Was Hostess' Death a Murder, Suicide or Natural Causes?

Or was it all three?

In fact, so great was the distrust between labor and management, built on a foundation of executive bonuses and broken promises, that Hummel — and, he said, his bakers union leadership — believed the wage cuts, starting at 8 percent and shrinking every year thereafter, were cumulative. Meaning, eventually, his take-home pay would fall by 27 percent. The Teamsters say they didn't read the agreement that way. And Hostess says that wasn't the intention. The Teamsters and management contend the first-year 8 percent cut in the base wage would gradually be restored. But that wasn't the bakers union's story. "I would lose my house," Hummel said.

The bakers didn't even bother to challenge in court a Hostess motion to impose the wage and benefit reductions on its membership. The judge had no choice but to grant it. In a bankruptcy court rarity, the judge ruled Hostess could not throw out its bargaining agreements with the Teamsters, who had negotiated diligently. That was the most hollow of victories, though, because on November 9, the bakers walked off the job. Hostess petitioned the judge to allow it to liquidate. After an unsuccessful last-ditch mediation effort, the company's request was approved. Hostess was no more.

Don't weep for management, though. Driscoll landed on his feet as the chief of Diamond Foods, owner of Kettle Brand Potato Chips and PopSecret. Shed not a tear for the private equity guys, either; they're still obscenely wealthy, and even though Ripplewood's equity got wiped out, it'll still probably get something. The lenders? That's the funny part. Under the terms of the deal they hashed out with the Teamsters, they would have actually made less money keeping Hostess a going concern than they will now by just selling the brands at auction. (Flower Foods, owner of Nature's Own bread and TastyKake, already bid nearly $400 million for Wonder Bread and the other bread brands. Flower, by the way, probably doesn't want to have anything to do with the unions. There's also a private equity firm with a hipster taste for legacy brands that wants Twinkie and the other cakes for $400 million.)

Catherine Downes
Catherine Downes

Details

Truly, the only schmucks out on their asses have blue collars. Storz, the Teamster driver, voted against Hostess' final offer. He said he doesn't know a single Teamster who voted differently. "They thought we were a bunch of goddamned idiots," he said. "Even after they closed their doors, three weeks later they gave themselves a bonus." It's true; Hostess petitioned the judge to let it pay $1.75 million in "incentives" to senior management during the wind-down. The U.S. Department of Justice asked the judge to appoint a trustee to oversee the liquidation because the bonuses may not be "permissible." The judge declined and let management pay out "incentives" anyway.

Storz, meanwhile, is still looking for a job. He's middle-aged. Employers wants youth. He doesn't want to leave his wife for weeks at a time, but everybody's looking for long haulers.

Hummel, the baker, cut off his cable TV, eats frozen burritos for lunch most days, eyes warily the expiration date on his federal safety net and hopes either his microbrewery takes off or he gets a power-line gig with the local utility. You'd think he might regret his union's decision to strike rather than take a deal that really wasn't that bad, considering the alternative. But you'd be wrong. Besides, what exactly was the lesson he and Storz were supposed to learn? Was it that not all private equity firms are rapacious Bains, but perhaps just gross miscalculators? That some hedge funds will stay at the table to keep a company going, probably longer than they should, instead of cashing out? Or that union bosses sometimes make moves that are entirely contrary to the best interests of the workers they represent?

Surely David Durkee, the new bakers union boss, has seen the latest bellwether: Michigan, a labor stronghold, recently ratified right-to-work legislation, so that workers can choose whether to pay union dues in a union shop.

And surely he's seen the latest Bureau of Labor Statistics report finding union membership at its lowest ebb in a century.

Now more than 5,000 of his membership are out on their asses in the cold, looking for work in an unfamiliar American marketplace. If there's a story here of two Americas, a story of union greed or corporate rapacity perpetrated by Wall Street, good luck finding it. There aren't many parties who don't have Twinkie the Kid's creamy blood on their hands.

