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Twinkie-Maker Hostess Fires 18,000 People: Blames Long-Suffering Workers - Keith Millea - 17-11-2012
The Vultures want your twinkies....:phone:
Published on Saturday, November 17, 2012 by In These Times
Twinkie-Maker Hostess Fires 18,000 People: Blames Long-Suffering Workers
by Bruce Vai
On Friday, the owners of Hostess Brandsthe company that makes widely recognized baked goods such as Twinkies and Wonder Breadmade good on a longstanding threat to close down operations, eliminating as many as 18,000 jobs.Hostess Brands is blaming its liquidation on this week's strike, by workers such as these in Schiller Park, Ill. The company's financial woes, however, are years old.
Company spokesperson Lance Ignon told Working In These Times that some 22 bakeries around the nation completed their last production runs early on Friday morning, while delivery drivers finished their final routes this afternoon. The company has no plans to resume operations.
In a statement, Hostess CEO Greg Rayburn blamed the shutdown on a strike this week by the Bakery, Confectionery, Tobacco Workers and Grain Millers International Union (BCTGM).
However, his scapegoating of the union obscures a larger and more complicated story of corporate mismanagement and naked greed. In fact, the company has been in severe financial distress for more than a decade, management has been in disarray, and vulture capitalists have been circling in search of financial prey.
Hostess might be considered an "old economy" company in the sense that it manufactured, produced and marketed popular cakes to a mass market. In its newest incarnationunder the slicker, greedier sensibility of Wall St.it is something else altogether.
Hostess claims that a BCGTM strike begun on November 9 was the company's undoing. The strike started at four scattered Hostess plants and spread across the country, forcing 11 bakery closures, according to Ignon.
The union, however, notes that the strike came only after months of fruitless contract negotiations and the imposition by Hostess of "draconian cuts" to wages and benefits. Prior to that, employees of Hostess were working under reduced incomes for almost 10 years. From 2004 to 2008 the company, then called Interstate Bakeries, went through a Chapter 11 bankruptcy in which all union workers took forced cuts.
BCTGM President Frank Hurt was not available for comment on today, but told Working In
These Times earlier this week that the BCGTM strike was the "tragic" result of the company's ill-conceived plan to bust the unions, dismember the company and sell off the pieces to highest bidders. Hostess managers have made clear that they care little for the hardships imposed on the workers, Hurt said, leaving the union no choice but to strike in hopes of the bringing the company back to the bargaining table.
Hurt has made other comments over the last three months in which he made clear that he believes the owners of the company have no real desire to return the ailing Hostess to profitability. Rather, they want to strip the company of its valuable assets while discarding the long-term employees and financial liabilities.
Hostess confirmed at least part of Hurt's analysis on Friday when the company also announced it wants to move quickly to sell its bakeries, distributions facilities, retail outlets and "popular brands."
According to an article in Friday's Kansas City Business Journal, that means the company will sell brand names such as Hostess, Twinkies, Wonder Bread, Ding Dongs and Ho Hos. Food industry analyst John Stout Jr. believes such sales would allow other businesses to resume profitable manufacturing of these products in other facilities.
Such a plan will require the approval of Judge Robert Drain of the U.S. Bankruptcy Court for the Southern District of New York. Hostess filed a Chapter 11 bankruptcy petition in Judge Drain's court early this year, and under bankruptcy law most major business decisions at Hostess require his approval. Indeed, the imposition of the brutal wage and benefit cuts on BCTGM members was specifically approved by Judge Drain in October.
Hostess spokesperson Ignon said the company plans to be back in Judge Drain's court next week to seek his okay for measures to further wind down operations. Hostess will not seek a formal conversion to a Chapter 7 liquidation proceeding, but rather a continuation of the status quo, in which the current owners and managers maintain control of the company, he said.
Whatever happens in Judge Drain's bankruptcy court next week, an estimated 18,000 Hostess workers will have no job to return to Monday.
