Hope for Twinkies as Hostess, union go to mediation

(Moneywatch) There may still be hope for consumers shut out of last week's great Twinkie binge: Hostess Brands and the Bakery, Confectionery, Tobacco Workers and Grain Millers International Union have agreed to mediation following some prodding by a Federal judge.

Last Friday morning Hostess announced it was planning to wind down operations because it could not come to terms with the union. This sparked consumer frenzy across the nation. Stores from Seattle to New York reported customers emptying the shelves as they bought boxes of the iconic "Golden Sponge Cake with Creamy Filling" by the armful.

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Hostess, which also makes Wonder Bread and other baked goods, said it had to shut down because it didn't have the finances to weather an extended nationwide strike by workers. The strikes began after Hostess imposed a contract cutting workers' wages by 8 percent. The union said the contract also cut benefits by 27 percent to 32 percent.

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Twinkies not going away just yet

Yesterday U.S. Bankruptcy Court Judge Robert Drain said the parties hadn't gone through the critical step of mediation and asked them to do so. He added pressure on the union by pointing out that it had rejected the company's contract even though it never filed an objection to it.

"Many people, myself included, have serious questions as to the logic behind this strike," said Judge Drain. "Not to have gone through that step leaves a huge question mark in this case."

Under the bankruptcy plan filed by the company, 19 corporate officers and high-level managers will receive $1.75 million in bonuses for carrying out the shutdown.

This and other parts of the liquidation plan have drawn criticism from U.S. Bankruptcy Trustee Tracy Hope Davis. In a court filing, Davis attacked provisions that would "grant bonuses to insiders" and "cherry-pick" which administrative claims get paid. She wrote that the case should be converted from a reorganization to a Chapter 7 procedure. If that were to happen a bankruptcy trustee would liquidate Hostess and distribute the assets in accordance with the U.S. Bankruptcy Code priority scheme.

Many of the executives getting bonuses received substantial pay raises earlier this year, within months of the company originally filing for bankruptcy. The salary of the CEO Gregory Rayburn tripled from $750,000 to roughly $2.5 million, and at least nine other executives received pay raises ranging from $90,000 to $400,000.

Even if the company does go out of business, Twinkies and other popular brands will almost certainly return to store shelves soon. The company says several potential buyers have expressed interest in the brands. Although sales have been declining in recent years, Hostess still does about $2.5 billion in business each year. Twinkies sales alone have brought in $68 million so far this year.

[klh2000]

Well. I''d tell anyone wanting to buy Twinkies or anything else. Offer little and give less. Seems management already took their cut for the demise of this company. And all the little guys who did the work got very little in return.

[rcentros]

Gee, the "host is dying" -- so the management has rewarded their incompetence with huge raises and bonuses. And, somehow, it's the union members who are the "parasites" even though they won't accept a big wage drop. No offense, but your talking points need a reality check.

[midnightrideriam]

I guess upper management what's to go back to the glory days
where they were free to do anything that wanted to workers. Like Carnegie did to his workers, Carnegie (steel) wanted to cut expense for one reason and only for one reason he wanted more money than J.P. Morgan so he made his workers work 12 hours a day 7 days a week for the same pay when they only had to work 5 days a week for 8 hours.

This is a perfect example of upper management thinking it's their divine right that most all the money the company makes goes to them and not the people whom help make the company.

It not the union fault that upper management increase their pay
30-80 % while everyone else took not only a pay cut but a benefit cut, so basically upper management keep on spending while everyone else cut expenses. no wonder upper management increase their dept 2 fold

[TonyP44]

Too delicious to fall

Hostess's fall is a bad for capitalism, at least our style of capitalism. Too many blames to go around. First, the management (and the hedge fund managers) did not update their products to meet the trend of the market.

* Unions are out-of-touch. If your patient is dying, you do not want to shake him hard violently. You need to have plan B when you're bluffing. All in with bad cards is just dumb. It is just common sense.

They're parasites and they will die too when their host is dead. The dream of owning the company will remain to be dream that they never want to wake up from.

* The workers are really dumb to let their master manipulate them until they lose out big time. Do you think you can protest and win in this kind of economy and the shaky state of the company? Another common sense.

* The politicians will not bail them out especially it is long past the election. This time they cannot b uy votes by blaming China, as these jobs can't be outsourced (unless you want to buy your Wonder bread shipped from China). Hence, even if it were before the election, the government will not bail you out for 'too delicious to fall'.

It is a lose-lose-lose (management-unions-workers) situation and only stupid folks will get into this situation.

Additional comments:
---------
As of 11/2012, I expect that a buyer(s) will buy the company (at least the well-known brands) and will save about 25% of the jobs and most likely with a clause to get rid of the unions (unless the new buyer does not learn from history). The new factory workers will be making 20K working for 28 hours week, so they will not be eligible for any medical insurances and other full-time benefits. Hence, unemployment benefits and welfare are not a bad tradeoff.

It is a tough world out there. Be realistic and check who's hiring for similar jobs that pay $50K with benefits. Do not waste your time and energy to ask for the same compensation for your next jobs.

------
Will the following be considered as insider's trading?

Say, I have prior knowledge that it is going to bankrupt. I buy the entire stocks of the goodies that can last longer, and sell them on eBay for $10,000 each. The fortune is small, but it is better than protesting in the cold for nothing to gain.


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There are other 75 similar articles:
http://ebtonypow.blogspot.com/2012/08/a-nation-of-no-losers.html

[spoozbiscuit]

If you look into it, you will see it wasn't the unions that were the parasites here, it was the vulture capitalists who loaded the company up with debt and extracted exorbitant pay packages.

"In short: The smart money guys larded Hostess with too much debt and never figured out a real plan for fixing its business. They're coming out with a loss as a result. As far as the unions go: You can blame them for not making enough concessions. You can blame the bakers for administering the final death blow. But you can't blame them for management's strategic incompetence or the decision to try to run a flailing company on debt, hope and empty calories. There's more than enough blame in this story for everyone involved to have a taste."

http://www.theatlantic.com/business/archive/2012/11/whos-to-blame-for-the-hostess-bankruptcy-wall-street-unions-or-carbs/265357/