Bye, Hostess

| November 16, 2012 | 83 Comments

I remember I was in Kindergarten when my mom sent me to the store up the block to buy a loaf of bread. The first time I was ever on my own with money in my pocket. I was all grown up when I picked out a loaf of Hostess bread with the little balloons on it and proudly held out my little handful of change and let the checkout lady count out whatever it cost. Then there was the time I thought I could win the Twinkie eating contest at our school’s Winter Fest and I ate so many Twinkies that I quit eating them for years.

But now they’re gone.

[Hostess] had warned employees that it would file a motion in U.S. Bankruptcy Court to unwind its business and sell assets if plant operations didn’t return to normal levels by Thursday evening. The privately held company filed for Chapter 11 protection in January, its second trip through bankruptcy court in less than a decade.

Thanks, unions. That’s what happens when you try to get blood from a stone.

Tman sent us the bad news.

Category: Economy, Unions

Loading Facebook Comments ...

Comments (83)

Trackback URL | Comments RSS Feed

  1. Veritas Omnia Vincit says:

    It never justifies the argument. However it’s how some employees think. And based on the posts here it’s how some vets think too when the government says we don’t have the money we thought we did to pay your benefits, you will need to cover more of the costs. Vets feel that the government is not honoring their commitment to a mutual agreement regarding compensation for years of service.

    Hostess employees felt the company was not acting in good faith based on previous agreements, the difference is that vets aren’t going to shut down the government while the Hostess employees could make Hostess shut down by driving it out of business…two situations where people feel they are being mistreated, two different outcomes because vets don’t have the power to make the government honor its’ commitments or the power to shut it down.

    That attitude would not be unique to Hostess, I received a cease and desist order from a union case I was involved in when I discussed some simple math with employees. I explained there was no magic in the monetary math, the printing company they were trying to unionize had a net profit of about 3% against gross revenues. The union was promising 10% increases across the board in wages, and more in benefits. I explained that the budgeted labor based on estimates was 5 million dollars, there was not enough profit in the company to increase the labor budget to 5.5 million dollars. That meant that the company would most likely eliminate $500k worth of salary or about 12 employees to accommodate the other employees increases. I was accused of threatening their livelihoods and told that I could no longer discuss budgets with employees.

    A most interesting moment I assure you. I’m not saying I agree, I am saying I understand. And I can respect their decision to kill their employer and take their chances elsewhere, perhaps finding work with an employer who honors its contracts and agreements instead of using bankruptcy as tool to renegotiate financial obligations it can’t meet due to the p1ss poor management.

  2. PintoNag says:

    @50 You’re twisted, Ex-PH2. Twisted. I can almost hear you laughing maniacially as you take the first bite.

  3. Rock8 says:

    John, with all your well-reasoned arguments on issues important to Vets, why is it you jump to the conclusion that it’s the union’s fault?

    Granted, they were on strike, but after two bankruptcies in 8 years at a company where the executives took raises and the employees were sacrificed, on a business model that kept buying, consolidating, then laying off to cut costs to finance the purchase, and where today’s announcement came from the hedge funds (holding the notes on IBC’s cash flow line of credit right now) deciding to cash out and exit at the expense of 18,000 families… blaming it on the unions is intellectually dishonest for not understanding the whole picture.

  4. dana says:

    @ 51, I had a similar experience discussing math to, of all things, employees of a printing plant. The company is now closed.
    @ 53, I did notice one of the costs was 100 million in pension and healthcare costs for retiree’s.
    also the teamsters were working with the company. the executives that got the “raises”, were also long gone when this happened.

  5. Drama says:

    Raise your hands if you’d love to see Mitt Romney buy the hostess assets and turn them around.

  6. melle1228 says:

    >>And I can respect their decision to kill their employer and take their chances elsewhere, perhaps finding work with an employer who honors its contracts and agreements instead of using bankruptcy as tool to renegotiate financial obligations it can’t meet due to the p1ss poor management.