The company has been maintaining a payroll of 18,300 to 18,500 workers, Ignon says, and most were laid off Friday. An undetermined number of managerial and administrative workers will be retained for the immediate future, he adds, but it is too early to give exact numbers.
About 5,000 BCTGM workers will lose their jobs, along with 7,500 members of the International Brotherhood of Teamsters and hundreds of members of ten other unions representing smaller sectors of the Hostess workforce.
CEO Rayburn's Friday statement made no mention of any assistance that the company plans to offer the newly jobless employees.
© 2012 In These Times
http://www.commondreams.org/view/2012/11/17-9
Twinkie-Maker Hostess Fires 18,000 People: Blames Long-Suffering Workers - Keith Millea - 17-11-2012
Weekend Edition November 16-18, 2012
"The Best Darn-Tootin' Idea I Ever Had...."
Behind the Twinkie Defense
by PAUL KRASSNER
The apparent demise of the Twinkie brings back memories for me . . .
A dozen police cars had been set on fire, which in turn set off their alarms, underscoring the angry shouts from five thousand understandably angry gays. This was in 1979. I had been covering the trial of Dan White for the San Francisco Bay Guardian. The ex-cop had confessed to killing Mayor George Moscone and Supervisor Harvey Milk.
Dale Metcalf, a former Merry Prankster who had become a lawyer, told me how he happened to be playing chess with a friend, Steven Scherr, one of White's attorneys. Metcalf had just read Orthomolecular Nutrition by Abram Hoffer. He questioned Scherr about White's diet and learned that, while under stress, White would consume candy bars and soft drinks. Metcalf recommended the book to Scherr, suggesting the author as an expert witness. After all, in his book, Hoffer revealed a personal vendetta against doughnuts, and White had once eaten five doughnuts in a row.
Hoffer didn't testify, but his influence permeated the courtroom. White's defense team presented that bio-chemical explanation of his behavior, blaming it on compulsive gobbling down of sugar-filled junk-food snacks. Psychiatrist Martin Blinder testified that, on the night before the murders, White "just sat there in front of the TV set, binging on Twinkies." Another psychiatrist stated, "If not for the aggravating fact of junk food, the homicides might not have taken place."
In my notebook, I scribbled "Twinkie defense," and wrote about it in my next report. On the 25th anniversary of that double execution, the San Francisco Chronicle reported that, "During the trial, no one but well-known satirist Paul Krassner who may have coined the phrase Twinkie defense' played up that angle." And so it came to pass that a pair of political assassinations was transmuted into voluntary manslaughter.
And I got caught in the post-verdict riot. The police were running amuck in an orgy of indiscriminate sadism, swinging their clubs wildly and screaming, "Get the fuck outta here, you fuckin' faggots, you motherfuckin' cocksuckers!" I was struck with a nightstick on the outside of my right knee and I fell to the ground. Another cop came charging at me and made a threatening gesture with his billy club. When I tried to protect my head, he jabbed me viciously on the exposed right side of my ribs. Oh, God, the pain! The dwarf in the clown costume had finally caught up with me, and his electric cattle prod was stuck between my ribs.
At the hospital, X-rays indicated that I had a fractured rib and pneumothorax, a punctured
lung. The injuries affected my posture and my gait, and I gradually began to develop an increasingly unbalanced walk, so that my right foot would come down hard on the ground with each step. My whole body felt twisted, and my right heel was in constant pain.
I limped the gamut of therapists from an orthodox orthopedic surgeon who gave me a shot of cortisone in my heel to ease the pain, to a specialist in neuromuscular massage who wondered if the cop had gone to medical school because he knew exactly where to hit me with his billy club, to a New Age healer who put one hand on my stomach, held the receptionist's hand with the other, and she asked her whether I should wear a brace. The answer was yes. I decided to get a second opinion perhaps from another receptionist.
* * *
In court, White just sat there in a state of complete control bordering on catatonia, as he listened to an assembly line of psychiatrists tell the jury how out of control he had been. One even testified that, "If not for the aggravating fact of junk food, the homicides might not have taken place."
