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Twinkies face extinction as a result of moocher demands

[ 92 ] November 14, 2012 |

twinkies

Galtian Overlords look on helplessly:

Nov 14 (Reuters) – Hostess Brands Inc said it would seek
this week to liquidate the company unless enough workers stopped striking by the end of the workday on Thursday to allow the maker of Wonder bread and Twinkies to resume normal operations.

Members of the Bakery, Confectionery, Tobacco Workers and Grain Millers International Union (BCTGM) went on strike on Nov. 9 in response to court-approved pay cuts. The company, which has about 18,000 employees, filed for Chapter 11 bankruptcy in January.

Hostess said it would file a motion with U.S. Bankruptcy Court in White Plains, New York, on Friday to close shop and sell its assets if enough employees do not return to work by 5 p.m. Eastern time on Thursday. If the motion is granted, Hostess would begin to close its operations as soon as Nov. 20.

Hostess Chief Executive Gregory Rayburn said the company did not have the financial wherewithal to weather an ongoing strike.

A union spokesman was not immediately available for comment.

The case is Hostess Brands Inc, Case No. 12-22052, U.S. Bankruptcy Court, Southern District of New York.

Comments (92)

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  1. UberMitch says:

    I look forward to first wingnut joke along the lines of “Twinkies can survive a nuclear war but not teh UNION THUGGERY! LOL!!!!1!!11!!!”

  2. CaptBackslap says:

    Jonah Goldberg isn’t going to take this lying down.

    He’ll at least get up on one elbow.

  3. Hostess said it would file a motion with U.S. Bankruptcy Court in White Plains, New York, on Friday to close shop and sell its assets

    Why don’t more places do this? Why wait for the Romney team to buy and destroy when you can do it yourself and keep the cash in the hands of your cronies?

  4. Name withheld says:

    Now we only need a bank who would loan the workers enough to buy the factories and continue operations. It would be a good bet, actually. But not likely to happen.

    • Richard says:

      I doubt it would be a good bet. I don’t think the long term prospects of increased Twinkie and Wonder Bread sales are that good.

      • Name withheld says:

        Let me guess. None of your friends voted for Romney either.

        • Richard says:

          I don’t understand your snark. It’s a tragedy that 18000 workers look likely to lose jobs but it appears that the company is making a product that people don’t want to buy regardless of who is running the company.

          • Josh G. says:

            The point is that you’re most likely an (upper-)middle-class liberal, and your food choices aren’t really representative of the population as a whole. A *lot* of people in the US eat foods like Twinkies and Wonder Bread all the time, and they tend to be in a different part of the socioeconomic spectrum than the kind of people who post to the comments in LGM.
            Sure, the health food craze has probably hurt their sales some. But there is still a viable company there. Enough so to support 18,000 employees? I don’t know. But I do know they would have a better chance of doing so without parasitic upper management siphoning off money.

            • ajay says:

              A *lot* of people in the US eat foods like Twinkies and Wonder Bread all the time, and they tend to be in a different part of the socioeconomic spectrum than the kind of people who post to the comments in LGM.
              Sure, the health food craze has probably hurt their sales some. But there is still a viable company there.

              The evidence implies otherwise.

              Not to mention the demographic change angle: are Twinkies and Wonder Bread equally appealling to all ethnic groups? Or are they really only a product for white-bread consumers?

              • Or are they really only a product for white-bread consumers?

                Literally!

              • Anonymous says:

                twinkies sales, not including WalMart, were down 2% in 2010 so probably weren’t down much at all. Hostess had over a billion in debt and blamed labor costs when they filed for Chapter 11. They also filed for bankruptcy in 2004.

                • actor212 says:

                  But that’s not what they’re claiming is the cause of the bankruptcy.

                  There’s no real reason this couldn’t ESOP out of bankruptcy, which would retain the pensions at their current proportions and give the employees the chance to recoup their balances by turning the profits into the pension.

                  A true Marxist business entity.

    • Fred says:

      They sure can’t do worse than current management.

    • Murc says:

      Now we only need a bank who would loan the workers enough to buy the factories and continue operations

      I sort of imagine banks have trap doors installed for use if syndicalists ever show up looking to do that.

  5. Major Kong says:

    “The joke is on you my friends. Nothing can harm a Twinkie.” – The Simpsons

  6. Calming Influence says:

    On the upside, there’s no risk in hoarding a commodity that has an infinite shelf life.

  7. Steve Pick says:

    My brother has worked for Hostess/Wonder Bread for more than 30 years. He’s in middle management, basically supervising the guys who drive the delivery routes. He’s pretty much about to lose everything tomorrow, his job, his future, presumably his pension (or at least part of it), if the company shuts down. The lords running the company will be fine, I’m sure, but 18,000 people will be out of work. I’m not sure I’ve ever seen a company handle labor negotiations this way – we will close up shop or you will take a pay cut. Can’t side with the company, but also can’t imagine what it feels like to be a striker knowing what will happen to all those people. It’s just horrible.