    Yeah except they killed jobs for 18,000 people and only 5,000 of them were union workers. So screw the other 13,000 people’s job-right. Unions and liberals talk crap about taking care of the little people, but this union just screwed 13,000 little people out of their jobs for a pissing contest.

  7. Ex-PH2 says:

    @Drama, my hand is held up high, holding a choco cupcake.

    @PintoNag, I couldn’t last until suppertime. I ate the snowballs, while cackling in an evil tone of voice. I still have one pack of Choco cupcakes left for dessert after supper. I did not take the funeral portrait. Maybe another time.

  8. SEAhorse says:

    Thanks a lot Petraeus!!

  9. malclave says:

    Maybe the unions should buy the brand name, and show the rest of us how profitable a business can be when it’s run as a Worker’s Paradise.

    Yeah, I know, FltMedic kind of obliquely suggested this back in @15, but this is a bakery, not a car company!

  10. B Woodman says:

    I never did like any of the Hostess snacks. Too, too sweet, and the filling made my teeth ache.
    As for the bread. You know why it was called “Wonder” Bread? It had so much air whipped into the dough to make it soft, light and airy, that it was a WONDER that it was bread.
    Yes, that makes me a heretic. So be it. To each their own.

  11. marinewm86 says:

    Well I for one will be hightailing it to the Hostess store to stock up on Twinkies!! Everyone should have a Twinkie Strawberry shortcake once in their life!!!! And Twinkies do last forver.

    First Bama Pie and now twinkies!! It’s just not right.

  12. Kent says:

    Bama Pies are gone? Ya know, no matter what the hole story is, about 100 union leaders and reps made the decision for 6000 union members, to end the jobs of 12,000 no union members. It is never about what is good for the union workers it is about who has the power. More to follow. When the military contractors get hit the jobs lost will be in the 100k range. Please contact the electoral college voters and ask them to vote Romney.

  13. marinewm86 says:

    On a more serious note has anyone heard about the Obama Lunches? Now being served in a Public school near you. Apparently FLOTUS has changed the USDA lunch requirements. Her reasoning is that too many children are overweight and instead of recess or physical education classes the Federally Funded School Lunch Program should lower the number of calories not to exceed 350 calories per child under the age 12 and 550 calories for teenagers.

    Ok so this pisses me off why? Because there are some children in this country that the school lunch meal was one dependable meals they recieved. I am furious about this and want to scream NO Mrs. Obama WE WILL NOT BE DOING LUNCH!

    Look at the USDA guidelines and google your local public school menu and then google the Sidwell Friends School Lunch menu where the politicans and POTUS’s children go to school and look at the differnce in the menus. Now I understand that Sidwell Friends school is a private school. But denying children in Public Schools good meals because their parents can not afford private schools is wrong. NO CHILD IN THE USA SHOULD BE HUNGRY!

    In addition some districts are removing all snack machines because of the fear that they could lose federal funding. So if FLOTUS has her way these kids will never know Twinkies anyway. Her celebrity chef wants these kids to eat tofu and carrots instead of a old school favorite Twinkies!

    Example of school lunch yesterday in my district!

    Black Beans
    Yogurt
    Banana
    skim Milk

    This was the third grade lunch option.

    Sorry for the rant.

  14. marinewm86 says:

    Kent I should have been more specific the BAMA Pecan Pie is no longer made!! I swear my brother with 26 years in the Corps cried when we found out BAMA no longer made the Pecan Pie.

  15. marinewm86

    I just shake my head anymore about the stupidity of people regarding obesity. When I was a kid (and I’m not that old, I grew up in the 1980s), we ate all the same crap. We had McDonald’s after every Little League victory, we ate sugary cereals, we had cookies and chips and hot dogs and hamburgers, etc. We didn’t have all these stupid diets and such. We stayed healthy the old fashioned way: being active.