![[Image: confessionskrassner.jpeg]](http://www.counterpunch.org/wp-content/uploads/2012/01/confessionskrassner.jpeg)
* * *
The Twinkie was invented in 1930 by James Dewar, who described it as "the best darn-tootin' idea I ever had." He got the idea of injecting little cakes with sugary cream-like filling and came up with the name while on a business trip, where he saw a billboard for Twinkle Toe Shoes. "I shortened it to make it a little zippier for the kids," he said.
In the wake of the Twinkie defense, a representative of the ITT-owned Continental Baking Company asserted that the notion that overdosing on the cream-filled goodies could lead to murderous behavior was "poppycock" and "crap"apparently two of the artificial ingredients in Twinkies, along with sodium pyrophosphate and yellow dyewhile another spokesperson for ITT couldn't believe "that a rational jury paid serious attention to that issue."
Nevertheless, some jurors did. One remarked after the trial that "It sounded like Dan White had hypoglycemia." Doug Schmidt's closing argument became almost an apologetic parody of his own defense. He told the jury that White did not have to be "slobbering at the mouth" to be subject to diminished capacity. Nor, he said, was this simply a case of "Eat a Twinkie and go crazy."
When Superior Court Judge Walter Calcagno presented the jury with his instructions, he assured them access to the evidence, except that they would not be allowed to have possession of White's gun and his ammunition at the same time. After all, these deliberations can get pretty heated. The judge was acting like a concerned schoolteacher offering Twinkies to students but withholding the cream-filling to avoid any possible mess.
Each juror originally had to swear devotion to the criminal justice system. It was that very system which had allowed for a shrewd defense attorney's transmutation of a double political execution into the White Sugar Murders. On the walls of the city, graffiti cautioned, "Eat a TwinkieKill a Cop!"
In 1983, the San Francisco Chronicle published a correction: "In an article about Dan White's prison life, Chronicle writer Warren Hinckle reported that a friend of White expressed the former supervisor's displeasure with an article in the San Francisco Bay Guardian which made reference to the size of White's sexual organ. The Chronicle has since learned that the Bay Guardian did not publish any such article and we apologize for the error."
It was ten feet long, 3 feet 6 inches high, 3 feet 8 inches wide, and weighed more than a tonno, not Dan White's penisthe world's largest Twinkie, which was unveiled in Boston. And on the 50th anniversary of the Twinkie, inventor Dewar said, "Some people say Twinkies are the quintessential junk food, but I believe in the things. I fed them to my four kids, and they feed them to my fifteen grandchildren. Twinkies never hurt them."
* * *
When the jurors walked into court to deliver the verdict, they appeared somber, except for a former cop, who smiled and triumphantly tapped the defense table twice with two fingers as he passed by, telegraphing the decision of voluntary manslaughter. White would be sentenced to seven years in prison.
In January 1984, he was paroled after serving a little more than five years. The estimated shelf life of a Twinkie was seven years. That's two years longer than White spent behind bars. When he was released, that Twinkie in his cupboard was still edible. But perhaps, instead of eating it, he would have it bronzed.
He called his old friend, Frank Falzonthe detective who had originally taken his confessionand they met.
"I hit him with the hard questions," Falzon recalled. "I asked him, What were those extra bullets for? What did happen?'"
"I really lost it that day," White replied.
"You can say that again," Falzon said.
"No. I really lost it. I was on a mission. I wanted four of them."
"Four?" Falzon asked.
"Carol Ruth Silvershe was the biggest snake of the bunch." (Silver realized that she might have been his third victim had she not stayed downstairs for a second cup of coffee that morning.) "And Willie Brown. He was masterminding the whole thing."
While White had been waiting to see Moscone in the anteroom of his office, the mayor was drinking coffee with Brown, chatting and laughing. Moscone told Brown that he had to see White, and Brown slipped out the back door just as Moscone was letting White in the front way. Thirty seconds later, White killed Moscone. The Marlboro cigarette in Moscone's hand would still be burning when the paramedics arrived.
