Death of the Twinkie?

[imoldernu]

Hard to understand how this came down, when the directors thought enough of management to prove increases and bonuses.Hostess To Pay $1.75 Million In Executive Bonuses After Blaming Unions For Bankruptcy | ThinkProgress

 

[pb4uski]

Hard to understand how this came down, when the directors thought enough of management to prove increases and bonuses.Hostess To Pay $1.75 Million In Executive Bonuses After Blaming Unions For Bankruptcy | ThinkProgress

It is easy for me to understand.

These proposed bonuses are not for outstanding performance, but rather are to incentivize existing employees who are viewed as critical to a wind-down to stay and ensure an orderly and productive wind-down of the business which results in more proceeds for creditors than if those key employees jumped off the sinking ship and left the wind-down in disarray.

Typically, the employees need to stay through a certain date in order to receive the bonus. Also, the cost is essentially coming out of the creditors pockets since they absorb any shortfall. If I were a creditor and thought that the proceeds of an orderly liquidation would be at least $1.75 million higher than the proceeds of a chaotic liquidation then I would favor the proposed bonuses - and given the amounts at stake $1.75 million isn't very much.

 

[frayne]

 

[imoldernu]

It is easy for me to understand.

These proposed bonuses are not for outstanding performance, but rather are to incentivize existing employees who are viewed as critical to a wind-down to stay and ensure an orderly and productive wind-down of the business which results in more proceeds for creditors than if those key employees jumped off the sinking ship and left the wind-down in disarray.

Typically, the employees need to stay through a certain date in order to receive the bonus. Also, the cost is essentially coming out of the creditors pockets since they absorb any shortfall. If I were a creditor and thought that the proceeds of an orderly liquidation would be at least $1.75 million higher than the proceeds of a chaotic liquidation then I would favor the proposed bonuses - and given the amounts at stake $1.75 million isn't very much.

That thought makes me feel better... I'm no longer angry with the bankers that kept the economy going.

 

[samclem]

It looks like the mediation plan failed and that the company will be liquidated.

From the WSJ:

Hostess Brands Inc. said Tuesday night that mediation talks with its bakers union failed and the company will proceed with plans to close down and sell its assets.
The company, which has already shuttered its plants and sent its workers home, will push ahead with its bid to embark on a shutdown that will leave 18,500 people unemployed and its iconic brands in the hands of new owners or gone, a spokesman said Tuesday evening.

Earlier Tuesday, the head of the bakers union whose strike precipitated the 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.

There's something very strange about this Union's "negotiating". It's clear their heart's not in it. The head of the Union doesn't even show up to the mediation session? Seems you'd go just for appearance's sake (and to put the Union in a better position with the BK judge). The Union President had earlier said he thought another company would buy out IBC and that the workers would keep their jobs. He's clearly delusional--there's very little chance these workers will be hired by anyone else taking over this business.
It's strange to see folks wringing their hands over the loss of 18K jobs, as though the jobs will disappear forever. Nope--somebody will be making these products somewhere (hopefully in the US), and it'll be a number of workers who are paid at a rate that allows the company to sell products and be competitive. Kinda like what would have happened with or without the auto bailout.

 

[martyb]

I bet I haven't eaten a Twinkie in 20 years, but for some reason...I suddenly really want one!

 

[MasterBlaster]

There's something very strange about this Union's "negotiating". It's clear their heart's not in it. The head of the Union doesn't even show up to the mediation session? Seems you'd go just for appearance's sake (and to put the Union in a better position with the BK judge). The Union President had earlier said he thought another company would buy out IBC and that the workers would keep their jobs. He's clearly delusional--there's very little chance these workers will be hired by anyone else taking over this business.

I am not so sure. Another buyer may want some of the equipment and facility/facilities and some of the critical employees. There is some value there still.

The next buyer just may have to negotiate with the very same union for a contract.

- stay tuned

 

[samclem]

I am not so sure. Another buyer may want some of the equipment and facility/facilities and some of the critical employees. There is some value there still.

The next buyer just may have to negotiate with the very same union for a contract.