    When I was a kid, I was outside pretty much all day. I was up at around 7am, watched cartoons for a little bit and then I was outside playing until my mom called me in for lunch, dinner and then to go to bed. Basketball, baseball, throwing the football around, running bases, hide and seek, riding bikes, riding skateboards, walking 6 blocks to the park to play in the park and playground. Always active. Then there was organized Little League, basketball in grammar school, intramural sports in high school, etc etc etc.

    The difference nowadays is the advent of the computer, computer games, the internet, cable TV, and all the different gaming systems. Kids are MUCH less active now than they ever were. And THAT is the cause of obesity.

    Granted, that is if we even have an obesity problem. I still remember looking at the chart in the doctor’s office in college when I went for a physical. It stated that at my height (5’9″), I should weigh a max. of 175lbs. Anything over would be considered “obese”. Well, at that time I was in THE best shape of my life. 30″ waist, 6-pack abs, lean and solid muscle. And I weighed 190lbs. So I would be considered “obese”. I learned then (this was 1998) that the “obesity” standards were ridiculous.

    But, of course, the food nazis have built an entire movement of banning food around it…

    You can diet and starve yourself all you want, if you don’t exercise along with it, you won’t get in shape.

    There’s no need to ban foods. Everything in moderation. And children need to eat to grow when young. But they ALSO need to be ACTIVE. There is no need to change children’s diets. Change their activity level and there will be no “obesity problem”.

    /off my soapbox, rant over

  16. Ex-PH2 says:

    There are free breakfast and lunch programs for all kids in my school district, regardless of ability to pay, because there is a large enough population of children in families below the poverty line to warrant getting the funding.

    I cannot imagine how on earth, in the richest country in the world, children can go home on the weekends and have nothing to eat all weekend, and the reason they come to school is that it’s the only place they can get even one meal a day.

    And any pediatrician will tell you that a macrobiotic diet (meaning strictly vegetarian) is not proper nutrition for any child. Beans, yogurt and skim milk will not give you strong bones or proper muscle development, never mind brain development. This is the same idiocy that says potatoes are junk food, when in fact, they are not.

    This (from memory, mind you) was a typical school lunch when I went to grade school:

    Fish or beef casserole with tomatoes and onions
    parsleyed potatoes
    green beans, spinach, or stewed tomatoes
    fresh fruit salad (apples, bananas, pears)
    bread and butter (not margarine)
    oatmeal or peanut butter cookie
    1/2 pint white or chocolate milk

    Nobody went hungry. Anyone could have seconds if they wanted them. There were no snack machines in the schools that I went to because the kids got decent food at lunchtime.

  17. UpNorth says:

    Marinewm86, yuck, no discerning 3rd grader will eat that dreck. Here’s the menu for the elementary schools in our district, for the same day:
    Tuna Salad
    Slice of bread(1)
    Mashed Sweet Potatoes, or
    Chopped Romaine Lettuce

  18. Ex-PH2 says:

    How are your children not starving to death on that crap?

  19. Green Thumb says:

    Standard GVT nutritional menu.

    Just finished an interesting case study from several years back.

  20. marinewm86 says:

    @66, 67 and 68

    Most of the schools no longer have PE for high schoolers and I was shocked that the grade schoolers only have one recess. They have replaced these classes with Computer Science. I really think kids need physical activity. (I did not allow my children to have a XBOX or Playstation until high school and they both played sports) I think part of the problem is lazy self-centered parents who worry more about the Kartrashians and keeping up with the Jones.

    The type of work I do I travel all over the US. And sadly we have areas of this country were there are children who do go to bed hungry. All I can say is spend a couple days at Pineridge. The Lunch Lady at one of the schools brings food from home to send home with some of the children in her community who are the most needy.

    And your right no self respecting 3rd grader would eat that. I found out because both of his parents work and the school called me because he refused lunch. So of course when I saw the lunch (I requested to see the lunch) I took him home with me and we made lunch and he got half a day off. No worries I got his homework. And made sure he took his spelling test. But I was mad and have been mad all day.