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28 comments
lobar
lobar

1 down,,2872 to go,,,good ridance! These go straight to ur arteries

pak152
pak152

can't wait to fully read this article to see how one-sided Brantley has made it

j.walter.miller
j.walter.miller

50k a year for clerking on a dock?  Are you serious?  That is a 10 dollar an hour job max.

Sharon_Moreanus
Sharon_Moreanus topcommenter

Hostess is Irving based...not Dallas.

Next thing we'll see here is that they are going into partnership with the Lagrange folks and opening in Deep Ellum.

bluebarnstormer
bluebarnstormer

Overall this is a great story that covers many of the details that are left out of most media reports. I appreciate you pointed out that both Unions gave concessions the first bankruptcy and the hedge funds failed to live up to their end of the deal- fixing infrastructure and running the company. All while giving themselves repeated bonuses. 

There are a few things wrong though. You discuss this as if the Bakers refused to negotiate with the company. That is false. The hedge funds were only willing to negotiate in bankruptcy court and refused to work out a deal in head to head negotiations, as is the historical standard. Negotiating in court is not a negotiation. The Bakers know the history of the judge and the hedge funds involved and saw NO reason pretend like we would be treated fairly. At this point, the hedge funds had already stolen our pension contributions ($4.25 an hour) and the judge had approved the theft. 

You also portray the Teamsters as 'taking a lead' because of the (false portrayal of) Bakers as not negotiating. The Teamsters do not 'lead' the Bakers and thank goodness for that. They failed to enact the will of their membership and everyone who worked there knows it. As Mr. Storz attested to in this article. You point out the narrow vote of 4400 Teamsters but fail to mention the 'disqualified' ballots outnumber the 'yes' votes.

I also find the printing of the story about the Bakers alternative offer highly suspect. I have been immersed in Hostess news for years and am an active Union member. I have never heard this in my life until this moment. Who is the source of this claim? How do you know that they aren't misrepresenting the deal proposed? Why are they unnamed if they are telling the truth? Did you confirm this with anyone? Apparently not with any officials at the Bakers Union, as you point out. 

Worst of all there's this. "Instead of mailing out ballots to its membership, like the Teamsters had, they held voice votes in their union halls." Says who? I voted by secret ballot in Lenexa, KS- the first bakery to vote. I can't speak for every bakery but clearly whoever told you that lie cannot either. Someone should ask the Teamsters why a mail in would be better since theirs was a colossal failure, and offended the MAJORITY of their membership at Hostess.

This article is fairly accurate about the company but is too generous to the Teamsters and too speculative about the Bakers. But thanks for including the previous concessions and the reasons the Bakers didn't trust the hedge funds.

And please stop using the phrase 'Union bosses', they are elected officials who are supposed to do what they are told by the membership, not the other way around. Maybe the Teamsters confused you.

bluebarnstormer
bluebarnstormer

@j.walter.miller You should reread the article. I made $34,000 on the dock BEFORE the cuts they imposed this bankruptcy. After 5 years the cuts would have that same job around $28,000 a year. It never ceases to amaze me how people will mock what someone makes at a job they know nothing about. And for the record, it is less than the baking industry standard for mass production in the US. Now how much do you make and what do you do? Shall we all debate it with little info?

pak152
pak152

@bluebarnstormer"And please stop using the phrase 'Union bosses', they are elected officials who are supposed to do what they are told by the membership, not the other way around." really? union 'officials' do what the membership tells them? do the official ask the members if they want union funds to go totally to the Democratic party?

bluebarnstormer
bluebarnstormer

@pak152 
 Any Union could vote to not contribute politically. Do you think they are required by law to contribute? They choose to because it is common sense. Sorry if that is too democratic for you when it doesn't end the way you want it. If you don't like what the Union does then get a job without one. You know, like the vast majority of jobs.

