http://slog.thestranger.com/slog/archives/2012/11/16/management-not-unions-to-blame-for-twinkie-bakers-demise Comments On: Management, Not Unions, to Blame for Twinkie Baker's Demise by Goldy en-us Copyright 2013 The Stranger. All rights reserved. This RSS file is offered to individuals, The Stranger readers, and non-commercial organizations only. Any commercial websites wishing to use this RSS file, please contact The Stranger. webmaster@thestranger.com (The Stranger Webmaster) Sat, 18 May 2013 00:00:01 -0700 Sat, 18 May 2013 17:15:00 -0700 Foundation http://blogs.law.harvard.edu/tech/rss
Hostess has been bleeding out for more than a decade, losing market share to other regional-turned-national brands, engaging in a serious of ill-advised acquisitions, mounting up astronomical debt, and basically being mismanaged at its highest levels. No company in good straights burns through six CEO's in eight years or ends up with a debt burden equal to roughly 40% of its annual earnings. And while one could argue that labor costs factor into that, the fact is, Hostess workers already agreed to major concessions in their 2004 contract, which resulted in a savings of over $100 mm, but which, primarily because of debt-servicing, was never re-invested back into the company. As a result of all this slip-shod management, Hostess was forced to declare bankruptcy for a second time in January. Subsequently when contract negotiations began with the Teamsters and Bakers, workers were once again - not even asked, but threatened - with additional wage cuts, increases in employee contributions to health benefits, and a de-facto gutting of their pension plan, otherwise the company would have no choice but to close its doors.

But anyone who was paying attention would have seen the writing was on the proverbial wall for Hostess when in late March they hired Gregory Rayburn as their "Chief of Restructuring", who, less than nine days after being hired, took over the CEO position when the company's then-current Chief Brian Driscoll suddenly resigned, with no warning or explanation.

So, all of a sudden you've got a guy who's entire career has been spent engaging in a series of Bain-style asset acquisition-and-liquidation schemes, heading a company carrying nearly $1 B in debt, running a board comprised almost exclusively of representatives from private equity firms, and engaged in an acrimonious contract negotiation with its two largest unions. And nobody thought this smelled fishier than an Alaskan crabber in a heat-wave? Really?

Rayburn was brought on-board at Hostess to serve one purpose: to prep the company for closure and liquidation of its assets; that's what he DOES, and has done for nearly two decades. Anyone believing anything else was seriously deluding themselves. The problem was: a company undergoing reorganization can't just up and call it quits without permission from the Federal Bankruptcy Court, and Rayburn undoubtedly knew he'd need more than just the set of current circumstances to convince them. What he needed was something along the lines of, oh, say, how about a work stoppage? That would provide him with the proverbial "straw that broke the camel's back", and allow him to close shop, then sell off the only assets of any real value, namely the Hostess brand name and product line. So, all he needed to do was make an offer to the unions that at least one of them would refuse, which turned out to be an 8% pay-cut (on top of the concessions the unions had already made in 2004), flat-out halting contributions to their contract-mandated pension funds, additional plant closures (on top of the 21 they'd already shut down in the previous decade), and "sweetening" the deal by promising to restore the wage reductions over the 3-year term of the contract. In response, the Teamsters agreed to take the offer, as crappy as it was, but the Bakers took the bait, rejected the contract and walked out. And that was all the excuse Rayburn needed.

The result of all this is that 18,000 workers are losing their jobs, while Rayburn & his cronies will cut off the handful of salable assets, in the same manner as an ivory poacher takes only the valuable tusks, and leave the remainder of the carcass to bloat and rot in the sun, where it will be picked over by lower-order vultures and hyenas until there's nothing left but bones. They will of course, walk away with handsome "golden parachutes" for their efforts, while the workers will be left with nothing, not even the spoiling meat to perhaps sustain themselves with until something more promising comes along.

But yeah, this as all the unions' fault...
Posted by COMTE]]> Sat, 17 Nov 2012 13:34:01 -0800 The Stranger
If it wasn't for the loss of those tasty Hostess fruit pies, this would be a top ten most apropos moment.

http://www.zerohedge.com/news/2012-11-16…
Posted by delbert]]> Sat, 17 Nov 2012 06:56:14 -0800 The Stranger Posted by Tent_Liberation_Army]]> Fri, 16 Nov 2012 22:18:16 -0800 The Stranger Posted by seandr]]> Fri, 16 Nov 2012 20:09:25 -0800 The Stranger
And no, whining isn't a job.
Posted by Cascadian Bacon]]> Fri, 16 Nov 2012 19:55:32 -0800 The Stranger Posted by biffp]]> Fri, 16 Nov 2012 19:15:05 -0800 The Stranger Posted by Fnarf]]> Fri, 16 Nov 2012 19:12:46 -0800 The Stranger
Here's a fascinating article from Fortune about the demise of Hostess from back in July. It sounds like even if the unions had agreed to all terms, it would in no way make up losses: $341 million in fiscal 2011 alone.

