Green Room

Video: Hostess chief on the labor dispute that killed Twinkies

posted at 11:12 am on November 16, 2012 by

Via the Washington Free Beacon. This was, in fact, a long time coming:

What’s clear is that a worker strike isn’t the only headache for Hostess.

PrivCo, a company that researches privately-held firms, estimates that at the end of 2011, Hostess had $40.3 million in cash and $1.43 billion in liabilities, including $303 million in debt that came due this year. PrivCo CEO Sam Hamadeh calls these figures a “recipe for a disaster in the making.”

Hamadeh says the company’s “onerous union contracts and its massively unfunded pension obligations” are a big part of the problem. “As of January 2012, Hostess’ pension fund was approximately $2 billion underfunded,” he says.

Toss in a broader social trend towards calorie-counting leading to lower demand and it’s a perfect storm. But don’t despair: Someone’s bound to buy the brand in liquidation and resume production. The question is whether tomorrow’s bland spongy lowbrow eclairs will be as tasty as yesterday’s bland spongy lowbrow eclairs. I can’t deny it — reading the news today, I’ve already got a craving for one.

Update: A solid summary from Mark Hemingway of just how insane the union’s behavior was here. Some workers took to crossing the picket line because they realized the union was on a kamikaze mission. Too late.

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Hamadeh says the company’s “onerous union contracts and its massively unfunded pension obligations” are a big part of the problem. “As of January 2012, Hostess’ pension fund was approximately $2 billion underfunded,” he says.

Sounds just like The People’s Republic of Illinois… Forward!

The latest review based on fiscal 2011 figures shows Illinois’ unfunded liabilities rose to $82.9 billion for a funded ratio of 43.4% from $75.7 billion for a funded ratio of 45.4% in fiscal 2010.

visions on November 16, 2012 at 11:30 AM

The parasite has killed it’s host….ess.

portlandon on November 16, 2012 at 11:31 AM

The question is whether tomorrow’s bland spongy lowbrow eclairs will be as tasty as yesterday’s bland spongy lowbrow eclairs. I can’t deny it — reading the news today, I’ve already got a craving for one.

Now I’ve got a craving for eclairs. Damn it, AP!

Doughboy on November 16, 2012 at 11:36 AM

A comment from another site where I read this story…

This is vulture capitalism at its ugliest. The business owners will sell the corpse of the business they murdered and stuff their pockets with cash, gloating all the while. A federal investigation is needed here.

Yes, let’s hold Congressional hearings/

JPeterman on November 16, 2012 at 11:38 AM

I know of at least three direct competitors in stores now who produce the exact same low brow inexpensive facsimile eclairs. Tasty Kake, Dolly Madison, and Little Debbie will have zero trouble absorbing the market share once owned almost entirely by Continental Baking Corporation. Don’t mourn for their other product, Wonder Bread, as you’ll have the usual bazillion and one suspects there to take up the slack.

If I had to guess, some of the original shareholders are going to shed themselves immediately of those nasty pension liabilities, union thugs, and take every one of those $40 Million bones and use it to purchase the very same used equipment that was abandoned just yesterday. They’ll open under a Corporation named “Hostess Brands,” or something else which is eerily similar, and begin production immediately without those Trumka look-a-likes.

By the way, here are some well known examples of this action already having been taken. K-Mart, Norwalk Furniture, Cravatt Coal, Picoma, Alcoa.

Flyovercountry on November 16, 2012 at 11:42 AM

A caller to a local Chicago radio station this morning said he went to his Jewel Food Store and cleared the shelves of Hostess products. There was quite a stack of boxes on the checkout conveyor which surprised the young union cashier who had no idea what was going on with Hostess then of course bashed the company for union abusing. The caller, btw, is looking forward to a big payday when he sells off some of the product.

And while I sympathize with CEO Rayburn for the loss of his business, I feel even more for him bcuz he looks too much like IL Sen Dick lyin’ sack’o’Durbin.

stukinIL4now on November 16, 2012 at 11:47 AM

Boycott Hostess!

forest on November 16, 2012 at 12:02 PM

I would say the bakers union made some enemies today even among the other unions.

