Unions scapegoated as vulture capital firm liquidates Hostess

Filed in National by on November 16, 2012

We all see what is happening, right? Hostess management claims that greedy striking workers are responsible for plant closings, and the lap dog press reports it even though the Wall Street owners of Hostess already planned to close plants even if the workers accepted the cuts and stayed at work.

Baker’s Union President Frank Hurt says the workers knew the score all along:

Our members know that the plans all along of the Wall Street investors currently in control of this company did not include the operation of Hostess Brands any longer than it takes to sell the company in whole—or in part—in a way that will maximize the profits of these vulture capitalists regardless of the impact on the workforce.

As reported nowhere, except Daily Kos (and maybe ‘Democracy Now!’) – “Workers were being asked to accept cuts, but top executives had gotten massive raises as Hostess was about to enter bankruptcy. Investments in the company’s future that had been promised as part of restructuring after the previous bankruptcy were never made. And as for the management, put in place by the private equity companies that now own Hostess, Hurt says:”

Unfortunately however, for the past eight years management of the company has been in the hands of Wall Street investors, “restructuring experts”, third-tier managers from other non-baking food companies and currently a “liquidation specialist”. Six CEO’s in eight years, none of whom with any bread and cake baking industry experience, was the prescription for failure.

Maybe having just defeated one of the “job creators” in an election, the public will be clued into how these “investors” operate. I’m not holding my breath waiting for the real story to be reported in the main stream media though.

About the Author ()

Jason330 is a deep cover double agent working for the GOP. Don't tell anybody.

Comments (21)

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  1. Walt says:

    The bums didn’t want to work, and so now they can join the ranks of the unemployed. Way to go. You could have been making Twinkies. Instead you’ll be making half-hearted job apps and skating on Unemployment until you get cut off. That’s the American Way these days.

  2. pandora says:

    It’s obvious that Walt knows absolutely nothing about this situation. Nice to see that Republicans are still shunning facts since that worked out so well for them recently.

  3. Jason330 says:

    Some don’t even wait for the lap dog press, the programming is that well developed.

  4. Liberal Elite says:

    If this opens the way for more mom and pop bakeries, net employment may increase.

    Hostess’ stuff was pretty awful anyway.

  5. cassandra m says:

    I’m pretty proud of these workers. They knew that this was a venture capital bust out operation and refused to go along with the program. So the VC guys have to pull the trigger on selling the assets earlier than they planned. Right now no one knows if these plants stay shuttered forever or reopen under new management.

  6. cassandra m says:

    I went over to their website to see if there was a way to help out, but the bandwidth of the site has been exceeded, so apparently lots of folks have the same idea.

  7. jason330 says:

    More from Hurt:

    “When a highly-respected financial consultant, hired by Hostess, determined earlier this year that the company’s business plan to exit bankruptcy was guaranteed to fail because it left the company with unsustainable debt levels, our members knew that the massive wage and benefit concessions the company was demanding would go straight to Wall Street investors and not back into the company.

    “Our members were aware that while the company was descending into bankruptcy and demanding deep concessions, the top ten executives of the company were rewarding themselves with lavish compensation increases, with the then CEO receiving a 300 percent increase.

    “Our members decided they were not going to take any more abuse from a company they have given so much to for so many years. They decided that they were not going to agree to another round of outrageous wage and benefit cuts and give up their pension only to see yet another management team fail and Wall Street vulture capitalists and “restructuring specialists” walkaway with untold millions of dollars.

    “Throughout this long and difficult process, BCTGM members showed tremendous courage,solidarity and devotion to principle. They were well aware of the potential consequences of their actions but stood strong for dignity, justice and respect.”

  8. Rustydils says:

    Very simple, someone will do an asset buyout only. Not buying the business, but just buying the factory and equipment real cheap. Then they will try and offer lower prices and get back the customers. If they are successful they will hire back workers, or hire new workers, orobably non union at that point

  9. Dave says:

    By nature I am curious about human behavior and I wonder what the bakers strategy was behind the rejection of the contract and the strike. Considering the looming banruptcy, I wonder what they expected the outcome to be.

    If I were in that situation, I would be thinking that I have got to find another job doing something I enjoy (like baking). If it were me, at the first glimmer of something (“workers knew the score all along”), I’d be polishing my resume and looking around the area (or even further) for something else. I would take what I can get knowing that whatever I’m getting is coming to end and would bail at the first opportunity. Sure the corporate bad guys are getting rich out of the deal but me going on strike won’t really affect them, it will affect me and mine. In the meantime while I am planning I have a paycheck coming in and maybe I leverage what and who I know into something good for me.

    I don’t get the strategy or the objective.

  10. pandora says:

    Perhaps their motivation was bigger than self.

    It is NO surprise that Hostess closed its doors, so the workers knew what was coming for quite some time.

