Hostess, maker of the Twinkie, pushed into liquidation by Private Equity firm and Unions

  • Posted by a hidden member.
    Log in to view his profile

    Nov 19, 2012 4:03 PM GMT
    q1w2e3 saidSounds like the creditors forced the execs to do the "right" thing AFTER they saw the attempt to raise the salaries. The intent was clearly there, no matter how they spin it.
    What were the circumstances of Jobs' $1 salary, by comparison? Was Apple about to file bankruptcy?


    The article addresses your concerns quite plainly. Don't you want to acknowledge the fact that what you posted was at least deceptive if not actually wrong for this year or would that shatter the delusions of what you want to believe - ie a greedy set of execs who cared nothing for the firm?
  • Posted by a hidden member.
    Log in to view his profile

    Nov 19, 2012 4:18 PM GMT
    Like all such stories, this isn't about just one thing. Declining brand, ineffective management, poor bankruptcy planning and intransigent labor all sound like they played a role.

    I love the debate about the healthiness of Twinkies. I agree, people eat lots of stuff that is very very bad for them, but Twinkies really are the worst of the worst - white flour, refined sugars and HCFS, and trans fats. Pretty much the most dangerous combination of stuff out there.

    I agree, the right management could have put lipstick on that pig, but it's still a pig.

    I do wonder how seriously we should take a link crediting "Tyler Durden" as the author, however,.
  • Posted by a hidden member.
    Log in to view his profile

    Nov 20, 2012 2:54 PM GMT
    showme saidLike all such stories, this isn't about just one thing. Declining brand, ineffective management, poor bankruptcy planning and intransigent labor all sound like they played a role.

    I love the debate about the healthiness of Twinkies. I agree, people eat lots of stuff that is very very bad for them, but Twinkies really are the worst of the worst - white flour, refined sugars and HCFS, and trans fats. Pretty much the most dangerous combination of stuff out there.

    I agree, the right management could have put lipstick on that pig, but it's still a pig.

    I do wonder how seriously we should take a link crediting "Tyler Durden" as the author, however,.


    Yes these things hurt Hostess, and put it in a situation where it could not meet union demands. The teamster union looked at the books and accepted the change because they knew there was no way they could pay the higher wages of the workers, and a job is better than no job.

    The baker's union thought it would make them look weak to accept the deal to other companies so they went on strike and shut down the plant. Then tried to blame Bain Capital (because, you know, this is a political issue) instead of accepting the fact that the union cared more about their interest than they did the Bakers for Hostess.

    Its a shame, it really is. While the company was in trouble, at the very least they could have survived another year or two. Instead these people are now unemployed in the middle of a recession, which drastically hurt them and is why Doug refuses to answer my question above.

    People are all for paying the lower workers more money, and I agree that the minimum wage has not kept up with the cost of inflation, a huge problem. But dont take this fight to a company that is on the verge of bankruptcy, take it to Coke or WalMart, or a company making huge profits that still pays their employees like crap.

    Also, you guys need to learn the difference between "I dont like this" and "I am glad this is happening." No one buys a twinkie for the health, but this is a free country and they have the right to buy it. To celebrate the death of a national company because you dont like the product personally is selfish and wrong. Get off your high horse, this company employed thousands who are now out of work. Think of their families! Think of the children!!!

    Thats all Im saying.
  • Posted by a hidden member.
    Log in to view his profile

    Nov 20, 2012 8:18 PM GMT
    riddler78 said
    q1w2e3 saidSounds like the creditors forced the execs to do the "right" thing AFTER they saw the attempt to raise the salaries. The intent was clearly there, no matter how they spin it.
    What were the circumstances of Jobs' $1 salary, by comparison? Was Apple about to file bankruptcy?


    The article addresses your concerns quite plainly. Don't you want to acknowledge the fact that what you posted was at least deceptive if not actually wrong for this year or would that shatter the delusions of what you want to believe - ie a greedy set of execs who cared nothing for the firm?