    Our Lunch in the olden days included:

    Real chicken with noodles
    mashed potatoes
    green beans
    jello
    chocolate cake
    white or chocolate milk
    hot rolls which Ms. Mavis made everyday

  21. marinewm86 says:

    @70 Sorry I do not give a flip about GVT those experts are a bunch of tofu loving morons who generally die of a heart attack at 50. I believe in healthy food vegetables, grains and meat.

  22. brat says:

    Leaving aside the idiocy of the Bakers Union ensuring over 1800 no longer work for Hostess, I have to tell you all that some of us have NEVAAAAAH had a Twinkie, and we managed to survive just fine.;)

    As for the bs Moooooshelle lunch served at #64′s school? As someone else noted, kids need more than that for bone development, muscle development and BRAIN food, if they are to learn well.

    I worked in an inner city elementary school for 6 years and our lunch menus more closely resembled #67 and # 68….And yes, for some of the kids, that may well have been their only full meal of the day…

    I have followed the Mooshelle dietary pronouncements and her “experts” (I presume she has consulted ‘experts) need their heads examined..

  23. brat says:

    @ 71: Yes, exercise is key…And yes, it starts with the role models in the home..but I’m going to stay off that soapbox, or we could be here all day/night…;)

  24. Ex-PH2 says:

    School schedule when I was in 7th grade:

    Classes in the morning 8AM to noon
    Lunch – one hour, including recess — everyone outside running around like mad things — on snowy and rainy days, everyone in the gym playing games of some kind
    Classes in the afternoong 1PM to 4PM
    Then we went home, did homework and had dinner. Out on the farm, I took the schoolbus to school, and we had recess AND gym classes. No one got out of dodgeball or softball, or chasing each other around the track. After we moved into the city, I walked to and from school every day, all the way from junior high school through high school. Some kids rode their bikes but I didn’t have one, so I walked – rain, snow or shine. In high school there was gym class every day of the week for everyone.

    Here’s the thing that the “experts” miss: if you eat too much starchy food and then sit on your behind instead of moving around, you get fat. Starchy carbohydrates (bread, rice, grain-based foods) are nutritionally dense, but they are also CALORIE dense, and the starch molecule makes them stick with you longer, and take longer to digest, so you not only don’t burn off those extra calories, you get sleepy and fall asleep at your desk.

    I’m beginning to understand why parents are deciding to home school their kids. No gym class, no recess, no walking to school, and classes that are either dumbed down to the lowest common denominator or so PC you wonder how kids will ever manage to learn anything about the real world.

  25. Ex-PH2 says:

    OH, and while I’m at it, beans do have protein but it’s an incomplete protein.

    In order to make that dish work, you have to add rice to it or you do not have a complete protein, you just have mostly starch with a deficient protein.

  26. UpNorth says:

    Interestingly, some of the players are, gasp, dems. Ripplewood is run by Tim Collins, 55, who’s been at the center of other famed PE transactions. Known as a brilliant capitalist-philanthropist-networker, he’s an eclectic character: a Democrat in an industry of Republicans …

    … Ripplewood’s foray into Hostess was partly enabled by Collins’s connections in the Democratic Party. He wanted to explore deals with union-involved companies and sought the help of former congressman (Dick) Gephardt, who in 2005 founded the Gephardt Group, an Atlanta consulting firm that provides “labor advisory services.” In his 2004 presidential bid, Gephardt — whose father was a Teamsters milk truck driver — was endorsed by 21 of the largest U.S. labor unions; in 2003, Collins was one of 19 “founding members” of Gephardt’s New York State leadership committee.

    “Tim Collins of Ripplewood, was a prominent Democrat, a position which allowed him to get involved in the first bankruptcy process in the first place, due to his proximity with the Teamsters’ long-term heartthrob Dick Gephardt (whose consulting group just happens to also be an equity owner of Hostess)”.

    Then I found out about some of the work rules, like Hostess couldn’t load Wonder Bread and Twinkies on the same delivery truck, had to be separate trucks. The driver couldn’t unload the product, for at least some of the lines, had to have a second person to unload and stack the product.
    Then, there were over 40 different pension plans under the Hostess umbrella.
    It’s not a wonder that Hostess went under, it’s a wonder they lasted as long as they did.