White hurriedly walked across a long corridor to the area where the supervisors' offices were. His name had already been removed from the door of his office, but he still had a key. He went inside and reloaded his gun. Then he walked out, past Supervisor Dianne Feinstein's office. She called to him, but he didn't stop. "I have to do something first," he told her, as he headed for Milk's office.
George Moscone's body was buried, and Harvey Milk's body was cremated. His ashes were placed in a box, which was wrapped in Doonesbury comic strips, then scattered at sea. The ashes had been mixed with bubble bath and two packets of grape Kool-Aid, forming a purple patch on the Pacific Ocean. Harvey would've liked that touch.
On the 25th anniversary of the twin assassination, the San Francisco Chronicle stated that I reported: "'I don't think Twinkies were ever mentioned in testimony,' said chief defense attorney Douglas Schmidt, who recalls HoHos and Ding Dongs,' but no Twinkies.'" Apparently, he forgot that one of his own psychiatric witnesses, Martin Blinder, had used the T-word.
Blinder now complains, "If I found a cure for cancer, they'd still say I was the guy who invented the Twinkie defense.'"
The Chronicle also quoted Steven Scherr about the Twinkie defense: "'It drives me crazy,' said co-counsel Scherr, who suspects the simplistic explanation provides cover for those who want to minimize and trivialize what happened. If he ever strangles one of the people who says Twinkie defense' to him, Scherr said, it won't be because he's just eaten a Twinkie."
Scherr was sitting in the audience at the campus theater where a panel discussion of the case was taking place. I was one of the panelists. When Scherr was introduced from the stage, I couldn't resist saying to him on my microphone, "Care for a Twinkie?"
In October 1985, Dan White committed suicide by carbon monoxide poisoning in his garage.
He taped a note to the windshield of his car, reading, "I'm sorry for all the pain and trouble I've caused."
I accept his apology. I got caught in the post-verdict riot and was beaten by a couple of cops. The injuries affected my posture and twisted my gait. I gradually developed an increasingly strange limp and I now walk with the aid of a cane. At the airport, I'm told by security to put my cane on the conveyor belt along with my overnight bag and my shoes, but then I'm handed an orange-colored wooden cane to enable me to walk through the metal detector. You just never know what could be hidden inside a cane.
[B]
Paul Krassner[/B] publishes the infamous Disneyland Memorial Orgy poster. His latest book is an expanded and updated edition of his autobiography, Confessions of a Raving, Unconfined Nut: Misadventures in the Counterculture, available at paulkrassner.com and as a Kindle e-book. He is a contributor to Hopeless: Barack Obama and the Politics of Illusion, forthcoming from AK Press.
http://www.counterpunch.org/2012/11/16/behind-the-twinkie-defense/
Twinkie-Maker Hostess Fires 18,000 People: Blames Long-Suffering Workers - Peter Lemkin - 18-11-2012
Loved the Krassner story! Twinkies for those of you who are not American is the KING of Junk Foods in the USA. Ingredients are: Enriched wheat flour, sugar, corn syrup, niacin, water, high fructose corn syrup, vegetable and/or animal shortening containing one or more of partially hydrogenated soybean, cottonseed and canola oil, and beef fat, dextrose, whole eggs, modified corn starch, cellulose gum, whey, leavenings (sodium acid pyrophosphate, baking soda, monocalcium phosphate), salt, cornstarch, corn flour, corn syrup, solids, mono and diglycerides, soy lecithin, polysorbate 60, dextrin, calcium caseinate, sodium stearoyl lactylate, wheat gluten, calcium sulphate, natural and artificial flavors, caramel color, yellow No. 5, and red #40. [Red #40 being a suspect carcinogen, many of those chemicals not very healthy, and there being so much saturated fat in them that a few are pretty bad for one]. However, I do feel for the employees.....a dying breed in the USA....no doubt they will now be made in Mexico and imported.