    The timeline is clearly correct in showing the intent. As this link points out, the $1 salary is 5 days AFTER another WSJ article raised concerns about the salary bumps.
    http://www.snopes.com/politics/business/hostess.asp

    And the generosity of the CEO with bonuses while trying to go bankrupt shows the same intent.
    http://wtvr.com/2012/11/19/unions-furious-about-hostess-shutdown-plan-to-pay-1-75-million-in-executive-bonuses/

    http://management.fortune.cnn.com/2012/07/26/hostess-twinkies-bankrupt/Even as it played the numbers game, Hostess had to face chaos in the corner office at the worst possible time. Driscoll, the CEO, departed suddenly and without explanation in March. It may have been that the Teamsters no longer felt it could trust him. In early February, Hostess had asked the bankruptcy judge to approve a sweet new employment deal for Driscoll. Its terms guaranteed him a base annual salary of $1.5 million, plus cash incentives and "long-term incentive" compensation of up to $2 million. If Hostess liquidated or Driscoll were fired without cause, he'd still get severance pay of $1.95 million as long as he honored a noncompete agreement.

    When the Teamsters saw the court motion, Ken Hall, the union's secretary-treasurer and No. 2 man, was irate. So much, he thought, for what he described as Driscoll's "happy talk" about "shared sacrifice." Hall says he tracked Driscoll down by phone and told him, "If you don't withdraw this motion, these negotiations are done." Hostess withdrew the motion a few weeks later when Driscoll left -- the same Driscoll who, Hostess told the court in its motion, was "key" to "reestablishing" Hostess's "competitive position going forward." Abbott and Costello couldn't have made this stuff up if they'd gone to Wharton.


    I credit Rayburn (the CEO who replaced Driscoll) with the $1 cut, but clearly it was to manage a public relations fiasco.

    Simply speaking, there is no shared sacrifice. This may be "standard" corporate practice nowadays, unfortunately.
  • Posted by a hidden member.
    Log in to view his profile

    Nov 20, 2012 8:21 PM GMT
    Chainers said
    Also, you guys need to learn the difference between "I dont like this" and "I am glad this is happening." No one buys a twinkie for the health, but this is a free country and they have the right to buy it. To celebrate the death of a national company because you dont like the product personally is selfish and wrong. Get off your high horse, this company employed thousands who are now out of work. Think of their families! Think of the children!!!

    Thats all Im saying.


    Replace "twinkie" with "cigarette."
  • Posted by a hidden member.
    Log in to view his profile

    Nov 20, 2012 8:40 PM GMT
    Besides the bad product, bad management is clearly in play here, with or without pension costs:

    http://www.washingtonpost.com/business/economy/2012/01/11/gIQAxrXAsP_story.html?Post+generic=?tid=sm_twitter_washingtonpostDriscoll said that the big pension fund originally served workers from several companies but that as those companies went out of business the burden on remaining firms grew. Pension funds have struggled since 2008 with the woes of the economy and stock markets.

    But the bankruptcy filing also says that Hostess lost $250 million in the less than three years since it emerged from its previous bankruptcy. That means it would have lost money without any pension costs at all. A person familiar with the company’s bankruptcy filing said it has lost money in 30 of the past 37 quarters.
    ...
    Hurt, the union leader, says that Hostess doesn’t pay more than other competitors. He said the roughly 5,500 members of his union working for Hostess earn $18 to $19 an hour in pay and pension costs. Hurt said that when he talked to Hostess executives on Tuesday they didn’t complain about the union.

    In the end, the company’s problems may be baked into its products. The person familiar with the company, who asked for anonymity to preserve his relationship with it, said that even the most popular food brands need reinvention every eight years or so. Yet Hostess has not done that.
  • roadbikeRob

    Posts: 22425

    Nov 20, 2012 9:17 PM GMT
    Aristoshark saidFor all the political bloviating, Hostess themselves has admitted that the unions aren't the problem.

    The problem is that far fewer people eat that crap anymore. In a world where 1/2 the country are trying to eat healthier and the other half have become food snobs who won't touch anything that isn't organic or artisanal, the market for all those kinds of things is dropping radically. If you read anything more than the headline, you'd see that this is their second trip to bankruptcy court, the first time being back in 2004.

