Hostess Twinkies vs. the unions

Today, Hostess Brands Inc., maker of Wonder Bread, and Hostess Twinkies, filed for Chapter 11 bankruptcy. Recently, it incurred an annual loss of over $300 million, but, that may not be the entire story.

Hostess began in 1930 as Interstate Baking Company in Kansas City, Missouri.  Over the years, it acquired numerous other baking companies, and in doing so, finds itself today with 372 different union contracts.  And, none of those unions are willing to give up their hold on Hostess. 

Hostess has a trove of complex labor rules that the company deems inefficient, the people said. In some instances, work rules mandate that separate trucks must deliver bread and cake products, these people said. Sometimes separate workers must load the trucks and additional workers must make final deliveries once a truck arrives at a supermarket, they said.

And, these “efficiencies” continue.

Hostess, for instance, pays about $100 million annually to some 40 multiemployer pension plans that cover workers at a wide array of companies other than its own, said people familiar with the matter. Hostess wants to switch to a so-called single employer plan that covers only its own workers.

But, as you might imagine, none of the 40 current pension plans are willing to lose their grip on Hostess money.

In bankruptcy, Hostess will have the opportunity to “reject” any current contract, union or otherwise, and try to restructure itself into a far more efficient company.  Among other things, it plans to,

…ask workers to make dramatic changes to everything from work rules to health benefits and how the company pays pension obligations…

So, Twinkies could still win this battle, but, it is a sad commentary that the battle has to happen in the first place.


19 replies
  1. GdavidH
    GdavidH says:

    Shame on Hostess and any other company that might want to manage their business and employees more efficiently. They are putting economic survival and free market competition ahead of the union contracts ( not the actual workers ) that were weighing them down with bureaucracy.  (Sarcasm)

    Perhaps this administration needs to rewrite the bankruptcy laws to mirror what happened when Gov’t Motors went bankrupt. You know, pay off the unions and their bloated benefits first, then throw a bone to the stockholders.  Executive Order?

    Wait….Hostess is privately owned, isn’t it??

    No pesky stockholders to please. Hmmm? 


  2. JBS
    JBS says:

    Unions. They will kill the golden goose every time. The time for unions is over, done and finished. They are an anachronism. It is interesting that none of the various unions were willing to work with Hostess to keep them from seeking bankruptcy protection. Talk about self-interest. And, it is curious that the very people the unions are supposed to protect are the ones who will suffer the most from this move by Hostess. 
    None of the union officials and pension plan administrators wanted to give up their hold on the fatted goose so now all lose. I fail to see their logic.
    How will the progressives spin this?

  3. kateinmaine
    kateinmaine says:

    union wrangling aside, it’s not like twinkies are made with soy and tofu.  even if they are able to re-emerge with a modicum of ‘hope’, that will all ‘change’ when moochelle trains her sight on those confounded sno balls.  donette let the ho ho ding dongs and fruit pies get you down, cupcake!

  4. ricbee
    ricbee says:

    This is not really the fault of the unions,it is the fault of management. These corporate boards just give them everything they want after a little play fight & then vote themselves big bonuses. The far away shareholder & complicit Funds don’t exercise their ownship power.

  5. Dimsdale
    Dimsdale says:

    New contest: how will Øbama (or Gingrich for that matter) make this “Romney’s fault”?
    You know it is coming…

  6. sammy22
    sammy22 says:

    @NH-Jim: this is the way the system is supposed to work, right? You screw up, you pay the consequences. Pinning it on the unions (as SOS implies) is only half-of-the story. As for Uncle Sam, pray it does not happen (or do something about it): everybody loses.

    • Dimsdale
      Dimsdale says:

      Tell it to GM and Chrysler.  And tell it to the preferred stockholders that got aced out of their investments.

  7. sammy22
    sammy22 says:

    Oh yes, Dims. That is what happens when you take a risk to reap a reward. That is part of the system advocated here. Or should we all keep the money under the mattress?

    • Dimsdale
      Dimsdale says:

      Let’s look at the definition of “preferred stock” (
      “A class of ownership in a corporation that has a higher claim on the assets and earnings than common stock. Preferred stock generally has a dividend that must be paid out before dividends to common stockholders and the shares usually do not have voting rights.”
      The risk was in the inability to vote, not to have Øbama crush their preferred equity stake (transferring much of it to union Øbama supports) or unilaterally (and dictatorially) appoint new board members.  Who will invest now and take the “risk” that Øbama will do something similarly Chavezesque?  That’s not a risk, it’s a suicide leap.  And there’s no money in the mattress to land on….

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