Twinkie-Maker Hostess Fires 18,000 People: Blames Long-Suffering Workers - Magda Hassan - 18-11-2012
Everything You (Probably) Didn't Know About the Hostess Brands® Story
NOVEMBER 17, 2012 1:49 PM7 COMMENTSVIEWS: 42992Hostess Brands, Inc., maker of the iconic Twinkie, announced yesterday that it would be closing and selling off assets due to a failure to come to an agreement with striking bakers. This announcement has prompted the usual amount of hand wringing and anti-union attacks in the media. However, lost in most of the stories and commentaries is how Hostess came to this point. It is a story of ongoing incompetence and greed.
A Brief Company History
Hostess Brands was founded in Kansas City in 1930 as Interstate Bakeries Corporation. The company grew over the next thirty years through a series of mergers and acquisitions, and in 1969 the company changed its name to Interstate Brands. In 1975 Interstate Brands was purchased by Data Processing Financial and General Corporation (DPF). DPF was a computer leasing company that had decided to change business models due to the IBM antitrust suit. While under DPF management the corporation continued to expand, acquiring more brands and investing substantial sums in plant expansion. After DPF finished the sale of its computer assets it changed the name of the company back to Interstate Baking in 1981. Expansion continued throughout the 1980′s and in 1987 management decided to change from a public to a private company, renaming it IBC Holdings.
Interstate Bakeries reemerged as a public company in 1991, and in 1995 it merged with Continental Brands. Thanks to the merger, Interstate was in control of two major bread lines: Butternut and Wonder. Due to the perishable nature of bread the company operated over 60 bakeries, so that none of their delivery trucks had to drive very far. After enzymes designed to extend the shelf life of bread appeared, the company hoped to turn the network of small bakeries into a more efficient operation consisting of a few large bakeries. Problems soon developed, as the new enzymes caused the bread to have a different texture and taste than what customers were used to. At about the same time the snack cake operation saw declining sales, which the company blamed on the popularity of new "low carb" diets such as the Atkins Diet.
2004: Bankruptcy #1
On September 22, 2004 Interstate Bakeries filed for Chapter 11 bankruptcy. While the company blamed declining sales on waning consumption of its various snack cakes, observers had a different opinion. Janet Adamy, writing in the Wall Street Journal on September 23, 2004, suggested the problem was largely to do with the failed experiment to extend shelf life:
When applied to bread, a new process sometimes produced loaves that were gummy and doughy. Reduced frequency of deliveries, one of the hoped-for benefits of the plan, meant retailers' shelves could grow disheveled. Hopes that the program would save money through plant closings didn't match Wall Street's expectations.
Interstate CEO, James R. Elsesser, resigned and was replaced with Tony Alvarez, a restructuring expert. The company announced that it had received $200 million of "debtor in possession"financing from J.P. Morgan Chase to allow it to continue operations during restructuring. Alvarez insisted that "industry pressures" and not the failed attempt at extending the shelf life of its products was at the root of the company's problems. Adamy disagreed, citing several contributing factors in her WSJ article:The dark view of carbs in some popular diets certainly didn't help. Yet this could hardly have been the whole story. A giant bread-making competitor of Interstate, Flowers Foods Inc., of Thomasville, Ga., has managed to post sales gains of about 5% in recent quarters, along with similarly robust earnings.
Interstate's sales, meanwhile, were easing slightly in the roughly two years it was rolling out its extended-shelf-life program. Interstate had a loss of $25.8 million for the fiscal year ended May 29, compared with $69.8 million in profits two years earlier.
A heavy debt load $748 million has been one problem. The company said in June it would take a $40 million charge against earnings to boost its workers' compensation fund, after higher costs in California and rising health-care expenses totaled more than expected for fiscal 2004. In July, Interstate said the Securities and Exchange Commission had begun an informal inquiry related to its workers' compensation reserves.