Reminds me of this:

https://www.youtube.com/watch?v=Q_TGQ7rGL-Q

crosspatch on November 16, 2012 at 12:02 PM

Hostess has come to the inevitable end of any company that has a union.

jukin3 on November 16, 2012 at 12:04 PM

JPeterman on November 16, 2012 at 11:38 AM

They actually believe that catastrophic liquidation bankruptcy is a source of windfall profits for ownership. They’re insane. Good work Bill Burton, Axe, Obama…

forest on November 16, 2012 at 12:10 PM

Congratulations, Union.
You won.

TimBuk3 on November 16, 2012 at 12:17 PM

The unions don’t care one bit about the 18,000 that lost their jobs.

FireBlogger on November 16, 2012 at 12:34 PM

Hostess has a lot similarities with America. They’ve got a great brand but horrible management that ran up debts so high that it was going to be next to impossible to pay them off and the people dependent on the company would not give up anything to save it.

ReaganWasRight on November 16, 2012 at 1:03 PM

I can live without Wonder Bread and Twinkies. Hohos, on the other hand …

Paul-Cincy on November 16, 2012 at 1:43 PM

“Toss in a broader social trend towards calorie-counting leading to lower demand and it’s a perfect storm.”

I suppose so, but if you walked into a Wegmans supermarket, that would be the very last reason that comes to mind. Hostess’ products just couldn’t compete on price, variety and delectability levels, but mostly on price. How does $2.50/loaf of Wonderbread compete with $1.50/loaf of fresh-from-the-oven Wegmans? That’s difference is past the brand loyalty threshold, I’m sorry to say and this is from a Wonderbread patron since Millbrook went out of business.

Dusty on November 16, 2012 at 2:02 PM

I know of at least three direct competitors in stores now who produce the exact same low brow inexpensive facsimile eclairs. Tasty Kake, Dolly Madison, and Little Debbie will have zero trouble absorbing the market share once owned almost entirely by Continental Baking Corporation. Don’t mourn for their other product, Wonder Bread, as you’ll have the usual bazillion and one suspects there to take up the slack.

Flyovercountry on November 16, 2012 at 11:42 AM

Actually, Dolly Madison is a Hostess brand as well, and thanks to “da Union”, 2000 people in my Kansas hometown are now out of work. Emporia has recently been hard hit by a series of plant closings, and, this will only deepen to local recession.

brushman on November 16, 2012 at 2:06 PM

Let me get this straight. You work at a bakery factory that makes a product that has a shelf-life of a bazillion years. Therefore, the product could be made anywhere in the world. Not to mention there are knock-off equivalent products already on the market. And you think you have employment negotiation leverage?

Carnac on November 16, 2012 at 2:11 PM

The question is whether tomorrow’s bland spongy lowbrow eclairs will be as tasty as yesterday’s bland spongy lowbrow eclairs. I can’t deny it — reading the news today, I’ve already got a craving for one.

AP, don’t panic. They have a shelf life somewhere in the realm of 150+ years. Even with no new Twinkies being made, all you’ll have to do is track down some pre-existing ones via ebay, craigslist, etc.

In fact, even if they are bought out and manufacturing resumes, the “original” Twinkies might just become a hot collectors item since they’re eternally edible. Yum yum.

pianomomma on November 16, 2012 at 2:51 PM

I suppose so, but if you walked into a Wegmans supermarket, that would be the very last reason that comes to mind. Hostess’ products just couldn’t compete on price, variety and delectability levels, but mostly on price. How does $2.50/loaf of Wonderbread compete with $1.50/loaf of fresh-from-the-oven Wegmans? That’s difference is past the brand loyalty threshold, I’m sorry to say and this is from a Wonderbread patron since Millbrook went out of business.

Dusty on November 16, 2012 at 2:02 PM

Not just with the bread. A Hostess Apple Pie is $1.49, all the competitors are at $0.75 or $0.99. Tough sell,

Nathan_OH on November 16, 2012 at 3:59 PM

Good. Now twinkies will come back and they’ll be cheaper since the new owner won’t have to get bled dry by unions.

kaltes on November 16, 2012 at 5:06 PM