Hostess lives another day to mediate with union
WHITE PLAINS, N.Y. (AP) - Twinkies will live to see another day.
Hostess Brands Inc. and its second largest union agreed on Monday to go into mediation to try to resolve their differences after a bankruptcy court judge concluded that the parties hadn't gone through the critical step. That means the maker of the spongy cake with the mysterious cream in the middle won't go out of business yet.
The news comes after the maker of Ho Ho's, Ding Dongs and Wonder Bread last week moved to liquidate and sell off its assets in bankruptcy court. The company cited a crippling strike started on Nov. 9 by the Bakery, Confectionery, Tobacco Workers and Grain Millers International Union that started, which represents about 30 percent of Hostess workers.
"Many people, myself included, have serious questions as to the logic behind this strike," said Judge Robert Drain, who heard the case in the U.S. Bankruptcy Court in the Southern District of New York in White Plains, N.Y. "Not to have gone through that step leaves a huge question mark in this case."
The mediation talks are expected to begin Tuesday, with the liquidation hearing set to resume on Wednesday. After Monday's hearing, Jeff Freund, an attorney for the bakers union, said any guess as to how the talks will go would be "purely speculative."
In an interview following the hearing, CEO Gregory Rayburn said that there is enormous financial pressure to come to an agreement with the union by the end of the day Tuesday. He noted that it's costing Hostess about $1 million a day in payroll costs alone to keep the company alive.
"We didn't think we had a runway, but the judge just created a 24-hour runway," said Rayburn, who added that even if a contract agreement is reached, it's unclear whether all 33 Hostess plants operate again.
Hostess, weighed down by debt, management turmoil, rising labor costs and the changing tastes of America, decided on Friday that it no longer could make it through a conventional Chapter 11 bankruptcy restructuring. Instead, the company, which is based in Irving, Texas, asked the court for permission to sell assets and go out of business.
Hostess, which is in its second bankruptcy in less than a decade, said that it was saddled with costs related to its unionized workforce. So the company brought on Rayburn as a restructuring expert to renegotiate its contract with labor unions.
Hostess, which had been contributing $100 million a year in pension costs for workers, offered them a new contract that would've slashed that to $25 million a year, in addition to wage cuts and a 17 percent reduction in health benefits. But the bakery union decided to strike.
By that time, Hostess had reached a contract agreement with its largest union, the International Brotherhood of Teamsters, which urged the bakery union to hold a secret ballot on whether to continue striking. Although many bakery workers decided to cross picket lines this week, Hostess said it wasn't enough to keep operations at normal levels.
Rayburn said that Hostess was already operating on razor thin margins and that the strike was the final blow. The company's announcement on Friday that it would move to liquidate prompted people across the country to rush to stores and stock up on their favorite Hostess treats. Many businesses reported selling out of Twinkies within hours and the spongy yellow cakes turned up for sale online for hundreds of dollars.
Even if Hostess goes out of business, its popular brands will likely find a second life after being snapped up by buyers. The company says several potential buyers have expressed interest in the brands. Although Hostess' sales have been declining in recent years, the company still does about $2.5 billion in business each year. Twinkies along brought in $68 million so far this year.
Hostess Brands Inc. and its second largest union agreed on Monday to go into mediation to try to resolve their differences after a bankruptcy court judge concluded that the parties hadn't gone through the critical step. That means the maker of the spongy cake with the mysterious cream in the middle won't go out of business yet.
The news comes after the maker of Ho Ho's, Ding Dongs and Wonder Bread last week moved to liquidate and sell off its assets in bankruptcy court. The company cited a crippling strike started on Nov. 9 by the Bakery, Confectionery, Tobacco Workers and Grain Millers International Union that started, which represents about 30 percent of Hostess workers.
"Many people, myself included, have serious questions as to the logic behind this strike," said Judge Robert Drain, who heard the case in the U.S. Bankruptcy Court in the Southern District of New York in White Plains, N.Y. "Not to have gone through that step leaves a huge question mark in this case."
The mediation talks are expected to begin Tuesday, with the liquidation hearing set to resume on Wednesday. After Monday's hearing, Jeff Freund, an attorney for the bakers union, said any guess as to how the talks will go would be "purely speculative."
In an interview following the hearing, CEO Gregory Rayburn said that there is enormous financial pressure to come to an agreement with the union by the end of the day Tuesday. He noted that it's costing Hostess about $1 million a day in payroll costs alone to keep the company alive.