Some analysts blamed former chairman Elsesser for the company's problems, saying that Interstate should have concentrated on marketing and increased sales rather than cost cutting. Elsesser brought to Interstate a reputation for cost cutting from his time at Ralston Purina, and it was suggested in some quarters that he failed to spend enough time on product development. For example, Interstate did not introduce a high quality multi-grain breadone of the industry's hottest productsuntil spring 2004, which put it well behind its competition. During the bankruptcy period Interstate closed nine of its remaining 54 bakeries, as well as more than 300 "outlet" stores. It reduced its workforce from 32,000 to 22,000 employees.Interstate's sales, meanwhile, were easing slightly in the roughly two years it was rolling out its extended-shelf-life program. Interstate had a loss of $25.8 million for the fiscal year ended May 29, compared with $69.8 million in profits two years earlier.
A heavy debt load $748 million has been one problem. The company said in June it would take a $40 million charge against earnings to boost its workers' compensation fund, after higher costs in California and rising health-care expenses totaled more than expected for fiscal 2004. In July, Interstate said the Securities and Exchange Commission had begun an informal inquiry related to its workers' compensation reserves.
2009: Reorganization and Givebacks
Interstate emerged from Chapter 11 in February 2009, announcing that it had put together financing to come out of bankruptcy as a stand alone company. According to a Business Courier article dated February 4, 2009
IBC had financing commitments from IBC Investors I LLC, an affiliate of private equity firm Ripplewood Holdings LLC, which was to provide $130 million of capital $44.2 million for 4.42 million shares and $85.8 million in new fourth-lien convertible secured notes. Other commitments were for a $125 million revolving loan with General Electric Capital Corp. and GE Capital Markets Inc. and a $344 million term loan-secured credit facility with Silver Point Finance LLC and Monarch Master Funding Ltd.
All of Interstate's 423 union locals approved revised labor agreements in connection with the reorganization. In a press release new CEO Craig Jung saidI want to thank IBC's employees for the sacrifices they have made and our union leaders for their commitment to our company and saving jobs. Their actions made possible the financing required to execute a business plan that will build competitive advantage and secure our company's future.
Included in the financing deal was a provision that two executives affiliated with Ripplewood Holdings, John Cahill and Greg Murphy, get seats on Interstate's board. Ripplewood officials announced that they were happy with the financing arrangement and that they intended to use the company's snack cake lines as a starting point for future success. As of November 2, 2009, the company was renamed Hostess Brands. In June 2010 CEO Jung left the company and was replaced by Brian Driscoll, who had previously held top management positions at several other food producers, including Kraft and Nabisco.2011: Bankruptcy #2
Rumors began in late 2011 that the company was again preparing a Chapter 11 filing. The New York Post reported on December 22 of last year that the main issue was union pension plans: The company was saying that it could not keep current on its $700 million loan and continue contributing to the plans. Hostess had been in violation of its union contracts since August 2011 by not making pension plan contributions. But the pension plan contributions were only part of the problem. Even with the savings realized by not adding its required contributions to the plan, the company was still short of money. Ripplewood officials stated that they would not invest more money in the company without significant union concessions. According to the Post article, a Hostess worker said
We understand that, should we pursue some form of legal action to require the company to live up to the terms of the contract, they may close, but we have come to believe that they will close anyway.
We believe the company is poorly managed and the only hope is a complete change in management.
As of the beginning of 2012, as reported in the Wall Street Journal, the company was carrying more than $860 million in debt and was facing a serious cash flow problem due to "high labor costs and rising prices for sugar, flour, and other ingredients." Hostess also owed more than $50 million to vendors who wanted payments on a shortened time frame due to the financial troubles of the company. The WSJ article also reported that Hostess was finding it hard to attract consumers due to a lack of offerings in the whole grain and multi grain bread categories. Another problem for the baker was that it had historically kept prices high, which made it difficult to charge more for its products and still remain competitive as expenses rose. Hostess filed for Chapter 11 bankruptcy protection a second time on January 10, 2012.We believe the company is poorly managed and the only hope is a complete change in management.
Another Wall Street Journal story, from April 2 of this year, relates the sacrifices that Hostess employees had made due to the company's first bankruptcy.
