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1 Bob Dillon  Sat, Nov 24, 2012 4:03:46pm

It would seem that both sides were so busy feeding off of Hostess that it simply imploded.

2 TedStriker  Sat, Nov 24, 2012 4:29:01pm

re: #1 Bob Dillon

It would seem that both sides were so busy feeding off of Hostess that it simply imploded.

Umm, no.

As much as some people want to pin some blame on the unions for how this all went down, I can't really fault them for calling Hostess management on their BS. In any case, Hostess might have a suitor; read this CNN/Money story, because there's some very instructive parts in it about why Hostess went tits up:

[Link: finance.fortune.cnn.com...]

"I think that we could offer a slightly better, more labor-friendly deal than what was on the table last week," says Sun co-CEO Marc Leder, in an interview with Fortune. "We also think that one point the unions have made is that there hasn't been a great amount of reinvestment in the business. We've found that investing new capital into companies like this can be very positive for brand, people and profitability... We would look to invest in newer, more modern, manufacturing assets that would enable the company to become more productive and to innovate."

Basically, the current vulture capital ownership has been doing a Romney/Bain Capital and has been wringing any profits out of Hostess into their own pockets and putting the company deeper and deeper into debt, while not investing much into facilities and equipment, ensuring that what we are seeing unfold now with the shutdown and attempted liquidation was going to be inevitable.

Sounds to me like the BCTWGM saw the writing on the wall after Hostess management wanted to slash their pay and benefits closer to the bone and said "NO MORE!", even at the probable expense of their own jobs going into winter and the holidays.

Hopefully, Sun Capital can pull off a buyout and get Hostess and its workers back to work soon.

3 Amory Blaine  Sat, Nov 24, 2012 5:01:30pm

Someone should alert the media. Because if you listen to the soundbites, it was all the unions fault after they "failed" to take the deal.

4 Lidane  Sat, Nov 24, 2012 5:15:49pm

Gee, you mean that shitty, incompetent management and a revolving door at the top which saw a half-dozen CEOs in less than a decade would lead to a multi-billion dollar sales juggernaut imploding?

Who could have ever predicted such a thing?

///

5 calochortus  Sat, Nov 24, 2012 5:32:24pm

But try telling any of this to the anti-union folks.

IIRC, the unions did give up some stuff the last time their contracts were up for renewal. Management was just intent on sucking every possible cent out of the business.

6 Bob Dillon  Sat, Nov 24, 2012 6:36:59pm

re: #2 TedStriker

[Link: littlegreenfootballs.com...]

Management was at fault and I posted as such. However with the following union rules someone would have to be crazy to take on and continue with this:

"Uncounted in the above numbers were the outrageous union-imposed rules that made for a too-high-to-bear cost of sales:

No truck could carry both bread and snacks even when going to the same location
Drivers were not permitted to load their own trucks
Workers who loaded bread were not allowed to also load snacks
Bringing products from back rooms to shelves required another set of union employees
Multi-Employer pension obligations made Hostess liable for other, previously bankrupted, retirement plan contributions from employees that never worked for Hostess at all"

7 KingKenrod  Sat, Nov 24, 2012 6:49:25pm

The best article I've read about the long decline of Hostess was written by David A. Kaplan for Fortune magazine - you can read it here. It was published before the final failure of the company to reach an agreement with its unions.

High labor costs were an issue. But so were high commodity costs, too much debt, a growing public distaste for their products, and finally the recession.

Another reason (not mentioned in the article) is that the acquisition spree that Hostess's predecessor IBC went on in the late 1990's never paid off - IBC wound up paying excessive debt service but never modernized to take advantage of the expansion (cutting labor costs and negotiating better contracts would be part of this). This landed IBC in bankruptcy court, only to emerge after 5 years with even more debt.


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