"We didn't think we had a runway, but the judge just created a 24-hour runway," said Rayburn, who added that even if a contract agreement is reached, it's unclear whether all 33 Hostess plants operate again.
Hostess, weighed down by debt, management turmoil, rising labor costs and the changing tastes of America, decided on Friday that it no longer could make it through a conventional Chapter 11 bankruptcy restructuring. Instead, the company, which is based in Irving, Texas, asked the court for permission to sell assets and go out of business.
Hostess, which is in its second bankruptcy in less than a decade, said that it was saddled with costs related to its unionized workforce. So the company brought on Rayburn as a restructuring expert to renegotiate its contract with labor unions.
Hostess, which had been contributing $100 million a year in pension costs for workers, offered them a new contract that would've slashed that to $25 million a year, in addition to wage cuts and a 17 percent reduction in health benefits. But the bakery union decided to strike.
By that time, Hostess had reached a contract agreement with its largest union, the International Brotherhood of Teamsters, which urged the bakery union to hold a secret ballot on whether to continue striking. Although many bakery workers decided to cross picket lines this week, Hostess said it wasn't enough to keep operations at normal levels.
Rayburn said that Hostess was already operating on razor thin margins and that the strike was the final blow. The company's announcement on Friday that it would move to liquidate prompted people across the country to rush to stores and stock up on their favorite Hostess treats. Many businesses reported selling out of Twinkies within hours and the spongy yellow cakes turned up for sale online for hundreds of dollars.
Even if Hostess goes out of business, its popular brands will likely find a second life after being snapped up by buyers. The company says several potential buyers have expressed interest in the brands. Although Hostess' sales have been declining in recent years, the company still does about $2.5 billion in business each year. Twinkies along brought in $68 million so far this year.
The Union realizing they screwed their members. Whomever purchases Hostess will make damn sure to rid it of of it's union. Become part of the 95% of private employers who have dumped unions.
To all you union haters: If you look at the history of this country since WWII, you will plainly see that the country was most prosperous when most people were making a good living wage. And that was because most people were part of a union. Capital has shown time after time that it is willing to exploit the workers for maximum profit. Unions were formed to protect workers from unfair labor practices like 60+ hour workweeks, child labor, no safety regulations, and so on. Â To oppose unions is to endorse corporate greed, malfeasance, and exploitation.
 @Old29 You speak as if it were impossible to have a union that is likewise corrupted by greed and exploitation - that street goes both ways. Union leaders do not always have worker's best interests at heart, and companies don't always take advantage of their workforce. There are labor laws that now address most of the concerns you listed, and I believe that unions had a lot to do with that. But demanding higher wages while a company is struggling to stay profitable helps nobody.
 @Ifishsum I don't disagree with any of what you said.
 @Old29 That was then, this is now. Unions have become an entirely different animal in recent years.
 @Old29 Unions were great in the post WW2 industrial explosion when Europe was still in disarray and America was the production powerhouse. Today, America is mostly a consumer culture were unions have become blotted has-beens only looking out for themselves.
 @Old29 To rephrase your phrase, people were making a good living wage when the country was most prosperous. That was when the employers weren't being sucked dry by taxes and unions.
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 @Tim Snyder  @Old29 Wow.  What a manifest misunderstanding of history.
 @Tim Snyder  @Old29 Paul Krugman wrote his column today just for you: http://www.nytimes.com/2012/11/19/opinion/krugman-the-twinkie-manifesto.html?
 @Max Quinn  @Tim Snyder  @Old29 If we were still an industrial economy and not a consumer economy then this article would ring true. The guy is living in the past, man.
 @Tim Snyder By the way you stated that, the country and it's people should be extremely prosperous right now since unions are being stripped and corporate taxes are at all time lows. Yet that's not the case, so please explain your reasoning.
 @Tim Snyder  @Old29 Wow, you couldn't be more wrong. During the largest booms since WWII Unions have always been strong and prominent, and tax rates usually hovered in the 75-90% range for those in the top brackets. Please try again, this time with some factual data.
Here is what the parasitic leaders of the bakers union are making.
http://www.unionfacts.com/employees/Bakery%2C_Confectionary%2C_Tobacco_Workers_%26_Grain_Millers
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They are getting all this money from the union members who are paying it out of their wages.
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Unions are nothing more than big corporations that take from the workers pretending to be helping them. At least big business is honest about making a big profit unlike the union bosses.