j.walter.miller
j.walter.miller

@bluebarnstormer @j.walter.miller You got a raw deal but you always have the opportunity to work for someone else.  A year of pension payments shouldn't dent your retirement plans too badly.  I don't have a pension at all.  I am planning my own retirement funding and managing my own investments.  That task is far to important to be trusted to any third party.  If my employer stole from my paycheck I would take it up with the Texas Workforce Commission and the Texas AG.  If I couldn't be made whole I'd find another job pronto.  I know you feel wronged by these people but you really have to look forward instead of dwelling on the past.  You can't change what happened.  Your attitude will determine what success you may have in the future. 

bluebarnstormer
bluebarnstormer

@j.walter.miller I have never said anything to imply that Hostess is the only employer out there. I responded to your original comment that falsified and ridiculed my earnings. I said they stole money from my paycheck and closed the plant to sell of the brands after stripping the Unions of their rights. I said if we don't do something about it then hedge funds will continue to destroy the middle class. I said looking away because you got it good doesn't change that you can be stolen from too.

You seem to be saying that since you have it good then everyone else should just deal with what happens to them. I will not be stolen from and be quiet about it. Maybe you would be. But I would call it wrong no matter who was stolen from, even if they stole from you.

Did you miss the part where they collected $4.25 an hour from our paychecks for our pension for over a year but didn't send it to the pension? Or the part where the judge ruled it third tier debt and waived it? Did you catch the part where the secured debt includes the loans and interest that the hedge funds gave themselves but doesn't include the stolen pension funds? Maybe you missed that the Federal Pension Guarantee Corporation isn't going to help us because they don't guarantee failing companies that steal from employee paychecks.


But hey, at least you got it good. I should just give them my car while we're at it.

j.walter.miller
j.walter.miller

@bluebarnstormer @j.walter.miller Small businesses employ the vast majority of Americans.  Statistically speaking, it's quite unusual to work for a huge firm if you are employed in this country.  I think you might have misunderstood the industry lingo, "boutique shop".  That term simply means "highly specialized small business"; not a retail store selling anything.

bluebarnstormer
bluebarnstormer

@j.walter.miller They sell at least 500 million Twinkies a year. Hostess had total sales of $2.5 Billion last year. The idea that people are more health conscious is a myth. There may be healthy people out there but America is fatter and less healthy than ever. Diabetes has reached epic proportions. Today's kids are the first generation to have a lower life expectancy than their grandparents in US history. You can blame a lot of things for the Hostess failure but 'healthy living' ain't on an honest list.

j.walter.miller
j.walter.miller

@bluebarnstormer @j.walter.miller The timing is serendipitous. The compensation adjustment corresponds with year end performance reviews.  The advantage to working for such a small, boutique shop is that I am able to get my raise and bonus now instead of having to wait till April if I worked for a huge firm like IBM.

j.walter.miller
j.walter.miller

Today has been awesome.  I found out this morning that my Linked In profile is in the top 5% of profiles viewed in 2012.  That means lots and lots of prospective employers checking me out.  I also got my year end review numbers too.  Raise and bonus.  Score!

j.walter.miller
j.walter.miller

@bluebarnstormer @j.walter.miller You're a baker, right?  Get a job with another bakery.  What are you doing for work now? Is it possible that people just aren't eating Twinkies anymore because they are health conscious?

bluebarnstormer
bluebarnstormer

@j.walter.miller Hedge funds seek money. Not just 'poorly managed' companies. Hostess was managed much better before the hedge funds took over for the final 8 years of biz. 82 successful years of innovation followed by 8 of piracy. 

Everything is for sale, including your company and you know it. As far as 'massive labor costs' Hostess Bakers were paid less than the national average for mass production bakeries. We make less then Sara Lee (the largest bakery) and General Mills workers nationwide. Those companies are profitable and have the same Union I am in. Hostess failed because hedge funds wanted to strip the Unions and sell the brands, that was the goal all along. It wasn't the Bakers who bankrupted it.

