Hostess Was Plotting Twinkie Sell-Off Months Before Workers Struck

Categories: Biz

DeadTwinkie.jpg
In another blow to the unions-killed-the-Twinkie-thereby-depriving-future-generations-of-a-real-American-childhood storyline -- if that wasn't already enough of a laughable oversimplification -- the Morning News is reporting that Hostess was actually preparing for liquidation more than a year before workers with the Bakery, Confectionery, Tobacco Workers and Grain Millers International Union went on strike.

Per the News, documents filed in Hostess' bankruptcy case show that the company hired a consultant back around July 2011 to take a look at what the company's assets would bring in if dismantled and sold off. That's some 16 months before union workers voted to strike on November 9, 2012.

Hostess spokesman Lance Ignon told the News that the company was "engaged in contingency planning, including the preparation of a liquidation analysis, months before the strike, given the uncertainty around labor negotiations."

Ignon neglects to mention that the company was laden with debt, went through seven CEOs in a decade, utterly failed to adapt to changing tastes, and was by no means blameless in its battle with the unions having, for example, diverted money intended for worker's pension to fund day-to-day Twinkie-making. Putting the whole thing on the union is like blaming ship builders for sinking the Titanic.

At least the Twinkie melodrama will be over soon. Hostess expects to have the sale of many brands completed by mid-March, according to the New. Then, perhaps, America will no longer have to endure Great Value Golden Creme Cakes.


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6 comments
Rooster0620
Rooster0620

Love me some D.O., but they really should have someone write about topics like this who actually knows something about business (evidently, so should the DMN).

BK doesn't just happen overnight.  It's not like your personal checkbook where you just wake up one morning and say, "Golly gee.  I guess I'm out of money".

It takes months of planning, and there has never been a BK in the history of BK's, where there wasn't a Ch.7 scenario created in addition to a Ch. 11 scenario, if for no other reason than your shareholders force you to explore all options.

pak152
pak152

and what is wrong with a contingency plan? don't you have one for the day the DO's doors are closed? running a business requires one to take a long look down the road and not just think about what will happen tomorrow. but Guesty said it best.

SouthernCalESQ
SouthernCalESQ

@jazgar Yeah, and the bankruptcy judge let them keep the money they took from workers because of the extra work they created...

Guesty
Guesty

While I generally share the DO's progressive economic outlook, I do think it should hire someone who knows something about business to cover these types of stories.  I mean, anything about business.  Like basic math. 

Hostess paid its employees (CEO all the way down) too much for its business.  A business that has greater costs (including salaries) than it makes won't survive.  Maybe that means Hostess didn't belong in business at all.  Maybe that means everyone should have been taking pay cuts.  Maybe there was a third way no one found or suggested. 

Whatever the optimal solution, status quo wasn't an option and the company and the union both knew it long before bankruptcy.  So the company ran through its options and came up with two.  Option #1:  Cut employee salaries and other costs; Option #2 sell off everything of value and pay its creditors what it could in bankruptcy.  Any competent business person would have considered at least these two options given the dire condition of the company (the law requires it).  Option #1 involved negotiating with the union, which began long before the strike.  Option #2 involved estimating the value of the company's assets to find out what a liquidation would look like.  Neither option could be accomplished in a day, or a month.    

Hostess wasn't able to accomplish Option #1 because the employees decided they would rather not work for Hostess than take the proposed pay cuts (make no mistake, if they didn't know that would be the outcome, they were damn fools).  That's their right, and I don't think anyone should complain about their decision to kill the company rather than take pay cuts below what they considered fair wages. 

A good business manager might have found another way to save the company or might have avoided putting Hostess in that position to begin with, though I haven't heard anyone suggest how that might have been accomplished. The union certainly didn't come up with any answers.  So the company went with Option #2. I'm not sure anyone made a morally wrong decision: A business died. They all do eventually.

As to the premise of your article: contingency planning is part of running a business.  Anyone that doesn't do it is in the wrong job.  Don't you think the union did some contingency planning well in advance of the strike?  If so, do you think that means the union decided a strike was inevitable well in advance of the actual strike and that the union wasn't negotiating in good faith given it knew it would strike anyways?  Of course not.  All the union's planning proves is that the union knew things might not turn out well and that it should have a plan.  The company's plans don't prove anything different.


roo_ster
roo_ster

This is all you got?  A contingency plan?  

I have made plans to defend my house if someone tries to break in, in case of fire, in case the roads are impassable for 3-14 days.


At work, I try to figure out all the likely/probable courses of action in my project.  "What if subcontractor X does not deliver on time?  What if my budget is cut 10%?"  Because most us us who make things happen understand that Nothing Ever Goes Exactly To Plan. 





everlastingphelps
everlastingphelps topcommenter

Actually, it's more like blaming the iceberg, and now the iceberg claiming that the Titanic was planning to hit it because it had some lifeboats on board.


Seriously.  A contingency plan is incriminating somehow?  I have a contingency plan for everything.  I have a contingency plan for if my apartment burns down, but that doesn't mean I'm setting fire to it next week.

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