    But hey, why not use the occasion to bash unions? It makes them feel better and they could be reasonably certain that simpletons like ol' Clem here would actually believe it. He believes anything as long as it confirms his loony worldview.
    Right, Clem?
    I have to agree 100%. Hostess saw that diet and tastes were changing in American society. People were waking up to the fact that all these sweet, preservative laden junk foods are a potentially serious health hazard. Hostess failed to diversify its business and now has suffered tremendously to the point of no return. Look at your fast food giants McDonalds and Burger King, they are both concerned with the changing attitudes in regards to diet and they are working hard to rebrand themselves with healthier food options to avoid suffering any possible heavy losses.
  • Posted by a hidden member.
    Log in to view his profile

    Nov 20, 2012 9:28 PM GMT
    q1w2e3 said
    riddler78 said
    q1w2e3 saidSounds like the creditors forced the execs to do the "right" thing AFTER they saw the attempt to raise the salaries. The intent was clearly there, no matter how they spin it.
    What were the circumstances of Jobs' $1 salary, by comparison? Was Apple about to file bankruptcy?


    The article addresses your concerns quite plainly. Don't you want to acknowledge the fact that what you posted was at least deceptive if not actually wrong for this year or would that shatter the delusions of what you want to believe - ie a greedy set of execs who cared nothing for the firm?


    The timeline is clearly correct in showing the intent. As this link points out, the $1 salary is 5 days AFTER another WSJ article raised concerns about the salary bumps.
    http://www.snopes.com/politics/business/hostess.asp

    And the generosity of the CEO with bonuses while trying to go bankrupt shows the same intent.
    http://wtvr.com/2012/11/19/unions-furious-about-hostess-shutdown-plan-to-pay-1-75-million-in-executive-bonuses/

    http://management.fortune.cnn.com/2012/07/26/hostess-twinkies-bankrupt/Even as it played the numbers game, Hostess had to face chaos in the corner office at the worst possible time. Driscoll, the CEO, departed suddenly and without explanation in March. It may have been that the Teamsters no longer felt it could trust him. In early February, Hostess had asked the bankruptcy judge to approve a sweet new employment deal for Driscoll. Its terms guaranteed him a base annual salary of $1.5 million, plus cash incentives and "long-term incentive" compensation of up to $2 million. If Hostess liquidated or Driscoll were fired without cause, he'd still get severance pay of $1.95 million as long as he honored a noncompete agreement.

    When the Teamsters saw the court motion, Ken Hall, the union's secretary-treasurer and No. 2 man, was irate. So much, he thought, for what he described as Driscoll's "happy talk" about "shared sacrifice." Hall says he tracked Driscoll down by phone and told him, "If you don't withdraw this motion, these negotiations are done." Hostess withdrew the motion a few weeks later when Driscoll left -- the same Driscoll who, Hostess told the court in its motion, was "key" to "reestablishing" Hostess's "competitive position going forward." Abbott and Costello couldn't have made this stuff up if they'd gone to Wharton.


    I credit Rayburn (the CEO who replaced Driscoll) with the $1 cut, but clearly it was to manage a public relations fiasco.

    Simply speaking, there is no shared sacrifice. This may be "standard" corporate practice nowadays, unfortunately.


    Your timeline might have been correct if you had posted the press release of the creditors at the time of the reduction in salaries - which the executives were under no obligation to do. However - you posted a press release from the union dated November 13 - 7 days ago - and months after a number of salaries had been reduced. Whether or not you want to acknowledge the reduction in salary is irrelevant, but that is in the very least the definition of shared sacrifice.

    The timeline is clearly incorrect with respect to what *you* posted. I note that for irony, a private equity firm has now put in a bid for the company. And because this is being in liquidation, the employees all get to be fired with new hiring. I mean I suppose in the world of some like apparently yourself, you should hire executives for dirt cheap because there's absolutely nothing to the job. icon_rolleyes.gif
  • Posted by a hidden member.
    Log in to view his profile

    Nov 20, 2012 9:29 PM GMT
    roadbikeRob said
    Aristoshark saidFor all the political bloviating, Hostess themselves has admitted that the unions aren't the problem.

    The problem is that far fewer people eat that crap anymore. In a world where 1/2 the country are trying to eat healthier and the other half have become food snobs who won't touch anything that isn't organic or artisanal, the market for all those kinds of things is dropping radically. If you read anything more than the headline, you'd see that this is their second trip to bankruptcy court, the first time being back in 2004.

    But hey, why not use the occasion to bash unions? It makes them feel better and they could be reasonably certain that simpletons like ol' Clem here would actually believe it. He believes anything as long as it confirms his loony worldview.
    Right, Clem?
    I have to agree 100%. Hostess saw that diet and tastes were changing in American society. People were waking up to the fact that all these sweet, preservative laden junk foods are a potentially serious health hazard. Hostess failed to diversify its business and now has suffered tremendously to the point of no return. Look at your fast food giants McDonalds and Burger King, they are both concerned with the changing attitudes in regards to diet and they are working hard to rebrand themselves with healthier food options to avoid suffering any possible heavy losses.