  27. UpNorth says:

    Shouldn’t post til the second cup of coffee. All of #77 came from NewsBusters.

  28. LOL blood from a rock. There was PLENTY of blood in that rock but the greedy capitalists did not want to share it.

    http://thinkprogress.org/economy/2012/11/16/1203151/why-unions-dont-shoulder-the-blame-for-hostesss-downfall/

  29. Hondo says:

    Gee . . . someone calling themselves “REAL conservative” quoting an article from “thinkprogress.org” written by Annie-Rose Strasser, a former “community organizer”.

    How droll.

  30. UpNorth says:

    ThinkProgress? Surely, you jest, Shirley. Go somewhere and dig up a credible source or two.

  31. Hondo says:

    And before “REAL conservative” accuses anyone here of “attacking the messenger”: the article cited in comment 79 is an obvious red herring/non sequitur/smokescreen intended to divert attention from the actual issue.

    Let’s do a bit of math.

    Hostess employed 18,500 employees before the Baker’s union forced them into liquidation. Roughly 6,000 were Baker’s union members; let’s assume the rest were Teamsters (the other, larger union that was actually working with Hostess to keep the company alive).

    Teamsters reputedly earn an average wage of around $22/hr. Add benefits, and that’s generally somewhere about $30/hour labor cost for the company.

    The Teamsters had agreed to give 8% back for a year to save the company. So let’s do the math on what that actually means.

    12,500 x $30 x 2087 = $782,625,000 pre-cut Teamster payroll
    8% x ($782,625,000) = $62,610,000

    Assuming the Baker’s union was making a bit less (say, $18/hr), that equates to a payroll cost of around $24/hour. For 6,000 Baker’s union employees, that comes to

    6,000 x $24 x 2087 = $300,528,000 pre-cut Baker’s union payroll
    8% x $300,528,000 = $24,042,240

    So, the total Hostes payroll was somewhat over $1B annually. They were asking for 8% back to save the company – or around $86.65M.

    The CEO/senior management salary increases were indeed a bad idea, and looked awful. However, they were by no means significant financially to the company. The amounts involved were piddling by comparison.

    The article documents three large increases out of 10 total – one of $1.8M, one of $400k, and one of less than $300k. I think it’s safe to assume these were by far the largest increases, as otherwise the author would have included them for additional “shock” value. So, assuming these other 7 “massive executive pay increases” averaged $150k each, we have

    $1.8M + $0.4M + $0.281M + 7*($0.15M) = $3.53M

    Forgoing these executive pay raises means that Hostess would have only needed $86.65M – $3.53M = $83.12M in worker concessions in order to say afloat. So that in turn means that they’d only have had to ask for a payroll concession of

    $83.12M / $1,083M = 7.7%

    So . . . forgoing the executive pay raises would have allowed Hostess to survive with only a payroll reduction of 7.7% instead of 8%.

    At a labor cost of $30/hour, that’s a difference of less than a penny per hour.

    Yeah, those CEO salary increases really were the deal-breaker, weren’t they?

  32. DaveO says:

    I agree that the good news story is that Hostess kept folks employed for so long.

    Key paragraph from the article:

    “CEO Gregory Rayburn, who was hired as a restructuring expert, said Friday that sales volume was flat to slightly down in recent years. He said the company booked about $2.5 billion in revenue a year, with Twinkies alone generating $68 million so far this year.” (http://www.sfgate.com/news/texas/article/Twinkie-maker-Hostess-reaches-the-end-of-the-line-4043395.php#ixzz2CVC3TKat)

    So:

    $US 2.5Bn in income
    33 factories
    500 outlets
    18,500 employees

    in how many states?

    I wonder if, years from now, business students in a free country will ask their professor if Hostess folded due to a lack of income, or an excess of spending?

Leave a Reply

Your email address will not be published. Required fields are marked *