The Hostess Bankruptcy Lie


The Internet is on fire with news that Hostess will be closing it’s doors and alas … no more Twinkies (at least until someone buys the product and relaunches Twinkies). People are swarming to stores to buy up the last Hostess products and many are thinking they’re going to strike it rich selling Twinkies on Ebay.

The story that Hostess gives you for closing it’s doors, is that it’s all the Union’s fault. Employees refused to make concessions to avoid bankruptcy. It’s a lie.

The story of Hostess is very similar to many “Bain Capital” like deals. Eight years ago, Hostess was acquired by private equity firms. It has had 6 CEOs during those years. None of the new “owners” have been bakery or food people.

This isn’t Hostess’s first bankruptcy. The employees already made concessions to help the company remain profitable in previous bankruptcys. And now, they were being asked to take an additional 29%-32% cut in pay and benefits, after the executive management just tripled their own salaries.

Of course, Hostess management had already claimed that the strike would be responsible for the closings of specific plants—when it had already planned to close plants even if the workers accepted the cuts and stayed at work. BCTGM President Frank Hurt says the workers understood who they were dealing with:

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.

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.

This is a cross-post from the Bakery, Confectionery, Tobacco Workers and Grain Millers (BCTGM).

In a desperate attempt to break the solidarity and resolve of striking BCTGM members across the country, Hostess Brands is falsely claiming that its decision to close three of its bakeries—St. Louis, Cincinnati and Seattle—is the result of the nationwide strike against the company by BCTGM members.

In fact, according to the company’s 1113 filing with the bankruptcy court earlier this year, as well as its last/best/final and non-negotiable proposal to its BCTGM-represented workers, the company was planning to close at least nine bakeries as part of its reorganization plan, although the company refused to disclose which bakeries it intended to close. This is in addition to the three bakeries that were to be closed as a result of the company’s planned sale of its Merita division.

Moreover, St. Louis Mayor Francis Slay was quoted in a Nov. 13 KMOX-CBS St. Louis article stating, “I was told months ago they were planning on closing the site in St. Louis….And there was no indication at that time it had anything to do with the strike the workers were waging.”

BCTGM President Frank Hurt stated:

The recent claim by Hostess CEO Greg Rayburn that our strike is the reason for the closure of the three bakeries is simply not true. That statement is a continuation of a disturbing pattern by the company of issuing public statements that are erroneous at best and disingenuous at worst.

Our members rejected the company’s outrageous proposal by 92 percent in September. Rejection came from every corner of the country. They were being asked to vote on a proposal with massive concessions, knowing that their plant could very well be one of those to be closed.

Our members are on strike because they have had enough. They are not willing to take draconian wage and benefit cuts on top of the significant concessions they made in 2004 and give up their pension so that the Wall Street vulture capitalists in control of this company can walk away with millions of dollars.

Over the past eight years since the first Hostess bankruptcy, BCTGM members have watched as money from previous concessions that was supposed to go toward capital investment, product development, plant improvement and new equipment was squandered in executive bonuses, payouts to Wall Street investors and payments to high-priced attorneys and consultants.

BCTGM members are well aware that, as the company was preparing to file for bankruptcy earlier this year, the then-CEO of Hostess was awarded a 300 percent raise (from approximately $750,000 to $2,550,000) and at least nine other top executives of the company received massive pay raises. One such executive received a pay increase from $500,000 to $900,000 and another received one taking his salary from $375,000 to $656,256.

Over the past 15 months, Hostess workers have seen the company unilaterally end contractually obligated payments to their pension plan. Despite saving more than $160 million with this action, the company continues to fall deeper and deeper into debt. A mountain of debt and gross mismanagement by a string of failed CEOs with no true experience in the wholesale baking business have left this company unable to compete or survive.

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