# Hostess to go under



## ScottySkis (Nov 16, 2012)

Hostess cupcakes and all their great baked goods might not be around much longer. They say because their employees are on strike and if they do not go back to work by 5 pm today the company is going bankrupt, no.http://www.necn.com/11/16/12/Hostes...nding_mobile.html?blockID=802599&feedID=11106


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## deadheadskier (Nov 16, 2012)

Guess I should go stock up on Twinkies.  I do believe the shelf life on them is a couple of decades.


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## skiNEwhere (Nov 16, 2012)

They're still good, even if we have to live through a nuclear apocolypse


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## JimG. (Nov 16, 2012)

deadheadskier said:


> Guess I should go stock up on Twinkies.  I do believe the shelf life on them is a couple of decades.



Decades and maybe eons.

The thought of no more Twinkies is horrifying!


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## hammer (Nov 16, 2012)




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## TheBEast (Nov 16, 2012)

Good riddance.....this is their second time in bankruptcy.


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## deadheadskier (Nov 16, 2012)

Upon hearing the news a friend of mind said, "I had converted to eating Little Debbie a long time ago.  Need to stay away from HoHo's though."   :lol:


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## Nick (Nov 16, 2012)




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## o3jeff (Nov 16, 2012)

No more Wonder bread either.


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## bvibert (Nov 16, 2012)

I'm not a huge fan of Hostess stuff, but I do have a weakness for their apple pies when I see them in the vending machine at work.


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## Grassi21 (Nov 16, 2012)

TheBEast said:


> Good riddance.....this is their second time in bankruptcy.



Yeah, screw them and the 18,000 jobs that will be lost...


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## o3jeff (Nov 16, 2012)

I'm sure someone will buy the Twinkie name and rights or you can just stock up on them now since you won't have to worry about them going bad in our lifetime.


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## ctenidae (Nov 16, 2012)

I think the employees are just upset they're not being cut in on the growth expected out of Washington state.


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## ScottySkis (Nov 16, 2012)

bvibert said:


> I'm not a huge fan of Hostess stuff, but I do have a weakness for their apple pies when I see them in the vending machine at work.





Sent from my ADR6410LVW using Tapatalk 2

+1 those pies are tasty, I hope someone keeps them open, we don't need more employees to louse their jobs, and cupcake was the first dessert that I loved as a kid.


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## mlctvt (Nov 16, 2012)

What no more pink sno balls?  I wouldn't touch them but a friend I bike with actually eats these in the middle of an 80 mile ride. She says they're the perfect fuel.


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## ctenidae (Nov 16, 2012)

5 more hours for Hostess to come back with a revised offer to the Unions and for the other 11 Unions represented to call the guys at BCTGM to take it and get their members back to work.

Posturing and negotiations, folks.


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## Mpdsnowman (Nov 16, 2012)

Well Monday they get permission from a Judge to file. The issue of the 18k jobs will be do they wish to work or do they wish to continue the union lead which obviously has reached a dead end. Alot of workers wanted to go back but the bakers union said no...As a result the business will go into the courts and yes those jobs are now at that mercy...

I dont think I had a twinkie in years. ZINGERS! now thats the ticket lol..


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## Geoff (Nov 16, 2012)

o3jeff said:


> I'm sure someone will buy the Twinkie name and rights or you can just stock up on them now since you won't have to worry about them going bad in our lifetime.



This

The problem is that Hostess has $800 million in debt.   When it's liquidated in Chapter 7, somebody is going to buy the brand and start making all those junk food products again.  It's entirely possible that they'll also buy the production equipment and crank the factories back up.


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## wa-loaf (Nov 16, 2012)

http://www.ebay.com/itm/1-box-of-Ho...871?pt=LH_DefaultDomain_0&hash=item4abe9221df


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## ScottySkis (Nov 16, 2012)

wa-loaf said:


> http://www.ebay.com/itm/1-box-of-Ho...871?pt=LH_DefaultDomain_0&hash=item4abe9221df





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Dam We should all go to deli tonight and buy all the stuff they got and resell on eBay, an d then go skiing at Stowe and stay on the mountain with the $ we could make.( great munchie food to)


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## Skimaine (Nov 17, 2012)

The long shelf life of Twinkies is a myth.


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## ScottySkis (Nov 17, 2012)

Skimaine said:


> The long shelf life of Twinkies is a myth.





Sent from my ADR6410LVW using Tapatalk 2

How long do they last?


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## Skimaine (Nov 17, 2012)

According to NBC one month. That's probably more of a guideline than a rule. I would go 6 months.


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## drjeff (Nov 17, 2012)

Skimaine said:


> According to NBC one month. That's probably more of a guideline than a rule. I would go 6 months.