    Were they? Is obesity in the US on the decline?
  • Posted by a hidden member.
    Log in to view his profile

    Nov 20, 2012 9:32 PM GMT
    q1w2e3 saidBesides the bad product, bad management is clearly in play here, with or without pension costs:


    This suggests two issues - (1) they didn't spend enough on marketing to rebuild the brands *and* (2) costs were too high - and legacy costs include previously negotiated labor agreements not just pensions. These jobs paid significantly above minimum wage - and yet were relatively unskilled.
  • Posted by a hidden member.
    Log in to view his profile

    Nov 20, 2012 9:53 PM GMT
    "relatively unskilled"

    ..intellectual snobbery and a true elitist.

  • Posted by a hidden member.
    Log in to view his profile

    Nov 20, 2012 10:17 PM GMT
    meninlove said "relatively unskilled"

    ..intellectual snobbery and a true elitist.



    I don't like to use the term unskilled labor though it's the technical term, so I use relatively - given that it is relatively unskilled relative to others. Your bias and buffoonery however are telling.
  • Posted by a hidden member.
    Log in to view his profile

    Nov 20, 2012 10:51 PM GMT


    Here's the entire sentence for context,

    "These jobs paid significantly above minimum wage - and yet were relatively unskilled."

    ...again intellectual snobbery and elitism. Remember that the next time you're desperate to use a bathroom and the only one available is full of vomit and has not yet been cleaned by the unskilled labour.

  • Posted by a hidden member.
    Log in to view his profile

    Nov 20, 2012 10:52 PM GMT
    meninlove said

    Here's the entire sentence for context,

    "These jobs paid significantly above minimum wage - and yet were relatively unskilled."

    ...again intellectual snobbery and elitism. Remember that the next time you're desperate to use a bathroom and the only one available is full of vomit and has not yet been cleaned by the unskilled labour.



    Again, my response was in context. The jobs fit the definition of being unskilled labor - which is a technical term. And again, you beclown yourself. Intellectual snobbery? Try English.

    The problem is that most of these jobs are easily substituted or do you disagree? This isn't snobbery, just fact.
  • Posted by a hidden member.
    Log in to view his profile

    Nov 20, 2012 10:53 PM GMT
    riddler78 said
    sfbayguy said
    riddler78 saidIronically, the private equity firm is run by a prominent Democrat with a shareholder in Hostess that includes Dick Gephardt.

    http://www.zerohedge.com/news/2012-11-16/hostess-liquidation-curious-cast-characters-twinkie-tumbles

    Hostess has gone the way of other companies, but ultimately not for the reasons you cite. Like when horse and buggy manufacturers went out of business, like when consumer photo film manufacturers and processors went out of business, like when VHS cassette manufacturers went out of business, like when record stores went out of business, like newspapers and magazines declining, like Nokia and RIM (Blackberry) declining, etc. When technology or tastes change, and companies fail to diversify their product lines, the company dies. They could pay their employees $0 and give zero benefits, but that won't stop the inevitable.


    The difference is that there's still significant demand for Twinkies. It's a bit of wishful thinking to think that given the portfolio of brands from Hostess that they aren't able to find a viable business. The problem is costs. I assume that they've been impacted by a number of factors - that have dropped revenues but this only means that it makes legacy costs even less sustainable.

    These brands will be bought - and new more competitive firms will operate them - that's how markets work.

    Incidentally, to argue that Twinkies are obsolete is um a bit ridiculous:
    http://www.reuters.com/article/2012/09/18/us-obesity-us-idUSBRE88H0RA20120918

    So Americans are getting fatter. That doesn't necessarily mean it's because of Twinkies. The demand for calories continues to increase in the US, but it's not necessarily from Twinkies as evidenced by the fat that demand for them has gone down. Heck you even admitted as much when you said their revenues were down. BTW, demand for horse and buggies are down, yet people travel by land much more than in the past, and most record stores have closed, but people buy more music than now than in the past.
  • Posted by a hidden member.
    Log in to view his profile