- stay tuned

?? Have you seen the rat's nest of legacy retirement and worker contracts that presently entangle this company? The incompetent way the Union has bargained? If any company buys these brands and this union represents their workers--well I hope the company is publicly traded so I can short it.

 

[eridanus]

Both sides acted in what they consider to be their own best interests. Even in mediation, when a closure was past-due, the Union and hedge funds didn't budge. I know it's a popular game to blame the Unions but it takes two to tango when labor contracts are being decided.

 

[ERD50]

Both sides acted in what they consider to be their own best interests. Even in mediation, when a closure was past-due, the Union and hedge funds didn't budge. I know it's a popular game to blame the Unions but it takes two to tango when labor contracts are being decided.

In doing a bit of research on this, I'm finding that the 'popularity' of which side to blame largely depends on which sites you visit


As far as "it takes two to tango" - it seems pretty routine to hear of a union striking, or threatening to strike. How often do we hear of a company locking the union out? As Michael B said earlier (maybe a different thread, there are several running on this), unions once served a purpose, they need to re-invent themselves. They generally have a lot of power, they need to learn to use it for good.

The next buyer just may have to negotiate with the very same union for a contract.

- stay tuned

I'd bet money that won't happen. What fresh company would want to deal with that? As samclem said, if they do, short them.


-ERD50

 

[HFWR]

My [-]Cliff's Notes[/-] wiki version of a case study reveals all the usual suspects: mergers/buyouts, excessive leverage, legacy costs, incalcitrant management and unions...

Perhaps this is broken beyond fixing, and someone with the deep pockets and marketing savvy will revive the brands, and bankruptcy will solve the rest.

 

[veremchuka]

It looks like the mediation plan failed and that the company will be liquidated.

From the WSJ:

There's something very strange about this Union's "negotiating". It's clear their heart's not in it. The head of the Union doesn't even show up to the mediation session? Seems you'd go just for appearance's sake (and to put the Union in a better position with the BK judge). The Union President had earlier said he thought another company would buy out IBC and that the workers would keep their jobs. He's clearly delusional--there's very little chance these workers will be hired by anyone else taking over this business.
It's strange to see folks wringing their hands over the loss of 18K jobs, as though the jobs will disappear forever. Nope--somebody will be making these products somewhere (hopefully in the US), and it'll be a number of workers who are paid at a rate that allows the company to sell products and be competitive. Kinda like what would have happened with or without the auto bailout.

+1

 

[samclem]

There's something very strange about this Union's "negotiating". It's clear their heart's not in it.

Okay, the mystery is solved. The baker's union was the one that went on strike and which wasn't negotiating or participating in mediation. As it turns out, the contract between the company and the baker's union wasn't very "fat" by industry standards, but the contract between the company and the Teamsters was a doozy (separate trucks required for Wonder Bread and Twinkies, the truck driver can't unload the truck or move products, and the guy who does that has to arrive at the store in a separate vehicle, etc). The Teamsters contract made it very difficult for the company to compete. The Teamsters were putting pressure on the bakers to sign a contract (so the Teamster's good deal would continue) , but apparently the bakers were tired of "taking one for the team(sters)" and decided it was better to just throw in the towel and take advantage of their generous unemployment benefits. Or, that's how it looks in this WSJ piece.
In part:

Hostess has spent eight of the past 11 years in bankruptcy. As the company explained to its latest judge, the Hostess brands "have not been able to profit from many of their existing delivery stops and have been unable to enter potentially profitable markets, such as dollar stores, vending services and movie theaters." If Hostess were able to rationalize or outsource delivery to serve these customers, ready to go are "new products based on its best-selling cake items that have a longer shelf-life and can withstand freezing en route to customers over longer transportation hauls."
Under pressure on Monday from Judge Robert Drain to back down from their strike aimed at forcing the company to liquidate, the bakers themselves pointed to "what everyone in the baking industry knew: Hostess's production costs were neither excessive nor out of line with the market but its distribution costs were—to the tune of between $80 million and $130 million annually."