Let's be honest, who could possibly stare at a package of twinkies on a shelf for more than a month without eating them??


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## Johnskiismore (Nov 17, 2012)

I remember when Hostess operated a factory in Natick, MA not far from where I grew up, the wonderful smells it produced.  Ah, the memories....


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## riverc0il (Nov 17, 2012)

I fondly remember eating way too many Drake's Coffee Cakes as a teen. There was a thrift bakery around the corner from my home and they'd sell the boxes with four or five 2-packs for like a buck a box. Probably haven't bought a box of those in well over a dozen years. Sooooo good, with no redeeming health benefit at all. 

I didn't realize how many brands are under Hostess until visiting their web site:
http://www.hostessbrands.com/brands/RegionalFavorites.aspx

Many of these brands will find buyers, no doubt.

Was the reason for the collapse purely the labor dispute? That would be ironic if the union fighting for their employees killed the goose that laid the golden egg by not being team players and getting on board.


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## wa-loaf (Nov 17, 2012)

riverc0il said:


> Was the reason for the collapse purely the labor dispute? That would be ironic if the union fighting for their employees killed the goose that laid the golden egg by not being team players and getting on board.



Not to get too political here but Hostess is owned by a Venture Capital company like Romeny's Bain ... buy up a business, leverage the hell out of it and pay off the venture business and execs and then go into bankruptcy because of the debt and get many concessions from the employees. This is the second go around on bankruptcy and they were trying to get even more concessions from the employees. I think it's way too simple to blame this on the Union. It seems when VC gets involved sometimes they save the company sometimes they don't, but either way the VC company makes a crapload of money.


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## riverc0il (Nov 17, 2012)

Good point on the venture capitalist. I guess some might argue that this would have already happened if a capital company wasn't there to step in and work it. So the VC still makes money even when they buy a company and can't get it to stand up? That is screwed up. Seems like there should be more risk involved for them.

I think there is going to be a lot of knee jerk reaction of "you can't blame this on the union". But I think the thought still deserves consideration that if concessions were agreed to, thousands of people would still have jobs. Upon a further review of the news, it seems that the Teamsters were on board with concessions but the bakers union wasn't which is interesting to think about...

I guess the moral of the story is that if a venture capital company takes over a company you work for, start looking for another job, lol. Perhaps there needs to be a bigger conversation about venture capital companies. Do they need regulation (uh oh, maybe too political there, lol)? If they succeed and stand a company back up, they could be saving jobs and local economies. But if they are just doing the often called "vulture" thing, then that of course is only self serving.


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## Geoff (Nov 17, 2012)

wa-loaf said:


> Not to get too political here but Hostess is owned by a Venture Capital company like Romeny's Bain ... buy up a business, leverage the hell out of it and pay off the venture business and execs and then go into bankruptcy because of the debt and get many concessions from the employees. This is the second go around on bankruptcy and they were trying to get even more concessions from the employees. I think it's way too simple to blame this on the Union. It seems when VC gets involved sometimes they save the company sometimes they don't, but either way the VC company makes a crapload of money.



Hostess had almost a billion dollars in unfunded pension liability.   The company wanted to stiff the workers on their pensions as part of worker concessions.   I imagine those factories are mostly 50 years old and have a very old employee base.   If you're a 50-something union worker counting on that pension for your retirement, that is a royal screwing.   From the union point of view, if the company goes bankrupt, the Federal government steps in and honors the pension obligation.   We've seen this over and over in other sectors like the airlines.   The private capital guys who actually own the company don't care.   They made sure Hostess is debt-financed with all their assets as collateral.   Their money is the senior debt so they get their money out first (including interest at junk bond rates) and everybody else gets screwed.   This is what happened to the American Skiing Company with Oak Hill Partners.    Oak Hill laughed all the way to the bank when ASC was liquidated.

So.... what this really was is playing games with bankruptcy law so the private capital guys get to ditch an enormous unfunded pension liability.   Hostess will spring back to life as a brand.   You'll be able to buy Twinkies.   They'll be made with the same production equipment as last week.   There's a good chance they'll be made in the same factories by the same workers.   Our tax dollars will be propping up the pensions of the older employees and the "new-improved" retirement deal is likely to be a 401-K with no employer match just like everywhere else in the private sector.


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## riverc0il (Nov 17, 2012)

Good discussion points, Geoff! This seems less like a topic of current events but rather a perverse systems issue in which every side is playing for maximum take at the expense of the "other". Fascinating stuff on a morbid level. 

Regarding pensions, that is interesting that the federal government honors pensions. How does that work? Full value or reduced? That would create a lack of accountability on the business to plan for long term benefits. What would a company care if they go under, it is done, nothing to loose and everything to gain by over extending. 