    • Holden Pattern says:

      I’m sure Loomis knows about recent history, but I think that most of the strikes in the 19th century and the first couple decades of the 20th century would have been like this. The owners basically starve out the workers, evict them from company towns, etc.

      This is just a return to form.

      • Murc says:

        What Holden said. This is actually rather common, although not so much with factory owners; letting their capital sit idle is pretty costly. They preferred to break the strike rather than shutter.

        It was used a lot in the extractive sector, though. A lot of petty tyrants in the Appalachians would have no qualms about shuttering their perfectly profitable mines if the workers got uppity. They had their nice fine house and substantial savings, and could sit on their porch looking smug while the holler went to hell around them. Some of them would even deliberately operate their mines sporadically, being open only part of the year or only some years, in order to keep their workforce as powerless as possible.

        • Jon H says:

          Except in this case the company has been in bankruptcy for months already, and the pay cut was backed up by a judge. The judge could be an ass, and the management could be giving misleading info to the judge, but it still seems a bit different than the case where a company is going along fine, the workers strike over a grievance, and the management threatens to just shut down the business and let everyone go.

          I can’t help thinking the union is trying its hand at brinksmanship and doing a poor job of it.

          • Jon H says:

            By which I mean, effective brinksmanship is threatening Wal-Mart that you’ll strike on Black Friday, a massive shopping day. Or in general causing problems when the management really needs things to run smoothly.

            It doesn’t seem very effective to strike a troubled company with a decreasingly popular product. There just isn’t much leverage there.

    • Jon H says:

      ” I’m not sure I’ve ever seen a company handle labor negotiations this way – we will close up shop or you will take a pay cut.”

      Not to defend the management, but apparently they did get a court to uphold that. I’d like to know more about that decision.

      • sparks says:

        If it was a bankruptcy court in Delaware, the court operates as a rubber stamp for whatever is placed in front of it. I watched a long slow bankruptcy proceeding where the bankrupt company got everything it wanted in defiance of even the mildest good sense.

        • Richard says:

          Its not in Delaware, its in White Plains, New York. The company proposed a reorganization plan calling for reduction in wages. The union filed an objection and the court heard testimony. It then approved the company plan. The union then called a strike. The company says it is shutting down and liquidating by this weekend if the strike doesn’t end. So now we’ll see who’s bluffing and who’s not.

          The company has been in trouble for a long time. It emerged from an earlier bankruptcy about three years ago

          • NorthLeft12 says:

            Yes, that seems right. Legal contracts between Unions and their employers are not worth the paper they are written on, but a contract with/for a private firm or individual is treated like the holy scriptures.

            That will teach those g–d– socialists!

            • Richard says:

              Actually under bankruptcy law contracts with private firms can be abrogated and its done all the time. Don’t know if it happened here but I would assume it was

      • Bruce Vail says:

        A little clarity on the law:

        It’s not a court order. The bankruptcy judge gave his permission for Hostess to impose cuts, but left it up to Hostess managers to decide how and when to implement them. With some of the other unions at Hostess, the managers were able to negotiate concession packages: Not so with the Bakery union.

  8. Oh, if only there was some other way for the owners to bring the strike to an end!

    They’ve tried screaming, crying, propaganda, threatening, screaming while crying, threatening propaganda…they’re out of options here.

    • Malaclypse says:

      Management team bio on the web site:

      Gregory F. Rayburn
      Gregory F. Rayburn

      President and Chief Executive Officer

      Greg joined Hostess in February, 2012 to oversee the Company’s reorganization under Chapter 11 bankruptcy. Greg previously served on the board of directors for A&P. With over 29 years of experience, Greg held positions as CEO, COO or CRO at various high-profile companies, including Indianapolis Downs, LLC; New York City Off Track Betting Assn.; Magna Entertainment Corp.; Sunterra Corp. and AAIPharma Services. He also notably served as CRO for WorldCom during what was then the largest U.S. bankruptcy filing in history.

      So, he has 29 years’ experience gutting companies, and 10 months experience running a company that, in theory, produces food.

      Yea, it seems this is obviously a Chicago-style Union Thug problem.

      • Jon H says:

        Indy Downs: horse racing
        New York OTB: racing, etc
        Magna Entertainment: horse racing
        Sunterra: fucking timeshares
        AAIPharma: pharma of some sort, emerged from bankruptcy in 2007 as a private company. Pre-bankruptcy there were allegations of channel-stuffing to pad their results.

        No, wait, maybe he’s the ideal person to run Hostess:
        “CEO of Muzak Holdings”

  9. FMguru says:

    I take it this is one those airline-style things where the suits take the company into bankruptcy in order to shed legacy costs, nullify existing contracts, and break the union?

    • Holden Pattern says:

      Depends; bankruptcy can be a reorganization like the airlines, or an orderly dismantling like Lehman.

    • bloix says:

      No. They’re threatening to liquidate. That means selling the assets – the brands, equipment, real estate, etc – paying what debts you have the cash to pay, and shutting down. The current management is saying, we can’t run this show anymore, we give up. It’s not at all like an airline reorganization, where the current management stays in control during and after the bankruptcy.

      • FMguru says:

        Excellent points, and ones I could have gleaned from the article if I’d been paying closer attention. I stand corrected.