 @RalphCramden If unions are like corporations how much do you think the executives get paid for an organization of their size vs a regular corporation. Â
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http://www.forbes.com/sites/helaineolen/2012/11/16/who-killed-hostess-brands-and-twinkies/
 @darren vandervortÂ
You must have missed this part of my post. "At least big business is honest about making a big profit unlike the union bosses."
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Or did your eyes glaze over after reading the first part and you refused to continue reading to the end?
 @darren vandervortÂ
I look at making a profit a good thing. No one is forcing anyone to buy Twinkies. They don't have a monopoly so there is no anti trust violations.
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The unions decided to go on strike. The company think they could survive and chose to shut down. It's a game of chicken and the unions lost.
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I did the same thing with a company I had in the 1980's. I had some employees that wanted a union and started the process. I kept going until the union vote passed and they demanded more money. I just shut down the business and sold the contracts to my competition. I couldn't afford to pay them what they wanted and they cut my profit margin too thin.
 @RalphCramden  @darren vandervort I don't consider 275k unreasonable for that type of work, with that many people under them.
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Transparency and honesty are not even close to how I view publicly traded companies.  The fact that you do view them as honest is absurd to me.Â
Hostess, weighed down by debt, management turmoil, rising labor costs and the changing tastes of America...
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There's the truth in the matter. Â
Wealth redistributed.
 @oodathunked So you support "Trickle Down Economics" Which is nothing more than Wealth Distribution to the top, but not the other way around? Care to explain why?
 @Ramsesthegreat Try redistributing poverty.
Hostest should respond to Unions with "GO Get F***ED!!!"
Any chance the unions will learn that a successful parasite does not kill its host?
Considering that Hostess is losing millions every week, I don't think there's any room to negotiate....
Okay, we will take another several million dollar loss. Will that be enough?
The judge does not want to lose his Twinkies.
Oh Bummer
One of the judge's relatives must be employed by the baker's union.
@scared_citizen yeah, blame the union for the new executives loading up the company with millions in debt, giving themselves massive bonuses (CEO took a 300% increase bonus over the previous CEO while fellow execs received over 200% increases). The execs are simply doing the Bain way of business. Load the company with debt, give themselves huge sums of money, liquidate the assets while taking a cut, and finally blame the employees for the problem.
 @Ramsesthegreat  @scared_citizen Ya we would not want to look at all the companies like Macy, Staples, etc... the Bain saved. Being a good liberal we only look at the evidence that supports the desired conclusions...
@Ramsesthegreat   You have the freedom to work wherever you want (at whatever fast food establishment that will hire you since you obviously are tired of working at Walmart). I, on the other hand, STARTED my own small business because I AM a job creator. I am not rich nor did my parents provide me the business. I worked hard and scraped by. I (as opposed to you), understand what it takes to not only work at a job but how to pay bills, satisfy customers, etc. From this side, I can see how something like Obamacare could ruin a small company that suddenly is saddled with a huge increase in health care costs for many employees (someone has to subsidize the huge number of people who will be getting it free now from the great "hand out creator" liberals). I just hope that not too many people get laid off due to this and the ones left working will have to work twice as hard. I also understand how paying an extra $100 per month to 18,000 hostess workers adds up to $1,800,000 more PER MONTH or $21.6 MILLION more per year when this company has already been in bankruptcy twice before in the proceeding 10 years. Maybe they could just pay the workers in Twinkies?
 @FreedomRocks  @scared_citizen Yet as a good conservative, you're more than happy to overlook all the American jobs that were destroyed by the likes of Bain simply in the name of profit by stating that a small percentage of the companies "helped" by them remained in America. I'm sorry that I don't bow down to the corporate overlords of this country, and actually believe that the employees and the consumers are the most important part of any successful business. Without either of those items, there is no business. These "job creators" as conservatives like to anoint them, have completely lost touch with the reality that a happy employee is much more likely to perform his job to a higher level than an unhappy employee that is forced to accept government assistance because companies like Wal-Mart refuse to pay a decent wage or give decent hours to any employee, and see them as nothing more than peons to be abused and thrown away.
 @Ramsesthegreat  @scared_citizen Just another liberal lemming toeing the Democrat line, believing the lamestream media.Â
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Regardless of this, you can't just blame management. Unions have been given too much power and give very little back to the employee.
@Ramsesthegreat  Ramses is a brand of condom and you are just as full of it as that product is.