    Nov 20, 2012 10:55 PM GMT
    sfbayguy said
    riddler78 said
    sfbayguy said
    riddler78 saidIronically, the private equity firm is run by a prominent Democrat with a shareholder in Hostess that includes Dick Gephardt.

    http://www.zerohedge.com/news/2012-11-16/hostess-liquidation-curious-cast-characters-twinkie-tumbles

    Hostess has gone the way of other companies, but ultimately not for the reasons you cite. Like when horse and buggy manufacturers went out of business, like when consumer photo film manufacturers and processors went out of business, like when VHS cassette manufacturers went out of business, like when record stores went out of business, like newspapers and magazines declining, like Nokia and RIM (Blackberry) declining, etc. When technology or tastes change, and companies fail to diversify their product lines, the company dies. They could pay their employees $0 and give zero benefits, but that won't stop the inevitable.


    The difference is that there's still significant demand for Twinkies. It's a bit of wishful thinking to think that given the portfolio of brands from Hostess that they aren't able to find a viable business. The problem is costs. I assume that they've been impacted by a number of factors - that have dropped revenues but this only means that it makes legacy costs even less sustainable.

    These brands will be bought - and new more competitive firms will operate them - that's how markets work.

    Incidentally, to argue that Twinkies are obsolete is um a bit ridiculous:
    http://www.reuters.com/article/2012/09/18/us-obesity-us-idUSBRE88H0RA20120918

    To argue that obesity is increasing in the US BECAUSE of Twinkies is um a bit ridiculous. You can't imagine how it would be possible for people to get fatter without Twinkies? The demand for calories continues to increase in the US, but it's not necessarily from Twinkies as evidenced by the fat that demand for them has gone down. Heck you even admitted as much when you said their revenues were down. BTW, demand for horse and buggies are down, yet people travel by land much more than in the past, and most record stores have closed, but people buy more music than now than in the past.


    Who said it's increasing because of Twinkies? I'm saying that the demand hasn't exactly evaporated because of changing tastes. Sure it's down - and that could be as much to do with branding - but they haven't brought down costs fast enough which appears to be the bigger issue.
  • Posted by a hidden member.
    Log in to view his profile

    Nov 20, 2012 10:58 PM GMT
    riddler78 said
    sfbayguy said
    riddler78 said
    sfbayguy said
    riddler78 saidIronically, the private equity firm is run by a prominent Democrat with a shareholder in Hostess that includes Dick Gephardt.

    http://www.zerohedge.com/news/2012-11-16/hostess-liquidation-curious-cast-characters-twinkie-tumbles

    Hostess has gone the way of other companies, but ultimately not for the reasons you cite. Like when horse and buggy manufacturers went out of business, like when consumer photo film manufacturers and processors went out of business, like when VHS cassette manufacturers went out of business, like when record stores went out of business, like newspapers and magazines declining, like Nokia and RIM (Blackberry) declining, etc. When technology or tastes change, and companies fail to diversify their product lines, the company dies. They could pay their employees $0 and give zero benefits, but that won't stop the inevitable.


    The difference is that there's still significant demand for Twinkies. It's a bit of wishful thinking to think that given the portfolio of brands from Hostess that they aren't able to find a viable business. The problem is costs. I assume that they've been impacted by a number of factors - that have dropped revenues but this only means that it makes legacy costs even less sustainable.

    These brands will be bought - and new more competitive firms will operate them - that's how markets work.

    Incidentally, to argue that Twinkies are obsolete is um a bit ridiculous:
    http://www.reuters.com/article/2012/09/18/us-obesity-us-idUSBRE88H0RA20120918

    To argue that obesity is increasing in the US BECAUSE of Twinkies is um a bit ridiculous. You can't imagine how it would be possible for people to get fatter without Twinkies? The demand for calories continues to increase in the US, but it's not necessarily from Twinkies as evidenced by the fat that demand for them has gone down. Heck you even admitted as much when you said their revenues were down. BTW, demand for horse and buggies are down, yet people travel by land much more than in the past, and most record stores have closed, but people buy more music than now than in the past.


    Who said it's increasing because of Twinkies? I'm saying that the demand hasn't exactly evaporated because of changing tastes. Sure it's down - and that could be as much to do with branding - but they haven't brought down costs fast enough which appears to be the bigger issue.

