Quote Originally Posted by hoyle21 View Post
This morning, Hostess Brands, the maker of such staples as Wonder Bread and Twinkies, announced that they would be liquidating their operations, laying off all of their workers, and going out of business. The issues at Hostess have been decades in the making, a failure to innovate, to improve manufacturing methodology, and a regular problem of conflict between management and workers.

In 2004, the company entered bankruptcy with approximately $450 million in debt. It emerged after investment from Ripplewood Holdings. Today, it now stands at just shy of $1 billion in debt, despite additional investment by two more firms, Silver Point and Monarch. How did this happen?

These firms borrowed money to invest, which then they transferred that debt to the firm, simple. In effect, there never was any investment, only more debt added.





To emerge from bankruptcy, the companies unions agreed to large concessions which these vulture capitalists demanded, cutting thousands of jobs, transferring benefits or cutting benefits entirely. The companies also agreed to modernize the factories, which were running at a loss due to the age of the equipment, some of which dated to the 1930s. The investments from Silver Point and Monarch were to go towards this modernization. Instead the company found itself saddled with even more debt. To add to the company’s woes, the holding companies stopped supporting the retirement fund, raiding it for easy cash to extract from the firm. The current estimates put the liabilities of this fund at over $2 billion currently.

In order to “save” the firm, the operators of the company turned to the unions, which had already surrendered huge concessions just a few years back to turn the company around, and demanded an across the board slash, an additional 31%, along with eliminating the retirement and benefits entirely. It was a bridge too far. The union went on strike, and now the company has declared it will be liquidated.

Of course the right-wing media is quick to blame the unions, but in the end the union members would have lost more if they had capitulated to the vulture capitalists demands. By this move, they can hope to salvage the retirement plan, while if they’d given in they would have lost it all. $2 billion is a lot of money to just “give away” in negotiations. Of course the unions were expected to surrender despite the fact that the management company was asking the bankruptcy court to give their outgoing CEO up to $5.5 million. All of this was in addition to the 80% raises the executives were being treated to.

Then there were company payments to the Teamsters Union for managing the retirement funds, insurance, etc, agreed upon in the earlier bankruptcy proceedings. The company failed to pay for those either, adding an additional $100 million to the pile of bad debt the firm has all to extract as much wealth out of the firm as possible. This cost will, if not resolved during the liquidation, be spread to other companies the Teamsters operates with, as part of the contracts. The Hostess liquidation now will impact not only their direct employees, but hundreds of other firms.

For those who not grasp how these firms operate, here is former Secretary of Labor Robert Reich explaining it:
great post brother, its amazing that the ceo's cant raise the cost of a twinkie 20 cents and save 18000 jobs but they have no problems blaming unions. how much do you think a cupcake maker makes an hour? im sure its not enough to ruin a company. its obviously poor management