Hostess Brands, Inc. -- maker of Twinkies, Ding Dongs, Ring Dings, Funny Bones, Yodels and Wonder Bread -- is going out of business for good, liquidating. The sudden news, which came Friday, prompted a few entrepreneurial souls to raid stores across the area, buy up the remaining Twinkies and sell them on eBay. Such are the times (and the economy) we live in.
For most of us, getting along without those sugary treats will be easy enough. But it will be a lot harder for the company's 18,500 workers, who will soon be laid off. In addition to its factories, Hostess operated 33 bakeries, 565 distribution centers and 570 outlet stores across the country.
Who's to blame? Most observers agree that the company had been badly run. It declared bankruptcy in January, the second time since 2004. The recession certainly didn't help. But companies can survive bankruptcy if given an opportunity to reorder their practices. That's hard to do when you're juggling 372 collective bargaining agreements.
Forbes noted earlier this year that those union contracts required numerous superfluous jobs and redundant expenses that made Hostess too inefficient. For example, bread and snack cakes, even if they were heading to the same destination, had to go in separate trucks.
A deal that included a 25 percent ownership stake in the company, a seat on the board of directors and $100 million in reorganized debt was offered to the company's unions. The International Brotherhood of Teamsters agreed to the deal, which included concessions for its members. But the Bakery, Confectionery, Tobacco and Grain Millers International Union, which represents 30 percent of the Hostess workforce, refused to make any concessions and instead announced a strike last Thursday.
Without the ability to get its product out, and without an investor to step in and buy it, the already teetering company had no choice but to liquidate.
The bakers union denied it had any role in the bankruptcy, blaming it entirely on the company's leadership. AFL-CIO President Richard Trumka went further, blaming "Bain-style Wall Street vultures." Apparently, Mitt Romney lost the election because he was too busy sabotaging the snack food industry to focus on campaigning.
The Teamsters, which represented a third of Hostess's workforce, had a different take. In a scathing press release last week, they sided with the Hostess management, saying the liquidation was "not an empty threat or a negotiating tactic, but the certain outcome" of the bakers' strike. This was, they added, "based on conversations with our financial experts, who, because the Teamsters were involved in the legal process, had access to financial information about the company." It further alleged that the bakers union chose "not substantively look for a solution or engage in the process," ignored warnings from the bankruptcy judge and did not fully inform its members of how dire the situation was before they voted to strike.
The repercussions go far beyond this one company. There were 10 other unions with Hostess contracts in addition to the Teamsters and the BCTGM. Their members are now out of luck. Hostess was also party to 40 multiemployer pension programs, meaning the other, still operating companies in the programs are now legally required to take on Hostess's roughly $2 billion in pension obligations. Has anyone asked the workers at those companies if they are happy to forgo raises in order to pay the pensions of union members who drove their own company out of business? They won't even have Twinkies as comfort food anymore.