    So what exactly were you trying to imply when you said:

    "Incidentally, to argue that Twinkies are obsolete is um a bit ridiculous:
    http://www.reuters.com/article/2012/09/18/us-obesity-us-idUSBRE88H0RA20120918"
  • Posted by a hidden member.
    Log in to view his profile

    Nov 20, 2012 11:01 PM GMT
    sfbayguy said
    riddler78 said
    sfbayguy said
    riddler78 said
    sfbayguy said
    riddler78 saidIronically, the private equity firm is run by a prominent Democrat with a shareholder in Hostess that includes Dick Gephardt.

    http://www.zerohedge.com/news/2012-11-16/hostess-liquidation-curious-cast-characters-twinkie-tumbles

    Hostess has gone the way of other companies, but ultimately not for the reasons you cite. Like when horse and buggy manufacturers went out of business, like when consumer photo film manufacturers and processors went out of business, like when VHS cassette manufacturers went out of business, like when record stores went out of business, like newspapers and magazines declining, like Nokia and RIM (Blackberry) declining, etc. When technology or tastes change, and companies fail to diversify their product lines, the company dies. They could pay their employees $0 and give zero benefits, but that won't stop the inevitable.


    The difference is that there's still significant demand for Twinkies. It's a bit of wishful thinking to think that given the portfolio of brands from Hostess that they aren't able to find a viable business. The problem is costs. I assume that they've been impacted by a number of factors - that have dropped revenues but this only means that it makes legacy costs even less sustainable.

    These brands will be bought - and new more competitive firms will operate them - that's how markets work.

    Incidentally, to argue that Twinkies are obsolete is um a bit ridiculous:
    http://www.reuters.com/article/2012/09/18/us-obesity-us-idUSBRE88H0RA20120918

    To argue that obesity is increasing in the US BECAUSE of Twinkies is um a bit ridiculous. You can't imagine how it would be possible for people to get fatter without Twinkies? The demand for calories continues to increase in the US, but it's not necessarily from Twinkies as evidenced by the fat that demand for them has gone down. Heck you even admitted as much when you said their revenues were down. BTW, demand for horse and buggies are down, yet people travel by land much more than in the past, and most record stores have closed, but people buy more music than now than in the past.


    Who said it's increasing because of Twinkies? I'm saying that the demand hasn't exactly evaporated because of changing tastes. Sure it's down - and that could be as much to do with branding - but they haven't brought down costs fast enough which appears to be the bigger issue.

    So what exactly were you trying to imply when you said:

    "Incidentally, to argue that Twinkies are obsolete is um a bit ridiculous:
    http://www.reuters.com/article/2012/09/18/us-obesity-us-idUSBRE88H0RA20120918"


    That they're not obsolete unlike the examples you posted. It's not like some amazing technology has made their market evaporate overnight. At best it's been a slow decline. There are plenty of firms that survive in stagnating and slow moving markets.
  • Posted by a hidden member.
    Log in to view his profile

    Nov 20, 2012 11:20 PM GMT
    riddler78 said
    The timeline is clearly incorrect with respect to what *you* posted. I note that for irony, a private equity firm has now put in a bid for the company. And because this is being in liquidation, the employees all get to be fired with new hiring. I mean I suppose in the world of some like apparently yourself, you should hire executives for dirt cheap because there's absolutely nothing to the job. icon_rolleyes.gif


    The timeline I'm referring to is:
    --salary raise just as bankruptcy was planned in 4/2012 while asking for salary cuts from workers
    --creditors find out
    --new CEO lowering salaries (till the end of the year only, BTW) to mend a PR gaffe
    --and trying to declare bankruptcy now while giving $1.75 mill in bonuses to executives.

    Some shared sacrifice indeed.

    BTW, in the world of somebody like me, I would not take ownership of something I cannot reasonably improve. If I were to be the CEO of Hostess, I would rebrand and reformulate their products for the health-conscious market. And I would not take bonuses until the company's out of its humongous debt.

    But then, I decided against business school for a reason.

  • Posted by a hidden member.
    Log in to view his profile

    Nov 20, 2012 11:27 PM GMT
    I'm glad somebody in the Dept of Justice sees it this way.
    http://articles.chicagotribune.com/2012-11-19/news/chi-hostess-seeks-bonuses-for-key-manager-in-liquidation-filing-20121119_1_hostess-brands-grain-millers-international-union-wind-down-planHostess Brands Inc., the maker of the iconic Twinkies snack cake, will square off in a bankruptcy court on Monday against an agent of the U.S. Justice Department, who says the wind-down plan is too generous to management.