      • Xenos says:

        So the shareholders get wiped out completely? Granted, it was a penny stock for years before it went into bankruptcy, so the market cap is somewhere in the negative numbers now. You would think the management would make a sincere effort or just let it go at this point:

        There are a lot of valuable non-financial assets in a company like that, maybe that is what they are fighting over:

        • Holden Pattern says:

          Those assets are not enough to cover the debt, guaranteed.

        • RedSquareBear says:

          I have to assume that the Twinkie IP brand has *some* residual value.

          They could sell it to a gay porn producer, to begin with…

          • Richard says:

            If they go through with the plan to shut down, they will sell all the assets and then distribute the proceeds from the sale according to the schedules and priorities in the bankruptcy code. Unpaid wages would have priority but there doesn’t seem to be any. Shareholders would get paid last. Its pretty certain that the asset sale would not result in proceeds sufficient to pay shareholders or even most unsecured creditors.

  10. Spirula says:

    Protest sign?

    “Eat me Hostess!”

  11. David Mathias says:

    Too bad for the workers who could lose their jobs. Even if the assets are sold and production stops, at least there are other heavily processed white breads and pastries for consumers.

  12. rea says:

    What kind of financial geniuses go backrupt selling Twinkies? How is that even possible?

    • Richard says:

      Sales keep going down and down. The messages about healthier foods have sunk in. Sponge cake stuffed with sugar goo is not a growth industry

      • Jon H says:

        “Sponge cake stuffed with sugar goo is not a growth industry”

        Well, it is, but not the right kind of growth.

      • John says:

        Is that actually true, or did you make it up based on a priori logic?

        • Richard says:

          Sales of Twinkies have gone down about 2% a year for the last five years or so (from what I’ve been able to find). And price of raw ingredients – flour, etc – have risen. And the company has over 850 million in debt including unfunded pension costs. So it isn’t making profits anymore. Is there a way to turn around the company? Who knows (since I’m no expert on the processed bread industry) but current management and previous management haven’t been able to do it. And the debt load is so great that it doesn’t appear they can get new financing.

          My guess is there is no long term viable future for Twinkies and Wonder Bread. Can the current company resources can be used to manufacture products that are more popular? Dont know but it looks like current management, after two bankruptcies in ten years, is throwing in the towel.

  13. Jim Snyder says:

    I feel almost criminal saying this, but:

    “Let them eat Twinkies!”

  14. Western Dave says:

    One of my students did a history of Wonder Bread for my “where does the food come from” project. He predicted that Wonder wouldn’t exist in 5 years because nobody buys white bread anymore, and all their attempts to launch other lines (Wonder wheat, etc.) have failed miserably.

    • NonyNony says:

      This is why smart companies come up with new brand names and trademarks so they can leave old brands that have baggage behind when needed.

      Like how the same company makes Banquet frozen dinners and Healthy Choice frozen dinners. Hostess could have done something similar if their management wasn’t a bunch of troglodyte corporate pirates looking to raid the company for money instead of building for the future.

    • bloix says:

      People do buy bleached flour white bread, but they buy store brands. There’s no market for a “premium” brand of bleached flour white bread any more.

    • Lee says:

      I like to think that we Jews were early adopters in the war against white bread by never eating it in the first place.

  15. kg says:

    I grew up in Schiller Park, IL., where the twinkie was supposedly invented. We used to snatch boxes of that crap off the backs of trucks at the factory on the way to Jr. high. It was awful, ‘cept I kind of liked the suzy_qs

  16. Nathan of Perth says:

    Twinkies! Haven’t had one in years…

  17. Joey Maloney says:

    Can’t stand Twinkies, but I may be solely responsible for keeping Hostess Snoballs in production. I don’t believe I’ve finished a road trip of any substantial length in the past twenty years without pink coconut crumbs down my shirtfront.

  18. brinx says:

    Always preferred Zingers myself. Hope the workers can stay afloat in the short term.

  19. actor212 says:

    You Maniacs! You blew it up! Ah, damn you! God damn you all to hell!

  20. Sebastian H says:

    Isn’t this less a union vs management story and more a rapidly declining company story? You can argue that management shouldn’t get paid as much as it seems to have in a rapidly declining company. But it is hard to be pro strike when the company appears to be in actual day to day not enough inputs to pay for further outputs bankruptcy.

    • Richard says:

      Its also a union v. union story. Many unions, including the Teamsters, have accepted the management proposal and are now asking that the bakers approve the proposal and end the strike or else all of the workers are out of a job tomorrow.

  21. MikeJake says:

    What Hostess needs is a zombie apocalypse to wipe out the current consumer preference for less sugar and carbs, and rebuild the demand for Twinkies from a solid foundation of the fanatical devotion of a single survivor.

  22. KEN NOWICKI says:

    why is this country so obsessed with junk food???? this twinkie thing on ebay is out of this world!!!!!! com on people! i am glad to see the stuff go, my body can live without em. they don’;t taste like they did 30 years ago, so everyone, let it go!!!!!!!!!!!!!!

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