Federal government might say that the worker shouldn't be penalized for that type of business decision making. Some might say you should look at the long term financial solvency of a business before taking a job in which a pension was a deciding factor. Where is the accountability ultimately? Seems like lots of people involved. It certainly would speak towards employee controlled retirement funding (e.g. 401k, IRA, Mutual Funds, Index Funds, etc.) rather than pensions that are subject to risky decision making.

I could definitely see a union of mostly older workers deciding it is better to loose a job than take lower retirement benefits if the government will honor the original deal. Is that really how it works? Tax payers hold up bad business decisions? That is crazy.


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## ScottySkis (Nov 17, 2012)

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They just showed on the news people raiding all those products in the store, I need to get off my as* and go shopping and sell this stuff on eBay I could buy a season pass.


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## Skimaine (Nov 17, 2012)

The Pension Benefit Guarantee Corporation is the federal agency that backs the pension plans.  Basically like the FDIC. Pension plans pay a tax to fund the corporation. Poorly funded plans pay more than well funded plans.


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## riverc0il (Nov 17, 2012)

Skimaine said:


> The Pension Benefit Guarantee Corporation is the federal agency that backs the pension plans.  Basically like the FDIC. Pension plans pay a tax to fund the corporation. Poorly funded plans pay more than well funded plans.


So Geoff was incorrect in stating that our tax dollars were funding it, but rather it is insurance paid by all pension plans that will pay out? That seems a sound way to secure them... until there is a bubble from too many coming due and failing at the same time. :-?


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## wa-loaf (Nov 17, 2012)

riverc0il said:


> So Geoff was incorrect in stating that our tax dollars were funding it, but rather it is insurance paid by all pension plans that will pay out? That seems a sound way to secure them... until there is a bubble from too many coming due and failing at the same time. :-?



The money going into the fund is not enough to cover all the pension liabilities so we are paying for a lot of this with tax dollars.


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## bvibert (Nov 17, 2012)

You guys know way more about hostess than i ever hope to know..

I just hope someone keeps making the apple pies.

We were in a convenience store today and they had a sign up for the last twinkie  in the store


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## Geoff (Nov 17, 2012)

Skimaine said:


> The Pension Benefit Guarantee Corporation is the federal agency that backs the pension plans.  Basically like the FDIC. Pension plans pay a tax to fund the corporation. Poorly funded plans pay more than well funded plans.



The Pension Benefit Guaranty Corporation was in the red $26 billion in 2011.   It has run in the red 30 out of 37 years.   Guess who made up the difference?  Anybody?   Anybody?  Bueller?


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## riverc0il (Nov 17, 2012)

Seems like yet another bubble waiting to burst. Add that to college loans. Yay!


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## Skimaine (Nov 17, 2012)

Geoff said:


> The Pension Benefit Guaranty Corporation was in the red $26 billion in 2011.   It has run in the red 30 out of 37 years.   Guess who made up the difference?  Anybody?   Anybody?  Bueller?



Quite right.


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## Geoff (Nov 17, 2012)

riverc0il said:


> Regarding pensions, that is interesting that the federal government honors pensions. How does that work? Full value or reduced? T



The Pension Benefit Guaranty Corp is the FDIC-like government guarantee organization that swallows up underfunded pension plans when a corporation goes bankrupt.   For the most part, these are pensions for union workers.   The maximum benefit is $50-ish thousand and they can't collect until age 65.   Right now, they're paying pensions for 600-odd thousand people but that number is going to jump significantly.

Like I said, I object to the financial slight of hand where private capital companies can use debt financing to jump into failing companies with huge unfunded pension funds, use debt financing at extremely high interest rates where it's senior debt secured by the assets of the corporation, and then take the company chapter 7 a few years later.   They're getting 10%+ interest on their money and get it all back including accrued interest at liquidation.   The taxpayer is stuck with the pension liability.   In my opinion, the law needs to be rewritten to put pension liability ahead of these guys.   It's not fair to the rest of us.


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## wa-loaf (Nov 18, 2012)

http://www.sacbee.com/2012/11/13/49...-pattern-of-misinformation.html#storylink=cpy



> Over the past eight years since the first Hostess bankruptcy, BCTGM members have watched as money from previous concessions that was supposed to go towards 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 CEO's with no true experience in the wholesale baking business have left this company unable to compete or survive.
> 
> Read more here: http://www.sacbee.com/2012/11/13/49...sinformation.html#storylink=cpy#storylink=cpy​


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## ScottySkis (Nov 19, 2012)

http://dailynewsfinder.com/2012/11/...ly-didnt-know-about-the-hostess-brands-story/ lots of info here.