Employees would have to concede $18,400/year EACH to cover 2011 losses, and 2012 was looking to be much worse.

Hard to blame this just on the unions. I'm sure it won't stop a thoroughly discredited paper like the Seattle Times, though.
Posted by Free Lunch]]> Fri, 16 Nov 2012 19:00:50 -0800 The Stranger
I still perk up when I hear the words "Hostess cupcakes" or "Hostess snowball", but I know I can't eat that shit. I can't believe that someone interested in building the business forward couldn't have used routine modern product development techniques to advance the brand. The craving for and consumption of treats has continued unabated, but the increasing trend toward the public wanting healthier food has been clear as NOT just a passing fad since the 80s.

I'm with @6. Sounds like they drove it under trying to extract maximum cash at all times instead of grow advance business.
Posted by cracked]]> Fri, 16 Nov 2012 17:13:06 -0800 The Stranger
They already had taken pay and benefit cuts. For whatever reason, they decided to face unemployment than suffer an 8 percent pay cut and 17 percent benefits cut.

If my employer were expecting that from me, I would quit too. It's not my responsibility to save my employer from itself, and my leaving rather than agree to be paid less than I'm worth doesn't make *me* responsible for the company's downfall. That's still management's fault.
Posted by keshmeshi]]> Fri, 16 Nov 2012 15:40:11 -0800 The Stranger Posted by I'll bet the latter]]> Fri, 16 Nov 2012 15:30:17 -0800 The Stranger
1. Find a new job.
2. Negotiate for new, competent management.
3. Take a pay cut to compensate for management's failures.

One that doesn't come to mind is "demand continuation of the pay and benefits you got when the company was profitable under competent management".

By the way, @8 and @11, the pension benefit gratuity corporation, the quasi-governmental agency that insures pensions, is funded by premiums paid by the companies whose pensions it insures. It's true that it is backstopped by the federal government because of many recent corporate bankruptcies it will eventually require a taxpayer bailout, but unless you think the Hostess execs caused the great recession, you can't hold them responsible for that.
Posted by David Wright]]> Fri, 16 Nov 2012 15:24:30 -0800 The Stranger
But like all unions, this one had plenty of complaints, but offered no solutions. They were offered a seat on the board and an ownership stake in the company, which would allow them to *gasp* actually be accountable for decision-making, but they scoffed at the offer. They were given access to all the same info as the Teamsters, and somehow the Teamsters thought "hey, better our people be working than unable to find jobs in a recession!"

So ask yourself: what do the Teamsters know that the BCTGM doesn't? Oh yeah, basic economics and finance...
Posted by Stodgers]]> Fri, 16 Nov 2012 14:46:24 -0800 The Stranger Posted by Cornichon]]> Fri, 16 Nov 2012 14:11:34 -0800 The Stranger

Posted by Nothankyou]]> Fri, 16 Nov 2012 13:57:02 -0800 The Stranger Posted by AsherCapHill]]> Fri, 16 Nov 2012 13:53:46 -0800 The Stranger Why hasn't the health food revolution hit Twinkies?

Shouldn't there be a ground vegetable version featuring lite-unhomogenized white stuff in the center?
Posted by Supreme Ruler Of The Universe]]> Fri, 16 Nov 2012 13:52:16 -0800 The Stranger Posted by Keenan C]]> Fri, 16 Nov 2012 13:52:15 -0800 The Stranger
Basically, the CEO and execs looted Blue state funds to do this.
Posted by Will in Seattle]]> Fri, 16 Nov 2012 13:39:45 -0800 The Stranger
Mother's cookies went out of business suddenly several years ago. Keebler bought the rights to the brand, and the brand's most popular cookies started appearing on store shelves within a year.

Hostess' less popular products are finished, but I'm sure someone will buy the rights to the most popular items. Anyone who can't make money selling fat and sugar to the American public is a fool.
Posted by keshmeshi]]> Fri, 16 Nov 2012 13:29:18 -0800 The Stranger Posted by tshicks]]> Fri, 16 Nov 2012 13:15:55 -0800 The Stranger
...again.
Posted by Rujax!]]> Fri, 16 Nov 2012 12:59:16 -0800 The Stranger Posted by ballard dude]]> Fri, 16 Nov 2012 12:58:00 -0800 The Stranger
Sounds like (without being in on the specifics) a classic Equity Firm Pump and Dump.
Posted by Chris Jury]]> Fri, 16 Nov 2012 12:57:53 -0800 The Stranger
Obviously, the world needs Twinkies, so the owners have completely screwed up.
Posted by Gus]]> Fri, 16 Nov 2012 12:48:32 -0800 The Stranger