    The U.S. Trustee, an agent of the U.S. Department of Justice who oversees bankruptcy cases, said in court documents it is opposed to the wind-down plan because Hostess plans improper bonuses to company insiders.

    The 82-year-old Hostess wants permission to pay senior management a bonus of up to 75 percent of their annual pay so they will stay on and help wind-down the business.

    The U.S. Trustee, Tracy Hope Davis, planned to ask New York Bankruptcy Court Judge Robert Drain at Monday's afternoon hearing to appoint an independent trustee to oversee the sales of the company's assets.
  • Posted by a hidden member.
    Log in to view his profile

    Nov 20, 2012 11:29 PM GMT
    q1w2e3 said
    riddler78 said
    The timeline is clearly incorrect with respect to what *you* posted. I note that for irony, a private equity firm has now put in a bid for the company. And because this is being in liquidation, the employees all get to be fired with new hiring. I mean I suppose in the world of some like apparently yourself, you should hire executives for dirt cheap because there's absolutely nothing to the job. icon_rolleyes.gif


    The timeline I'm referring to is:
    --salary raise just as bankruptcy was planned in 4/2012 while asking for salary cuts from workers
    --creditors find out
    --new CEO lowering salaries (till the end of the year only, BTW) to mend a PR gaffe
    --and trying to declare bankruptcy now while giving $1.75 mill in bonuses to executives.

    Some shared sacrifice indeed.

    BTW, in the world of somebody like me, I would not take ownership of something I cannot reasonably improve. If I were to be the CEO of Hostess, I would rebrand and reformulate their products for the health-conscious market. And I would not take bonuses until the company's out of its humongous debt.

    But then, I decided against business school for a reason.



    Your explanation is disingenuous. The timeline I referred to was what you posted rather than your revised set of postings. You posted a union press release dated about a week ago when they would have already been fully aware of the changes in salary. You claim that the pay change was to mend a PR gaffe but it was even more likely this was in large part because of the creditors that pushed the article out in the first place.

    There are other firms that are going to buy out their brands without the legacy costs - and my guess is that they will be profitable - and have a very high expectation of being profitable.
  • Posted by a hidden member.
    Log in to view his profile

    Nov 20, 2012 11:30 PM GMT
    Brands are only useful insofar as they can be profitable... and private equity firms are sniffing around looking to buy these brands - in a competitive bid.

    http://www.pehub.com/173899/private-equity-wants-bite-hostess/

    Erik Halvorson, a Hostess spokesman, says the company has received a “couple of dozen calls” from real and credible bidders interested in buying Hostess brands. He declined to comment on specific parties. Some of the bidders appear to be more interested in marketing their own brands than making a serious offer, he says.

    Hostess has filed for bankruptcy protection twice and has pretty much been on the block for two years. No buyer surfaced mainly because of legacy liabilities associated with the collective bargaining agreements and multi-employer pension plans, Halvorson says. The sudden interest in buying Hostess is driven by the fact that any potential bidders wouldn’t have to assume these legacy liabilities, he says.

    Still, any sale of Hostess as a whole would be difficult, Halvorson says. Someone would need to fund an auction of the entire company. Hostess products, which include Ho Hos and Drakes cakes, are also off the shelves at grocery stores. The brands are a “diminishing asset,” he says.

    It will be easier for Hostess to sell its individual assets than to find a buyer for all of the company, Halvorson says. Flowers Foods, Pepperidge Farm owner Campbell Soup Co., and Mexico’s Grupo Bimbo are expected to bid for Hostess’ brands, Reuters says.

    “We expect to have a very robust auction for many of the brands,” Halvorson says.
  • Posted by a hidden member.
    Log in to view his profile

    Nov 21, 2012 3:23 AM GMT
    riddler78 said
    sfbayguy said
    riddler78 said
    sfbayguy said
    riddler78 said
    sfbayguy said
    riddler78 saidIronically, the private equity firm is run by a prominent Democrat with a shareholder in Hostess that includes Dick Gephardt.

    http://www.zerohedge.com/news/2012-11-16/hostess-liquidation-curious-cast-characters-twinkie-tumbles

    Hostess has gone the way of other companies, but ultimately not for the reasons you cite. Like when horse and buggy manufacturers went out of business, like when consumer photo film manufacturers and processors went out of business, like when VHS cassette manufacturers went out of business, like when record stores went out of business, like newspapers and magazines declining, like Nokia and RIM (Blackberry) declining, etc. When technology or tastes change, and companies fail to diversify their product lines, the company dies. They could pay their employees $0 and give zero benefits, but that won't stop the inevitable.