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## severine (Nov 19, 2012)

It's unfortunate so many will lose their jobs. Growing up, my dad worked for Nissen first, then Entenmann's for the last 25+ years. He had a lot of buddies working for Wonder and Drakes over the years--and we often had it in the house, thanks to bartering the stale. I won't miss the product itself--I can make far better quality at home--but I hate to see so many get screwed while the higher-ups kept bumping their salaries. Blech.


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## riverc0il (Nov 19, 2012)

Drake's Cake rack at the local convenience store was cleaned out. LOL. In other news, don't write off the company quite yet. Seems like the Bakers Union wants their jobs enough to want to deal. Guess they thought Hostess was just playing chicken?


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## severine (Nov 19, 2012)

riverc0il said:


> Drake's Cake rack at the local convenience store was cleaned out. LOL. In other news, don't write off the company quite yet. Seems like the Bakers Union wants their jobs enough to want to deal. Guess they thought Hostess was just playing chicken?


It's not just a matter of "playing chicken." Yes, a job is better than none, but at what price? Concession after concession while the fat cats get fatter? Not cool.


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## riverc0il (Nov 19, 2012)

I think there certainly needs to be a conversation about what is going on at the Board of Directors level who are approving the fat cat pay checks. I certainly don't understand it, how failing companies approve massive pay increases and bonuses for top level execs while a company is struggling. 

The executive culture in this country is certainly a small part of the problem. I see it in my own company... reducing positions, increasing workload for existing positions due to cut positions, capping max pay scales, reducing base pay levels for new associates, eliminating holiday bonus checks, etc. all while top execs don't take the same cuts. Trust me, I see it.

But on the flip side, most union workers are extremely well compensated for what they do. Obviously they aren't making mega bucks but I think juxtaposing union workers against fat cats isn't presenting the whole picture. Would be nice if the execs took some pay cut with the front line workers. I agree it doesn't make sense one group takes a cut while the other gets a raise. But I also don't think stone walling a company on the brink of closing its doors is a very good decision for the workers. I understand why the two sides "negotiate" the way they do... but I think it leaves something to be desired and seems too adversarial.


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## deadheadskier (Nov 19, 2012)

The answer you will get from the top brass is that they "need" to pay that kind of salary to their top execs to attract the talent required to be successful in those positions.


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## severine (Nov 19, 2012)

deadheadskier said:


> The answer you will get from the top brass is that they "need" to pay that kind of salary to their top execs to attract the talent required to be successful in those positions.


And they've proven themselves to be so successful... 

Unions get a bad rap, but not every union worker is an overpaid lazy slob. I don't know how it works exactly for the bakers--and I realize they were a big part of the negotiations--but the route salesmen are exactly that--salesmen. Pay is based on their ability to actually sell the product. They don't just show up and collect. In my own profession (municipal employee), I've seen concession after concession while the higher up, non-contract employees continue to receive raises and increased benefits. One memorable example of someone who gets it, however, is the mayor where I live, who did not take a raise for 3 years because he believed that if he expected everyone else to make sacrifices, he should, too. Granted, he didn't give back any of his pay, but what he volunteered is almost unheard of. 

Corporate culture is built on the shoulders of the workers who give and give so they can keep receiving. I don't care what they think they're doing with this "talent"--without those on the bottom, the wheels just don't turn.


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## drjeff (Nov 20, 2012)

Bigger picture question here with the Bosses vs. Unions issue.

Who "owns" the company?  The boss and/or board of directors who under most circumstances have a contractual fiduciary obligation to answer to either the investors who took the risk and put up the capital to allow the company to operate in the 1st place and/or the shareholders who have a similar roll?  Or the workers, who have signed a contract agreeing to such and such terms (pay per timeframe, benefits, job duties, etc)??

Most bosses completely realize that to build a company, you need a group of talented workers who agree with the vision and plans that the leaders of the company convey to them.  What often happens to attract such a "team" is that they need to be compensated fairly, both monetarily and psychologically.  The other factor is that we live in a society today where the "norms" of yesterday aren't the same today, and the leaders, more often it seems than the workers, see this.  There aren't too many areas of modern life today that technology hasn't impacted and often made it easier to do more, quicker, with less.  There are often in most areas of business a greater amount of competition than there used to be.  If a business can't "evolve" to the changes that they likely face (and often those changes end up being can you produce a product of as good, if not better quality, for less) than they'll got out of business more than likely.