Luigi Peruzzi has been delivering Twinkies and Ding Dongs to gas stations and grocery stores in Detroit for 25 years. When his employer, Hostess Brands Inc., was in bankruptcy court in 2009, Mr. Peruzzi agreed to give up half his weekly base pay, going to $100 a week from about $209, forcing him to depend more on his commissions. The Hostess driver was told the sacrifices were needed to make the company thrive.
This past spring Hostess proposed a salary freeze for union workers that would save it an estimated $6.1 million a year through 2015a proverbial "drop in the bucket" compared to the company's overall debt burden. Unions balked at the freeze, noting that Hostess had "failed to innovate and pursued failing strategies." Hostess's Teamsters workers president Dennis Raymond observed that he wanted to be sure that "sacrifices are not made in vain again due to mismanagement."Pay Increases…For Some…As the Company Slowly Goes Under
As the company was asking for more givebacks from workers, a group of creditors said in court papers that the company "may have manipulated its executives' salaries higher in the months leading up to its Chapter 11 filing," again according to the WSJ. According to the creditors' court filing, the following Hostess executives saw substantial salary increases in July 2011:
- Brian Driscoll, CEO, from around $750,000 to $2,550,000
- Gary Wandscheider, EVP, $500,000 to $900,000
- John Stewart, EVP, $400,000 to $700,000
- David Loeser, EVP, $375,000 to $656,256
- Kent Magill, EVP, $375,000 to $656,256
- Richard Seban, EVP, $375,00o to $656,256
- John Akeson, SVP, $300,000 to $480,000
- Steven Birgfeld, SVP, $240,000 to $360,000
- Martha Ross, SVP, $240,000 to $360,000
- Rob Kissick, SVP, $182,000 t0 $273,008
A Hostess spokesman, in reply to the creditors' filing, responded that the executives' salaries were increased at a routine compensation review "to align them with industry standards and because the executives were being asked to take on significant additional responsibilities associated with trying to restructure the company outside of bankruptcy proceedings." All this while asking workers such as Mr. Peruzzi, a 47 year old father of three, who, according to the WSJ article grossed about $51,000 last year, to take further pay and benefit cuts.
What Went Wrong
Critics point to a number of failures at Hostess. Again, according to the Wall Street Journal:
Hostess kept a lot of debt on its books$774 million in secured obligations when it exited Chapter 11 the first timeand didn't anticipate the depth of the recession or that commodity prices would spike, combining to crimp sales, according to court documents and people close to Hostess.
Hostess was slow to update old production systems and keep pace with competitors offering newer, healthier foods, in part because of its inability to invest.
Hostess posted an unaudited loss of about $341 million on roughly $2.5 billion in sales in the year ended last May. Though Americans are keen to talk about Twinkieswhich have gained an aura of mythical, if kitschy, indestructibilitythey seemed less interested in eating them. Unit sales of the snack were flat in the 52 weeks ending Feb. 19, according to SymphonyIRI Group, a Chicago-based market research firm.
To appeal to more health-conscious Americans, Hostess launched a line of whole-grain breads called Nature's Pride that the company says has been selling well, but it is a small product line compared with rival offerings.
In February Hostess had asked the bankruptcy judge to approve a new compensation package for CEO Driscoll. Part of the proposed package provided for Driscoll to receive severance pay of up to $1.95 million should Hostess liquidate or should he be fired without cause, providing he honored a noncompete clause. This package was on top of the salary increase that Driscoll had received the previous July. In March of 2012 Driscoll resigned, and was replaced by Gregory Rayburn, a restructuring/turnaround specialist who had been with the company only nine days. In order to appease unions, who were reportedly upset with Driscoll's compensation package, Rayburn cut the salaries of the top four executives to $1, to be restored at the beginning of the year.Hostess was slow to update old production systems and keep pace with competitors offering newer, healthier foods, in part because of its inability to invest.
