Quit Crying Over Your Damn Twinkies; Hostess Brands Employees Got ‘Bained’

by on November 19, 2012 · 7 comments

in Economy, Labor, Politics

The mass media is once again missing the real story when it comes to their reporting on the bankruptcy of Hostess Brands, makers of Twinkies, Ding Dongs and Ho Hos.

Today we’re seeing mass media stories (I refuse to link to this crap) about consumers flooding into outlet stores around the country buying up all the last of these sugar/fat bombs. Why there’s even mention of Twinkies being auctioned on EBay…. of Ho Ho’s collectables.

This disappearance of these brands from store shelves is –attention Ding Dong collectors – a temporary phenomena. Those ‘treats’ will be back on store shelves sooner than you think. Bloomberg news is already reporting about investors (including Dean Metropolous owner of totally unionized Pabst Brewing) interested in buying the rights to the brands involved here.  No doubt some of the plants and much of the distribution network will also get snapped up shortly.

What is outrageous here is the degree to which so-called responsible news organizations bought into the meme that a strike by members of the Bakery, Confectionery, Tobacco Workers and Grain Millers International Union is responsible for its demise.

The closure of the 565 distribution centers, 33 bakeries and 570 bakery outlets owned by Hostess is a real world example the downside of what can happen to companies after they get passed around to Bain-style investment operations that don’t know or care about the actual business at hand.

Employees at Hostess watched 6 CEO’s come and go since 2002.  By any measure all of them left the company worse than when they took over. All of them got paid, not just the salaries they agreed to, but bonuses and increases all along the way.

These executives talked of investments in new equipment, new research and new delivery trucks that would have made the company competitive, but those improvements never materialized as Hostess went further and further into debt.

In 2011, Hostess had sales of more than $2.5 billion but ended the year with a loss of $341 million as it struggled to pay the interest on $1 billion in debt. This debt wasn’t about poor sales or selling products for no profit or about paying employees or about the cost of benefits– it was about paying off loans that previous operators took with them rather than invest in the company.

This year the company sought bankruptcy protection for the second time in eight years.

Still, the CEO who brought on the latest bankruptcy got a raise (from approximately $750,000 to $2,550,000) while Hostess demanded that its workers accept a 30 percent pay and benefits cut.

At least nine other top executives of the company received massive pay raises in the weeks immediately before this latest bankruptcy filing. One executive received a pay increase from $500,000 to $900,000 and another received one taking his salary from $375,000 to $656,256.

An employee working for Hostess in 2005 before the first round of bankruptcy concessions who made $48,000 annually saw his/her pay drop to $34,000 in 2011 prior to the most recent contract offer.

In July of 2011 employees received a letter from the company saying that the $3+ per hour they contributed to the pension was going to be ‘borrowed’ by the company until they could be profitable again. Then they would pay it all back. The Union was notified of this the same time and method as the individual members.

The company’s latest filing for bankruptcy has already led to a court ruling that the $3+ per hour was a debt the company couldn’t repay. The union continued to work despite the theft of their self-funded pension contributions for over a year.

Here’s the company’s final offer that 92% of those union meanies refused:

1) An 8% hourly pay cut in year 1 with additional cuts totaling 27% over 5 years.

2) The company got to keep monies previous borrowed from employee contributions to the pension fund (equal to about $3+ an hour) forever.

3) Weekly insurance premiums would be doubled and a program of much lesser quality would be instituted.

4) The company wanted total withdrawal from ALL pensions.

So that employee who made $48,000 in 2005 would end up with $25,000 in five years, irrespective of seniority or position.  Getting rid any obligations to the 18,500 people who worked at the company makes selling of the equity in the brand names and infrastructure a profit-making deal for the latest bunch who took over the company.

I call that getting ‘Bained’.

Where did the money go?

This article is excerpted from The Starting Line, a daily news column at the San Diego Free Press


{ 7 comments… read them below or add one }

Kenloc November 19, 2012 at 10:32 am

Great article dude


Terrie Leigh Relf November 19, 2012 at 4:03 pm

Horrors! It’s CEOs like this who. . .[fill in the blank]

So, I have a stoopid question. . .Who is Bain?


Sherry November 20, 2012 at 8:26 pm

No questions are stupid but this one is close. Did you really follow the Presidential election at all? Just put Romney + Bain in any search engine and you’ll get all the answers you want. Please study all you can of political climbers both local and national to place a well informed vote.


Wireless Mike November 19, 2012 at 4:46 pm

Ayn Rand would be proud.


Wizard of Cape May November 19, 2012 at 5:04 pm

You forgot about the 6,700 Teamsters at Hostess and this statement from their union boss…

“The company has clearly been mismanaged for quite some time. However, the workers should not suffer because of poor management and therefore, the Teamsters Union tried everything in its power during the company’s most recent financial difficulties to shape an outcome that would put Hostess on strong footing to be viable and preserve jobs. Unfortunately, the company’s operating and financial problems were so severe that it required steep concessions from a variety of stakeholders but not all stakeholders were willing to be constructive. Teamster Hostess members, based on the facts and advice from respected restructuring advisors, understood what was at stake and voted to protect all jobs at Hostess. ”


Sounds like the baker’s union wasn’t willing to be constructive while the Teamster’s were. Now those baking jobs are gonna go south of the border where sugar is half the price due to the absence of US imposed sugar trade tariffs.



Goatskull November 20, 2012 at 8:11 am
David November 20, 2012 at 2:17 pm

Your math does not add up. Look at the the website I have listed for Hostess Last Best Offer. An 8% percent cut is just that not 27%.


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