I've been to many leadership seminars where the topic of wages comes up.  And there's plenty of discrepency about what is the best model.  Performance based vs. time based raises??  Just because someone may have worked for a company for more years doesn't always mean that they're proportionately going to be a more productive employee and as such warrant a raise simply because the calender now shows another year.  At the same point, the stability of an employee knowing that after such and such a date there will be such and such a raise, reguardless of the performance of both the employee and company is attractive to an employee.  Longterm though what is happening seems to be the "zero risk" on the part of the employee reguardless of the company's finacial health is proving to have issues.

Inspite of what many may think, most CEO's and upper management just don't sit back and collect a big paycheck for little work.  There's some major descisions that are made, and the ramifications of them on people are often very clear to those making them


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## Geoff (Nov 21, 2012)

riverc0il said:


> I think there certainly needs to be a conversation about what is going on at the Board of Directors level who are approving the fat cat pay checks. I certainly don't understand it, how failing companies approve massive pay increases and bonuses for top level execs while a company is struggling.



This happens all the time with struggling companies.   Senior people in any company are paid a base pay plus a variable part that is tied partly to how they perform and partly to how the company performs.   What happens is it becomes clear that the company is in the shitter and the senior team is going to see zero for the variable part of their compensation.   Most of the senior team immediately start looking for their next job.   As people abandon the sinking ship, the company has no choice but to shift variable compensation over to base pay for a chunk of the team to prevent them all from quitting.

This actually happened to me last July 1.   The company changed how the variable part of my compensation works and I ended up with what looked like a $50K pay cut.   After a bunch of back & forth, I had $35K of that shifted over to base pay.  I got a face-saving phantom promotion and a $5K "raise" applied to my variable compensation.    It's still likely to be a ~$10K pay cut from where I was before but it's not enough that I'm going to quit over it.   I'm the only person in the company who put his foot down about it.   Since July 1, a half-dozen key people have quit in a company of 50.   It's not like most people can't just walk across the street and get a job at their old pay rate (or better) and not have to deal with the B.S. of a sinking company.


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## ctenidae (Nov 21, 2012)

I believe a good chunk of the package Hostess is offerig is equity to the Unions, who will then, in fact, become very large owners of the company, with teh ability to vote on the Board of Director's slate, and thereby control management. The airlines did it, GM did it, it's pretty common. Outsize bonuses and salary packages could just be management seeing the writing on the wall and getting theirs while they could (not necessarily a good thing...)

I agree, most management is aligned with the employees and other stakeholders- sort of an everyone in it together mentality. However, it is fairly easy for management to succumb to the tyrany of the immediate, aka the stock price, and that skews things a bit, a problem which can get worse as time goes on, particularly if performance is slipping. Stakeholders can also forget how they fit into the equation. Whether it's WalMart abusing their position as major or sole customer, or Unions forgetting that in order for a company to survive and grow it needs to turn a profit. Any of those three, and particularly a comination of any two, can cause massive problems for a company- looks lik Hstess is getting hit with both management failings and Union forgetfulness.


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## hammer (Nov 21, 2012)

Geoff said:


> This happens all the time with struggling companies.   Senior people in any company are paid a base pay plus a variable part that is tied partly to how they perform and partly to how the company performs.   What happens is it becomes clear that the company is in the shitter and the senior team is going to see zero for the variable part of their compensation.   Most of the senior team immediately start looking for their next job.   As people abandon the sinking ship, the company has no choice but to shift variable compensation over to base pay for a chunk of the team to prevent them all from quitting.


Maybe the whole team does need to quit in that case...OK I'm being a bit facetious, but until management makes a conscious and public effort to take its lumps when companies go down I think there will continue to be an "us vs. them" attitude amongst the worker bees.

That said unions also need to stop shooting themselves in the foot as well.


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## dmc (Nov 21, 2012)

Wallstreet vultures making themselves rich on the backs of the middle class.... again...


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## severine (Nov 21, 2012)

hammer said:


> Maybe the whole team does need to quit in that case...OK I'm being a bit facetious, but until management makes a conscious and public effort to take its lumps when companies go down I think there will continue to be an "us vs. them" attitude amongst the worker bees.
> 
> That said unions also need to stop shooting themselves in the foot as well.


Wall Street Journal today said Hostess wanted the bakers union to accept an 8% pay cut in the first year, plus continued pay cuts in following years. I know pension was being cut, too. I can totally understand why the union would have fought that.

That said, looks like mediation failed and they'll be liquidating assets shortly. Time to start making them at home. Less chemicals in the homemade versions, at least.


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## legalskier (Nov 21, 2012)

dmc said:


> Wallstreet vultures making themselves rich on the backs of the middle class.... again...



"A 'bust out' is a common tactic in the organized crime world, wherein a business' assets and lines of credit are exploited and exhausted to the point of bankruptcy."