Hostess posted an unaudited loss of about $341 million on roughly $2.5 billion in sales in the year ended last May. Though Americans are keen to talk about Twinkieswhich have gained an aura of mythical, if kitschy, indestructibilitythey seemed less interested in eating them. Unit sales of the snack were flat in the 52 weeks ending Feb. 19, according to SymphonyIRI Group, a Chicago-based market research firm.
To appeal to more health-conscious Americans, Hostess launched a line of whole-grain breads called Nature's Pride that the company says has been selling well, but it is a small product line compared with rival offerings.
In July, David Kaplan, writing on CNNMoney/Fortune.com observed:
But in truth there are no black hats or white knights in this tale. It's about shades of gray, where obstinacy, miscalculation, and lousy luck connived to create corporate catastrophe. Almost none of the parties involved would speak on the record. Still, it's clear from court documents and background interviews with a range of sources that practically nobody involved can shoot straight: The Teamsters remain stuck in a time warp, unwilling to sufficiently adapt in a competitive marketplace. The PE firm failed to turn Hostess around after taking it over. The hedgies can't see beyond their internal rates of return. Et cetera, et cetera, et cetera.
The Beginning Of the EndAlso in July, the New York Post reported that Hostess and the Teamsters were close to a deal. Under the terms of the proposed deal, the company would continue its contributions to the pension plans, and workers would agree to substantial pay and benefit cuts. The article quoted a Brooklyn Hostess delivery driver who said
"I am not taking another hit…I am making about $65,000. That is the same as I was making 10 years ago."
He pointed to a Stroehmann's bread truck driver delivering to the same supermarket who he said gets a guaranteed $300 a week compared to his $195 and earns much more in commissions.
This month the 6,600 Hostess employees who are members of the Bakery, Confectionery, Tobacco Workers and Grain Millers' International Union voted to strike after the latest contract proposal from Hostess was rejected by 92% of its membership. Hostess management issued the following statement:He pointed to a Stroehmann's bread truck driver delivering to the same supermarket who he said gets a guaranteed $300 a week compared to his $195 and earns much more in commissions.
A widespread strike will cause Hostess brands to liquidate if we are unable to produce or deliver products. If that's the case, the company will move promptly to lay off most of its 18,300-member workforce and focus on selling its assets to the highest bidders. We urge our employees to remain on the job to rebuild the company.
In response to the strike, Hostess announced on November 16 that it would be laying off most of its 18,500 employees and liquidating its assets. In order to do so, it will require the approval of U.S. Bankruptcy Court Judge Robert Drain. Consumers who may be fretting about the loss of their Twinkies, Ho Ho's, Wonder Bread and other brands will probably not have to do without them for too long, as it is expected that other companies will be willing to purchase them from Hostess.What We Learned
In recent days a variety of pundits and news sources have laid the blame for Hostess's demise squarely at the feet of unions and their contracts. But a close examination reveals that were the workers to agree to work for free the company would probably not have survived; all the strike did was hasten the inevitable. Those on the right are quick to point to "greedy unions" in these situations, but it must be pointed out that in collective bargaining both sides come to an agreement that they believe that everyone can live with. Unions represent the wishes of their members, and it is only human nature to ask for as much as they can get in negotiations. Companies have the responsibility to share accurate financial information with the unions, and should draw a line in the sand when the unions ask for more than the company feels it can comfortably provide. No matter whether you are talking about a $50,000 a year employee or a $5,000,000 CEO, people get used to living on the salary they receive, and asking workers to give back substantial amounts of pay and benefits not once, but twice in a period of less than ten years while at the same time boosting executive salaries is not the way to achieve a good and peaceful relationship with labor.
Hostess workers were not asking for more; like many other workers in many similar situations in recent times they were merely trying to hold onto what they had. It was not the fault of the workers or their unions that Hostess suffered from years of inept management and failed ideas, but now their jobs are gone and they are left holding the blame.
http://dailynewsfinder.com/2012/11/17/everything-you-probably-didnt-know-about-the-hostess-brands-story/