I will 'bad-mouth' this disaster of an economy until people finally see the truth, in other words, forever. Nothing you have said gives me hope that the average person even understands what's going on. Good luck in India, training your replacements.

j.walter.miller
j.walter.miller

@bluebarnstormer @j.walter.miller My employer is not attractive to hedge funds.  We are bringing in boat loads of cash so the fund would have to pay top dollar to acquire our company.  Since we are privately held I can tell you with certainty we are not for sale.  Since I own shares in this company any eventual sale will benefit me personally.  Hedge funds typically look for businesses that are being poor managed that can be bought at a deep discount.  Some of the malady that makes a company a good target is massive labor costs due to unions.  My occupation is non-union and it's going to stay that way.  Competitive.  If something were to happen to this employer I've got dozens of options for even higher paying jobs at my finger tips.  I'm sorry if that infuriates you but I won't let you bad mouth our entire economy.  Parts of it are doing really well.

bluebarnstormer
bluebarnstormer

@j.walter.miller "software everywhere' is supposed to prove something? They don't need to produce it here in this country and if hedge funds get a hold of your employer you can bet they will look into how to move overseas. I had a 'severance package' in my contract with the company too, but got nothing because the bankruptcy court ruled they didn't have to pay it to us. It was in the contract! People need to stop pretending that they are 'special' (hint: you're not) and accept that we need to look out for the economy as a whole. Allowing hedges to screw 'others' only leaves the door open for them to screw you. 

As far as 'I promise there are plenty of jobs for anyone willing to make a change.' BS unless we all plan to move to third world countries. Not every underemployed or unemployed person can switch to software and get a job. And what would you tell all these people when they are outsourced and laid off again? They won't be surprised but apparently you will be. 

j.walter.miller
j.walter.miller

@cruz.dolores @j.walter.miller Look around you.  There is software everywhere.  Every traffic camera, every ATM, every mobile phone, every cash register, every car, every building.... everything depends heavily on computers and software.  I get a half a dozen phone calls, emails or linked in messages a week offering new job opportunities.  I was laid off once in 2008 from a start-up that ran out of ramp (cash) due to the severe downturn.  I got 2 months severance and found another job in 4 days making about 12k more.  If you are willing to change occupations I promise there are plenty of jobs for anyone willing to make the change.

cruz.dolores
cruz.dolores

@j.walter.miller You are living in a fool's paradise. Your pink slip will come sooner or later. And since you're so smart and skilled, they will probably force you to train your foreign replacements, holding your severance, reference, and unemployment eligibility hostage until you do. That's how they've been rolling in corporate America.

j.walter.miller
j.walter.miller

@bluebarnstormer There are some types of low end software jobs that can be off shored efficiently.  What I do isn't that kind of work.  Software engineering enjoys negative unemployment (there are far more jobs available than qualified engineers to fill them resulting in fierce competition, stellar compensation/benefits and an awesome quality of life).  The software that is built today automates many, many lower end jobs that were once done by humans.  There are more jobs than ever in software but a shrinking number of manual labor type jobs that used to be plentiful 40 years ago.  Software engineering wages have continued to rise despite the economic misfortune this country has suffered in the last five years.  My advice to anyone that is facing job obsolescence is to retrain yourself for an occupation that has more available jobs.

bluebarnstormer
bluebarnstormer

@j.walter.miller I didn't misunderstand. What you do is worth a couple of bucks a day in India. The free market is worldwide now and we are getting to a point where the only thing left will be service jobs in the US. But no one will be able to afford the services. 

If everyone just keeps looking the other way while hedge funds strip the economy of its middle class then we deserve what happens. We can't just keep cutting the wages of average Americans and pretending like everything will be fine. You may feel job outsourcing insulation now but what about 10 years from now if the current outsourcing trends continue. 

But before you worry about that you should worry about the current economy. Obviously the loss of 18,000 jobs affects the sales of software, less to the company and more to employees who have lost middle class purchasing power. As the middle class shrinks so does the marketplace for software. How much more would you make in your field if middle class jobs were rising in pay and number instead of continuing the 40 year decline?

j.walter.miller
j.walter.miller

@bluebarnstormer I think you misunderstood.  My income is in the top 16%% in this country. My income is in the top 3%% worldwide.  What could a union possibly do for me except drive away employers and keep shitty engineers in jobs when they should be fired?

 
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