Except in this case, it wasn't illegal. Which, to me at least, is a mystery.


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## dmc (Nov 22, 2012)

legalskier said:


> "A 'bust out' is a common tactic in the organized crime world, wherein a business' assets and lines of credit are exploited and exhausted to the point of bankruptcy."
> 
> Except in this case, it wasn't illegal. Which, to me at least, is a mystery.



Right...  Legal organized crime by the wealthy...   I'm personally sick of it...


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## Geoff (Nov 22, 2012)

hammer said:


> Maybe the whole team does need to quit in that case...OK I'm being a bit facetious, but until management makes a conscious and public effort to take its lumps when companies go down I think there will continue to be an "us vs. them" attitude amongst the worker bees.
> 
> That said unions also need to stop shooting themselves in the foot as well.



In this case, Hostess just did a Chapter 11 four years ago.   This isn't the management team that put this company on the ropes being squeezed both on the finance side with a lot of debt at high interest rates and unfavorable labor contracts.   Gregory Rayburn, the CEO, had only been there since last February.   He had 30 days as Chief Restructuring Officer before replacing the previous CEO.   Before that, he was a high end management consultant for FTI.   The company paid him $100K per month as Chief Restructuring Officer and bumped him up to $120k per month when he became CEO. That isn't out of line for that kind of talent for a $2.5 billion in sales company.   The 300% executive raise was a total lie fabricated by the union.   You'll notice that the retractions in the press are either buried in fine print or simply never happened.

The people making the money from this deal are the private equity people who put the money in four years ago at the Chapter 11.   That money is always senior debt and pays big interest.   When Hostess liquidates, they'll get their money back plus a big chunk of interest.   I'm not sure how you can fault them.   Without that kind of deal 4 years ago, Hostess would have failed then.


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## ScottySkis (Nov 29, 2012)




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## ctenidae (Nov 29, 2012)

You're actually wrong on a few points, there, Geoff. 

Ripplewood is the PE shop that acquired Hostess out of bankruptcy, and they put in equity, not senior debt. The lenders that helped finance the buyout are looking like they're going to get wiped out, too. At the time of the acquisition, Tim Collins, who heads Ripplewood, was very vocal about his overall plan to work with Unions to help turn around iconic US brands, and he hoped Hostess would be sort of the flagship company for the strategy. He got lambasted for not pushing for enough concession at the beginning, and they're getting wiped out for not being able to get concessions now. Some of the concessions he tried to get at the beginning, but couldn't, by the way, were flexible work rules that would allow people to do more than one job (a strategy employed by Wilbur Ross in the steel industry, only Wilbur said "Either you let operators do maintenance, or you're all fired"). Dick Gephardt was brought in as a consultant to work with the Unions, too.

The money that private equity shops put in is never senior debt- that's why it's called private _equit_y_. _Debt investments are usually in the form of mezzanine debt, which would convert to equity in a bankruptcy, but very few of the mezz shops look for that kind of strategy- they'd rather loan money to a comapny that can pay it back and succeed than "loan to own" and have to turn around a failed company (that said, there are some guys who do that, too). In a standard LBO (leveraged buyout) there is, obviously, debt involved (hence the leverage), which is usually senior debt. In a liquidation, they may have first dibs on cash from the asset sale, but it's very rarely enough to satisfy the principle, much less pay "big interest." By the way, interest rates are still set by the overall market- if you can get cheaper debt somewhere, you do.

Finally, while no one should cry for most private equity guys, the ultimate benificiaries of private equity investments are, in fact, your kid's teachers, your garbageman, police and firefighters, and other public employees. It's their pension money that is invested in private equity. CalPERS is the single largest US PE investor. They're not "fat cats." It's true that the private equity firms get paid a big chunk of profits, but the vast majority (industry standard is 80%) of profit goes drectly to the LP investors (CalPERS, etc). And remember, the investment still has to make money for the PE firm to make any money. I concede that management fees are a big source of income, but it's not as egregious in general as it's made out to be (a few huge shops as notable possible exceptions).

The private equity industry has done a terrible job of explaining itself, or letting people know what they really do. It's not all rape and pillage- if that's your MO, it becomes very difficult to convince management teams to work with you, and you're stuck with hostile takeovers of already failing companies. While good for making movies, it's not a very good long term strategy. Wall Street is, generally rightfully so, villified for slash and burn, quick profits without regard for the future (or even the present at times).  Private equity makes money over the long term, 4-7 year holds for companies, and create value by making companies bigger and better. At least, that's how you do it if you want to be around for more than a couple of years.

Yes, it's my industry, so obviously I have a nicre view of it. I also have an inside view of it, and have been on both the LP and GP side.  Just because it's where I work doesn't mean I'm wrong.


