Hostess Twinkies Bite The Dust

It is often the case in contemporary America. Upon hearing the news, we don't know whether to laugh or cry.

NEW YORK (CNNMoney) — Hostess Brands — the maker of such iconic baked goods as Twinkies, Devil Dogs and Wonder Bread — announced Friday that it is asking a federal bankruptcy court for permission to close its operations, blaming a strike by bakers protesting a new contract imposed on them.

The closing will result in Hostess' nearly 18,500 workers losing their jobs as the company shuts 33 bakeries and 565 distribution centers nationwide, as well as 570 outlet stores. The Bakery, Confectionery, Tobacco Workers and Grain Millers International Union represents around 5,000 Hostess employees.

"We deeply regret the necessity of today's decision, but we do not have the financial resources to weather an extended nationwide strike," said CEO Gregory Rayburn in a statement.

Hostess will move to sell its assets to the highest bidder. That could mean new life for some of its most popular products, which could be scooped up at auction and attached to products from other companies.

A letter that Hostess sent to its network of stores that carry its product said it expects "there will be great interest in our brands." But it said it could not give a time frame for when the sales would take place and its products would be available again.

But even if those brands are bought and restarted, the Hostess workers will not get their jobs back.

"The industry has overcapacity. We're overcapacity. Our rivals are overcapacity," said Rayburn in an interview on CNBC. Asked if the shutdown decision could be reversed if the Bakers' union agreed to immediately return to work, he responded, "Too late."

The "industry" has overcapacity. Think about that. We don't have overcapacity in steel, or copper, or crude oil, despite rumors to the contrary. We don't have overcapacity in automobiles, stereos or microwave ovens. No, we have overcapacity in Twinkies, Wonder Bread, Ding Dongs and Devil Dogs.

In short, we have the ability to make too much of what people in the 1970s used to call "health food"

And that is not all. There is more. There is always more. 18,500 people will lose their jobs because Hostess claims they can not make money "manufacturing" Ding Dongs. Hostess blames the the Bakery, Confectionery, Tobacco Workers and Grain Millers International Union, which represents about 5,000 of the Hostess employees who will lose their jobs. What's up with that?

Hostess filed for Chapter 11 bankruptcy in January, then reached a deal with one of its major unions in September that included a new contract with reduced wages and benefits. But the 5,000 member bakers' union rejected the deal, leading to the protested contract that cut salaries in addition to reducing the company's pension obligations and contribution to the employees' health care plan.

"Our members are on strike because they have had enough," bakers' union president Frank Hurt said in a statement on Tuesday. "They are not willing to take draconian wage and benefit cuts on top of the significant concessions they made in 2004 and give up their pension so that the Wall Street vulture capitalists in control of this company can walk away with millions of dollars."

The company gave bakers a 5 p.m. Thursday deadline to return to work or face a shutdown of the company.

Who are these vulture venture capitalists? The ones who, if they can't have slave labor, are going to take their marbles and go home (sell off the Hostess plant and brands)?

Hostess—now controlled by a group of investment firms including hedge funds Silver Point Capital and Monarch Alternative Capital—will sell its assets to the highest bidder, meaning that some of its more popular products could be picked up at auction and packaged by other companies.

And finally there is this—

Steven Mufson of the Washington Post summarized the company's fatal problems as "a combination of pension burdens, labor rules, crippling debt from financial engineers and management’s failure to freshen up a stale product line and keep up with consumers’ changing tastes."

I don't know what else to say. It's Friday. I've seen enough this week. Well, OK, I do have something to say—

Yadda, yadda, yadda. Blah, blah, blah.

This Twinkies situation is so screwed up in so many ways that one hardly knows where to begin. What a clusterfuck! What a SNAFU!  FUBAR! This entire so-called "civilization" of ours is train wreck. The only pity is that we can't tear it down and start all over again.

Have a nice weekend.

Bonus Video — Just listen to these CNBC assholes! There's no fucking hope for US. We are Hopeless.