    The difference is that there's still significant demand for Twinkies. It's a bit of wishful thinking to think that given the portfolio of brands from Hostess that they aren't able to find a viable business. The problem is costs. I assume that they've been impacted by a number of factors - that have dropped revenues but this only means that it makes legacy costs even less sustainable.

    These brands will be bought - and new more competitive firms will operate them - that's how markets work.

    Incidentally, to argue that Twinkies are obsolete is um a bit ridiculous:
    http://www.reuters.com/article/2012/09/18/us-obesity-us-idUSBRE88H0RA20120918

    To argue that obesity is increasing in the US BECAUSE of Twinkies is um a bit ridiculous. You can't imagine how it would be possible for people to get fatter without Twinkies? The demand for calories continues to increase in the US, but it's not necessarily from Twinkies as evidenced by the fat that demand for them has gone down. Heck you even admitted as much when you said their revenues were down. BTW, demand for horse and buggies are down, yet people travel by land much more than in the past, and most record stores have closed, but people buy more music than now than in the past.


    Who said it's increasing because of Twinkies? I'm saying that the demand hasn't exactly evaporated because of changing tastes. Sure it's down - and that could be as much to do with branding - but they haven't brought down costs fast enough which appears to be the bigger issue.

    So what exactly were you trying to imply when you said:

    "Incidentally, to argue that Twinkies are obsolete is um a bit ridiculous:
    http://www.reuters.com/article/2012/09/18/us-obesity-us-idUSBRE88H0RA20120918"


    That they're not obsolete unlike the examples you posted. It's not like some amazing technology has made their market evaporate overnight. At best it's been a slow decline. There are plenty of firms that survive in stagnating and slow moving markets.

    You said arguing that it's ridiculous to argue Twinkies are obsolete, and provided to a link about increasing obesity as evidence. The implication that increasing obesity is evidence of high demand for Twinkies is ridiculous.

    Anyway, what's your big problem with this whole situation? You should be ecstatic. Maybe you can outsource Hostess jobs from the US and send the jobs to China.
  • Posted by a hidden member.
    Log in to view his profile

    Nov 21, 2012 12:05 PM GMT
    sfbayguy saidYou said arguing that it's ridiculous to argue Twinkies are obsolete, and provided to a link about increasing obesity as evidence. The implication that increasing obesity is evidence of high demand for Twinkies is ridiculous.

    Anyway, what's your big problem with this whole situation? You should be ecstatic. Maybe you can outsource Hostess jobs from the US and send the jobs to China.


    Obsolescence would imply that there's been some major shift in consumer tastes or technology. That American obesity is on the rise suggests that it isn't because Americans are eating healthier as was suggested by several. And when it comes to food tastes, the impact of technology isn't so pronounced - or at least no examples that I think of.

    I didn't say that obesity was indicative of high demand of Twinkies either. You've repeatedly created a straw man.

    I'm neither happy nor sad - though I liked the odd Twinkie and loaf of wonderbread. As for outsourcing to China, these days you're increasingly likely to outsource food jobs to the US:

    http://blogs.the-american-interest.com/wrm/2012/11/15/china-prefers-made-in-the-usa/
  • Posted by a hidden member.
    Log in to view his profile

    Nov 21, 2012 12:42 PM GMT
    riddler78 said
    Your explanation is disingenuous. The timeline I referred to was what you posted rather than your revised set of postings. You posted a union press release dated about a week ago when they would have already been fully aware of the changes in salary. You claim that the pay change was to mend a PR gaffe but it was even more likely this was in large part because of the creditors that pushed the article out in the first place.


    BTW, the executives did get the salary changes for a while until the new CEO (Rayburn) assumed his job. The raises were approved in 7/2011.

    http://www.snopes.com/politics/business/hostess.asp

    And if it weren't for the WSJ article and bad PR, I doubt the new CEO would have even bothered.