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## billski (Nov 29, 2012)

It's a lot more than Twinkies going down


Baker's Inn 
Beefsteak 
Blue Ribbon 
Bread du Jour 
Butternut Breads 
Colombo[SUP][35][/SUP] 
Cotton's 
Di Carlo 
Dolly Madison 
Drake's 
Dutch Hearth 
Eddy's 
Good Hearth 
Holsom 
Home Pride 
Hostess 
J.J. Nissen 
Merita 
Millbrook 
Nature's Pride 
Parisian 
Standish Farms 
Sweetheart Bakery 
Toscana[SUP][35][/SUP] 
Wonder Bread


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## Glenn (Nov 29, 2012)

The top brass are an easy target these days. I read an interesting blurb about the demands the unions had. When Hostess bought out some of the bakeries, they weren't careful about negotiating union rules. Some of the bakeries had really oddball rules, like only certain drivers could deliver cakes...but not bread. When you mix up a lot of different rules, spread accross multiple business units, things get out of hand fast.


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## legalskier (Dec 10, 2012)




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## Dubld (Dec 10, 2012)

What am I going to serve for an appetizer for Christmas dinner?


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## ctenidae (Apr 25, 2013)

Dubld said:


> What am I going to serve for an appetizer for Christmas dinner?



http://online.wsj.com/article/SB10001424127887324474004578443062380660262.html

It's OK- they'll be back in time for Independence Day, at least. Evil, evil private equity folks, putting all those nice people back to work.

Just without their Union cards...


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## bvibert (Apr 25, 2013)

ctenidae said:


> http://online.wsj.com/article/SB10001424127887324474004578443062380660262.html
> 
> It's OK- they'll be back in time for Independence Day, at least. Evil, evil private equity folks, putting all those nice people back to work.
> 
> Just without their Union cards...



Damn you WSJ; making me pay to read your articles...


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## ctenidae (Apr 25, 2013)

bvibert said:


> Damn you WSJ; making me pay to read your articles...



Weird- I got it through Google News, didn't have to log in or anything.


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## bvibert (Apr 25, 2013)

ctenidae said:


> Weird- I got it through Google News, didn't have to log in or anything.



This is what I get when I click on the link above:


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## ctenidae (Apr 25, 2013)

Maybe WSJ has a deal with Google News. Try using Google's link:

http://news.google.com/news/url?sr=...n&did=-7408754451723789990&sid=en_us-b&ssid=b


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## bvibert (Apr 25, 2013)

That's better, thanks!

I tried going in through Google news myself and was still rejected.  I guess I don't have any street cred... or something...


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## ctenidae (Apr 25, 2013)

bvibert said:


> That's better, thanks!
> 
> I tried going in through Google news myself and was still rejected.  I guess I don't have any street cred... or something...



Well, I'm kind of a big deal, you know.


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## o3jeff (Apr 25, 2013)

Odd, both links work for me and I don't pay.


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## Glenn (Apr 25, 2013)

WSJ Trick: If you encounter a locked article, google the title. It'll let you in when you land via google.


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## legalskier (Apr 25, 2013)

ctenidae said:


> http://online.wsj.com/article/SB10001424127887324474004578443062380660262.html
> 
> It's OK- they'll be back in time for Independence Day, at least. Evil, evil private equity folks, putting all those nice people back to work.
> 
> Just without their Union cards...



Where will they be selling them?  Let me guess.....Walmart?

*Hostess To Pay $1.75 Million In Executive Bonuses After Blaming Unions For Bankruptcy*

http://thinkprogress.org/economy/2012/11/19/1215811/hostess-executive-bonuses/?mobile=nc


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## ctenidae (Apr 25, 2013)

legalskier said:


> Where will they be selling them?  Let me guess.....Walmart?



I imagine WalMart was one of the biggest Hostess outlets before the bankruptcy. Not sure what that has to do with private equity or the executive bonuses, though?


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## drjeff (Apr 25, 2013)

ctenidae said:


> I imagine WalMart was one of the biggest Hostess outlets before the bankruptcy. Not sure what that has to do with private equity or the executive bonuses, though?



Walmart is one of the biggest sellers of any and all junk food nationwide (and the average waistline dimensions of the typical walmart shopper backs this up   :lol: )

I'm sure that one of the worries that the new Hostess owners will be having is that in the last few months that formerly Hostess "addicted" Walmart shoppers will have found out that they like other brands junk food snack cakes better than twinkies


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## ctenidae (Apr 25, 2013)

drjeff said:


> ...they like other brands junk food snack cakes better than twinkies



Blasphemers! You will bow to the Almighty Ding Dong, and supplicate the Everlasting Twinkie! Thou shalt have no high fructose corn syrup before me. Honor thy cream filling, and by all means covet thy neighbors fruit filling.


