"Union bosses" and "Wall Street vultures" blamed for Hostess' demise

People are shown standing in the parking lot at the Utah Hostess plant in Ogden, Utah, Nov. 15, 2012.
AP Photo/Rick Bowmer

In this highly politicized day and age, even a Twinkie can turn into a political football.

When Hostess announced it was going out of business, citing a labor strike that limited production and distribution of the company's products, a conservative group called Americans for Limited Government was quick to pin the blame.

The group said in a press release that "you can almost hear the union bosses...gleefully celebrating the destruction of one of America's most enduring brands." That claim came despite the fact that these "union bosses" are presumably among the 18,500 workers who are being laid off from the company.

"More than 18,000 workers are unemployed today because of the greed and short-sidedness of labor bosses and their followers who have chosen to destroy their own jobs rather than make concessions that would allow the company to survive," said Bill Wilson, president of Americans for Limited Government. "It is common for parasites to kill their hosts, but it rarely happens in a way where so many people can see it."

Meanwhile the president of the AFL-CIO, Richard Trumka, released a statement calling the closure "a microcosm of what's wrong with America, as Bain-style Wall Street vultures make themselves rich by making America poor." Bain Capital is the asset management company founded by former Republican presidential nominee Mitt Romney that invested in faltering companies.

"Crony capitalism and consistently poor management drove Hostess into the ground, but its workers are paying the price," he said. "These workers, who consistently make great products Americans love and have offered multiple concessions, want their company to succeed. They have bravely taken a stand against the corporate race-to-the-bottom. And now they and their communities are suffering the tragedy of a needless layoff."

According to CNBC, the forces most responsible for Hostess' decision to close are "two hedge funds that control hundreds of millions of Hostess debt and which have finally decided they won't squeeze any more filling into the Twinkie." It is not clear that Hostess would have lasted this long without such investors: Hostess has faced struggles to maintain market share as Americans' appetites have moved away from junk food and competition has increased, and the company sought bankruptcy in 2004 and again in January. Hostess' debt was most recently purchased by the two funds, Silver Point and Monarch, which generally buy corporate debt at discounts in hopes of turning companies around.

While Hostess had reached an agreement with its largest union, the International Brotherhood of Teamsters, it could not come to an agreement with the Bakery, Confectionery, Tobacco Workers and Grain Millers International Union, which went on strike last week. That union said the demands from management were unreasonable.

"The crisis facing Hostess Brands is the result of nearly a decade of financial and operational mismanagement that resulted in two bankruptcies, mountains of debt, declining sales and lost market share," the union's president, Frank Hurt, said in a statement. "The Wall Street investors who took over the company after the last bankruptcy attempted to resolve the mess by attacking the company's most valuable asset - its workers."

In July, Fortune wrote that the battle over "who will get what crumbs from a disintegrating corporate cookie" was tied in part to battles over generous employee pension funds. At the time, Hostess reportedly had about $2 billion in unfunded pension liabilities.

"What the hedge funds want is some degree of capitulation from a union whose members will otherwise lose thousands of jobs in liquidation," Fortune's David Kaplan wrote in an extensive article in July. "If the hedge funds don't get it, they've concluded, the company isn't worth saving."