Virtually all Americans are familiar with Hostess, makers of Twinkies, Ho-Ho's, Cupcakes and other baked good snacks. According to the news, Hostess has been unable to reach a labor agreement with their bakers, who happen to belong to the Bakery Workers Union. Since Twinkies, Cupcakes and Wonder Bread are so popular, how did Hostess get into such a financial bind, requiring them to seek a pay cut for their bakers? And since Hostess is in so much financial trouble, why would the Bakers refuse to take a pay cut to save the company and their jobs?
Hostess Brands, Inc., once known as Interstate Bakeries has a history of declaring bankruptcy. In 2004, Hostess dropped the Interstate name, and sought protection against creditors by obtaining "gap credit" through the majority sale of equity to venture capital firm Ripplewood Holdings with smaller interests to GE Financial Capital and along with a couple of other venture capital firms. From this sale of equity, Ripplewood closed as many as nine bakeries, 300 sales outlets and laid off 10,000 employees. In 2009, Hostess dropped certain bread lines (Sunbeam) and continued to produce only Wonder Bread, Twinkies and Cupcake brands. By December 2011, Hostess again began experiencing financial difficulties, with management deciding to stop making required loan repayments ($700 Million owed) and required contributions to union pensions. Instead of making these required payments, Hostess management (through the Venture firm Ripplewood), had in 2010 given its CEO a compensation package including $1.5 million in salary plus "long term compensation" to the additional tune of $1.95 Million (all the while the Union was being told by management that it could not afford to make pension contributions).
As a result, Hostess again formally filed for bankruptcy relief seeking to reduce employee pay as part of their reorganization plan. The Bankruptcy Court found these compensation moves to be outrageous, especially when it was proven that Hostess executives had received pay raises of 80% the year before the bankruptcy filing. In response, the bakers immediately went on strike protesting the pay cut while Hostess executives would continue to receive elevated pay. Now with the strike unresolved, Hostess recently proclaimed it will seek Chapter 7 Liquidation instead, and hence, Republicans use the Union as the scapegoat for the financial ruin of the company. According to news out just today, the Bankruptcy Judge has ruled that Hostess will not get off so easy by liquidating. Because up to 22,000 jobs are involved, the Judge has ruled that both the company and the Union must mediate their differences, with full acknowledgement that management has raped the financial pockets of the company by design.
So to Union haters, pay attention to the real reason for companies going under. It is never in the best interest of employees to see their jobs disappear. Unfortunately, executives operating under the control of Venture Capitalists, make a habit of buying companies, strip their financial assets (what Mitt Romney once said was to "harvest" the assets), only to then discard them in bankruptcy. Wake up haters of Unions, employees and judges are on to your "business plans" and are no "Ho-Ho's."