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## ScottySkis (Apr 25, 2013)

legalskier said:


> Where will they be selling them?  Let me guess.....Walmart?
> 
> *Hostess To Pay $1.75 Million In Executive Bonuses After Blaming Unions For Bankruptcy*
> 
> http://thinkprogress.org/economy/2012/11/19/1215811/hostess-executive-bonuses/?mobile=nc



Probably gas stations. I love the cupcake since I was a kid.


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## ctenidae (Apr 25, 2013)

Scotty said:


> Probably gas stations. I love the cupcake since I was a kid.



Was, or are?


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## ScottySkis (Apr 25, 2013)

ctenidae said:


> Was, or are?



Was, I try not to eat that stuff anymore.


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## Geoff (Apr 25, 2013)

ctenidae said:


> http://online.wsj.com/article/SB10001424127887324474004578443062380660262.html
> 
> It's OK- they'll be back in time for Independence Day, at least. Evil, evil private equity folks, putting all those nice people back to work.
> 
> Just without their Union cards...



I'm wondering if the no-union thing will stick.  They'll mostly hire back the union people who used to work at those bakeries.  Once they're hired, there is nothing the company can do to stop them from voting to go union.   I figure it all depends on how they treat their workforce.   If they treat 'em like crap, they'll quickly become a union shop.


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## ScottySkis (Jun 23, 2013)

July 15 their coming back, yahoo I know what my dessert will be a cupcake for sure that weekend.


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## ScottySkis (Aug 1, 2013)

I got my cupcake should I eat it or save it?


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## o3jeff (Aug 1, 2013)

Eat them, see if they taste the same.


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## bvibert (Aug 1, 2013)

I'm waiting for the apple pies to start showing up in our vending machine at work again...


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## ScottySkis (Aug 1, 2013)

o3jeff said:


> Eat them, see if they taste the same.



I save them maybe the company will close again and I can sell them for millions on EBay and retired and ski a lot.


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## Abubob (Aug 1, 2013)

Scotty said:


> Was, I try not to eat that stuff anymore.





Scotty said:


> July 15 their coming back, yahoo I know what my dessert will be a cupcake for sure that weekend.





Scotty said:


> I got my cupcake should I eat it or save it?



I'm trying not to judge here. I know you're _trying_, Scotty.


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## ScottySkis (Aug 1, 2013)

Abubob said:


> I'm trying not to judge here. I know you're _trying_, Scotty.



Your right I am fat ass and got start going to a gym, walking is helping a little 3 miles in morning but I got stop going to bagel or 7/11 for donuts is not helping. For now Cupcake is in freezer at work.


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## ctenidae (Aug 1, 2013)

Scotty said:


> I save them maybe the company will close again and I can sell them for millions on EBay and retired and ski a lot.



The great thing is, no matter how long it takes, they'll still be fresh.


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## ScottySkis (Aug 1, 2013)

ctenidae said:


> The great thing is, no matter how long it takes, they'll still be fresh.



Yes it will be.


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## ScottySkis (Aug 15, 2013)

I had an Entemains cupcake and it was good.


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## bvibert (Aug 16, 2013)

Entenmann's?

My father-in-law works for them.


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## ScottySkis (Aug 16, 2013)

bvibert said:


> Entenmann's?
> 
> My father-in-law works for them.



Yes thats it. Hopefully your dad gets a nice discount on their stuff.


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## bvibert (Aug 16, 2013)

Scotty said:


> Yes thats it. Hopefully your dad gets a nice discount on their stuff.



Yeah, he get's plenty of good stuff from them!


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## o3jeff (Aug 16, 2013)

bvibert said:


> Yeah, he get's plenty of good stuff from them!



But the stuff your wife bakes is 100 times better!


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## bvibert (Aug 16, 2013)

o3jeff said:


> But the stuff your wife bakes is 100 times better!



Yes, it is!


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## ScottySkis (Aug 17, 2013)

bvibert said:


> Yes, it is!


I love so much if that stuff.


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## darent (Aug 17, 2013)

don't burn the herb scotty and you will eat less of that junk!!


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## ScottySkis (Aug 17, 2013)

darent said:


> don't burn the herb scotty and you will eat less of that junk!!



Or just ignored the munchies, or eat an Apple.


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## ScottySkis (Nov 15, 2013)

Abubob said:


> I'm trying not to judge here. I know you're _trying_, Scotty.



Well they made to today in freezer at work to today RIP cupcakes they were delicious.


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