  11. jason330 says:

    “Our members decided they were not going to take any more abuse from a company they have given so much to for so many years. They decided that they were not going to agree to another round of outrageous wage and benefit cuts and give up their pension only to see yet another management team fail and Wall Street vulture capitalists and “restructuring specialists” walkaway with untold millions of dollars.”

  12. Dave says:

    “not going to agree to another round of outrageous wage and benefit cuts and give up their pension”

    But isn’t that what happened? Wages and benefits went to zero. Right? Look there are battles worth fighting and everyone wants to fight the good fight, stand up for what’s right, but to play Don Quixote seems illogical to me. If I know it’s coming and if there is nothing I can to stop it shouldn’t I go into strategy mode and come up with a plan that works for me and family? Ya know, food on the table and all that?

    I’m kind of a fan of the Powell Doctrine in battles where you maximize the potential for success, minimize casualties and which has as a key component the use of overwhelming force. Bottom line, you don’t fight battles you know you are going to lose unless it meets some strategic objectives. I just can’t see what the strategic objective is here unless it was to give the venture guys a black eye in that case they get a black eye and get rich.

    Of course, I’m a pragmatic sort.

  13. Dave says:

    As an added thought; you want to get back at the bad guys? Change the tax code to treat investment income the same as ordinary income. A dollar is a dollar, I don’t care how someone earned it. That’ll put a crimp in the Bain protocol for business. As long as there is cheap money to be made because investment income is taxed as a far lower rate, all those guys who only have investment income will start paying some real taxes.

  14. puck says:

    ” Change the tax code to treat investment income the same as ordinary income.”

    No need to change the tax code; that is already current law for dividends. When/if the Bush tax cuts expire, dividends reset from 15% to the Clinton rates of being treated as regular income (long-term capital gains reset from 15% to 20%). In my mind the dividend rate reset is the biggest single argument to let the Bush tax cuts expire. No doubt if it happens, wealthy investors will be screaming for “relief.”

    I’m OK with a discount for long-term capital gains to promote stronger hiring and investment. 23% is about right (counting the new 3% capital gains tax from ACA).

  15. cassandra m says:

    Workers standing pat in the Bain-style bust out disrupted the amount of money the VCs could extract from that company. Hurt’s statement makes it pretty clear they knew the stakes. These workers knew that they weren’t going to be working much longer — givebacks or no. These workers also knew that there aren’t many options for them vis other jobs. They specifically decided against doing what Dave suggests — giving in to move on. The work wasn’t going to happen without them, so they might as well end the gravy train the VCs thought they had.

  16. Dave says:

    “did not include the operation of Hostess Brands any longer than it takes to sell the company in whole—or in part—in a way that will maximize the profits of these vulture capitalists regardless of the impact on the workforce.”

    And I would question whether they achieve a disruption of the gravy train. I certainly would love to see an unemotional benefit vs cost analysis of the workers investment in their actions. Collective bargaining is a very American thing. But it’s not always the smart thing. Ultimately, the VC guys were going to shut it down and sell it off. That was their objective. The strike allowed them to achieve their objective early. Maybe they lost a few mill. Maybe not. What is clear is that the strike had virtually no impact on them (they still buy boats) and may have made it easier since they probably don’t incur any costs for retraining, outplacement and other worker considerations.

    Falling on your sword should not be an impulsive and emotional decision.

  17. cassandra_m says:

    Falling on your sword should not be an impulsive and emotional decision.

    Amusing that the only people in this equation who are “impulsive and emotional” are the workers here. They were done one way or another. So calling the bluff of the people working to make just a little more money *at those worker’s expense* seems just as calculating as the whole Bain-style bust out scheme in the first place.

    Another consideration is the price of sugar. The price of sugar has been artificially too high for a very long time. Since lots of other companies needing sugar — the real thing — have moved out of the country to produce, it is worth it to look at this factor.

  18. Jason330 says:

    Super ! We pay nearly twice the global market price for sugar because a couple of wealthy Florida families are not content to make most of the money. they need to make all the money. hurray capitalism! Hurray free enterprise!

  19. ketchapirate says:

    I am curious if the their action had anything to do with the pension account – reading the details of the offer – it appears that the VC were attempting to get the unions to swap their 900 Million owed in missed pension payments for a 100 Million note. If agreed and liquidated later that could have been a windfall for the VC… I did note that the 900 Million was “unsecured” so not sure how much would have been paid. It is interesting that the amount of loss last year was about what was paid to execs.

  20. puck says:

    Hostess execs allegedly gave themselves massive raises before their bankruptcy, including a 300% raise for the CEO. Not just before their recently announced liquidation, but before their Chapter 11 bankruptcy filing in January. As I understand bankruptcy, it may be possible for employees and other creditors to claw back some of this money.

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