shipping crates - all with no labor costs. Production costs could drop as low as a penny per hundred count.

mjcOH1's picture

I think the plan is possum that eat kudzu and shit twinkies.

BidnessMan's picture

Can't see Michelle allowing a bailout of Twinkies and Ding Dongs

DaveyJones's picture

All those preservatives and they couldn't save a thing

nmewn's picture

I'm not sure all the food nazis can see your humor...but I'm sure somewhere, Bloomberg is chuckling for a completely different reason ;-)

Ineverslice's picture


so much for the nuclear souvenir...didn't even make it to December 21.  

Workers, revolt! Fight for ur beloved sponge cake!

Jack Burton's picture

Oddly enough, Americans love their bakery goods. The net result of Hostess going under is other bakery companies will pick up market share and expand to meet the new demand. They will hire workers. What will the net job loss be, perhaps very small.

Americans will eat sweet baked goods, if not Hostess, then some other brand. Those brands will need to hire. Overall bakery consumption will remain where it is now and Hostess' customers will buy from others.

I never liked Hostess anyways, I buy from local bakeries. They employ people too, just like hostess.


Zgangsta's picture

It's not just the total number of jobs that needs to be considered.  These were 18,000 $22-an-hour Union jobs that were lost.  If those who lost these jobs choose to stay in the industry, they will likely be working for half the pay and half the benefits.  So if every one of these people finds a new job, that's still a loss of 9,000 Union jobs worth of purchasing power.

dark pools of soros's picture

this is what happens in a depression.. the rich cash out and let it all tumble as they go wait it all out on islands & estates.  Wars happen, some great resets occur, but quality of life bottoms out.

Management wasn't always in such power..  lots of time it was the dork that couldn't work left to do the books but they didn't make 400 times what the workers made.

return to small business and local economies is the next step after the Great Cash Out

P.T.Bull's picture

So, do you just trot out the marxist narrative no matter what the specific circumstances?

Urban Redneck's picture

Get your queer math straight.

a 400 multiple is utter BULLSHIT in this case

Al Huxley's picture

That sounds pretty fucking socialist to me - you sound like you think an economy where .01% of the population has 99.99% of the money isn't viable.  Still, I think I'm equally as pissed about the truck drivers making 130K as I am about the CEO making 2.2 million.  Hard to pick a side here.

steveo77's picture

Purchasing Power????


Give me a effen break!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!


Loss of productivity power


kaiserhoff's picture

Yes, they do employ people, and I doubt they pay bread truck drivers $2400/week.

Mary Wilbur's picture

Bakery snack consumption ought to increase jobs in the field of health care. Welcome to diabetes type 2.

Savyindallas's picture

I hope the workers lynch their union reps.

Larry Dallas's picture

Good. They're on the street. Fuck 'em.
Couldn't happen during a better time of year.

I see some news stories in the future of a crazy union member who will kidnap Mr. Hurt a la Randy Quaid in Christmas Vacation.

This is going to blow sky high and many union members are going to be testing their bosses.

cesarsp_us's picture

i thout it was the season to be jolly???

Jugdish's picture

Now the workers can stay home and collect unemployment for eternity. Everyone wins except the sheep.. I mean taxpayers.

Larry Dallas's picture

That is going to be one hell of a drop in standard of living and they are not going to stand for it.

These Union guys were all about conspicous consumption and they're not going to deal with living on entitlement and having to buy the Vizio instread of the Sony.

Keep an eye out for gold chains, pinky rings and classic American hotrods being sold on eBay/Craigslist in those cities being affected by this most.


Cheesy Bastard's picture

The article says they feel mislead by union president Mr. Hurt.  The next step in the union chain is to speak with executive vice president of the union, Mr. Torment.  The final step in the grievance process ends with Mr. Privation.

formadesika3's picture

Hurt, good name. I wonder how often these union officials are paid to take a dive. Nah... could never happen.

Al Huxley's picture

Damn, I accidentally down-arrowed you when I meant to up-arrow you.  Good one, though.

Cheesy Bastard's picture

Thanks, Al, and no problem on the down arrow.  For future reference though, you can change a down arrow by clicking the up arrow, and vice versa.  By the way, they got the run around from a guy named "Frank".  Heh.

Tom Servo's picture

Well Doug and Scott, you hitched your wagon to this team of lying sack of shit horses, and you wonder why you end up at the bottom of a ravine.  Decisions have consequences in grown-up-ville....


zorba THE GREEK's picture

Hostess products are some of the worst crap a human can consume.

They are so full of preservatives that I once found a package of Hostess

cupcakes in my glove compartment that had been there for over 6 months.

They still looked like the day I bought them. I threw them out and never

purchased another Hostess product since. If you eat enough of them, you

won't need to be embalmed when you die. Hostess going out of business

is a good thing for the public. Maybe now their laid off employees will find

some honest, productive work. I also look forward to the day that all the

casino workers lose their jobs.