 

Comments

[Ben]

"Upon hearing the news, we don't know whether to laugh or cry." Exactly how I feel.

I just hope something comes along for the people who are losing their jobs. I know there probably wont be anything for them, but damn it I wish the best for them. Have a nice weekend Dave, everyone, peace.

[JohnWDB]

One of the videos linked after that Twinkie video ends is Ron Paul's farewell speech from Congress. He says a lot of good things, but perhaps this is best, "...we allowed our leaders to concentrate on the material abundance that freedom generates while ignoring freedom itself". And this is the most succinct statement of the problem, though it will be largely ignored. We got duped, friends. We let politicians tell us that rising GDP was all that mattered, even if it meant borrowing against future generations and devaluing assets of the middle class. We let them tell us that the ability to buy cheap stuff manufactured abroad was worth steady loss of middle income jobs, so long as multinational corporations were enriched and GDP went up. We let them tell us that protecting a steady supply of petroleum was worth endless conflict paid for by raiding social safety nets, mounting casualties, and having terrorist attacks on our own soil. We let them tell us that massive financial institutions were crucial to our phony economy and that pilfering the middle class to prop them up was necessary because they were "too big too fail". We let them tell us that an abundance of cheap, ready made meals and snacks was worth the wholesale subsidy, homogenization, and centralization of our food industry, at the expense of nutrition and sustainability.

We sold ourselves, our futures, and our freedom for a bunch of cheap stuff that makes us depressed and obese. That supply of that stuff will dwindle and increase in price, and the void that's been left will become glaringly apparent. The most scathing indictment against this latest charade of an election is that Ron Paul was universally considered a lunatic. He was decried by "liberals" and "conservatives", both of whom forgot the principles they once self-righteously proclaimed. Over a hundred million Americans wanted to believe that this election was the most important in history while they laughed at the only voice that was actually talking about the reasons for the decline of the empire. They got what they wanted, though, and they'll spend the next few months celebrating the "victory" while we circle the drain, then blaming the ultimate demise on "obstructionism" by "the other guys". Perhaps the great justice in it all is that human beings got exactly what they wanted.

[Dave Cohen]

@JohnWDB

... got exactly what the deserved

-- Dave

[James]

The brands will survive. Hostess was a trainwreck and this is its second bankruptcy (2005 they were in bankruptcy). Management blamed the strike, saying the reduction in wages and pension were necessary for sustainability (IE profits levels the investors could get behind). Of course, it ignored the fact that in 2005 the workers had made wage and pension concessions previously and that previous rounds of management had given up nothing (tried to hide bonuses and raises, in fact- CEO pay went from about $750,000 to $2.5 million during that time). Revenue was up, yet somehow despite hiring the consultant brought in during the last bankruptcy as CEO, debt was not going down. Imagine that.

So, they cut a deal with the teamsters (the union that includes all the non-baker employees) reducing wages and benefits further and stiff $2 billion to creditors, including vendors. But the baker's union said "no" and went on strike.

The response was to fire everybody and sell off the assets, which means the consultants, execs, and lawyers will all get paid and lots of workers, vendors, retirees, and others get nothing.

What annoys me is that bad management took an icon and ran it into the ground and people are delighting that the union strikers (as well as thousands of others) are now jobless. Yeah, that will show those stupid assholes to not take what the top thinks is best for them!

My bet is that a Chinese company picks them up and replaces flour with shredded newspaper.

[Oliver]

No doubt the "management" and their consultants had lucrative parachutes already devised, and then maneuvered the union into striking via a pay-cutting deal that was impossible to accept, so that over-lunched Rayburn and his cronies could sink the company, take the money and run.

With capitalism in terminal velocity descent - morally and financially - corporate executives get good returns for failure. They are nothing more than parasites, in a diseased system that rewards parasites for their cleverness in devouring other people's assets.

Anyone know where to find Madame Guillotine?