I was reading this link earlier. It is an unbiased report on the "Hostess" story.
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Who's to Blame for the Hostess Bankruptcy: Wall Street, Unions, or Carbs? By Jordan Weissmann
inShare0Nov 16 2012, 6:02 PM ET 38
Try all of the above.
(Reuters)
Hostess Brands, the maker of Twinkie and Wonder Bread, is getting ready to bake its last corn-syrupy snack cake. After failing to win major contract concessions from one of its key labor unions, the beleaguered 82-year-old company has asked a federal bankruptcy court for permission to start liquidating its assets -- or, in real person speak, begin the process of selling off pieces of the company to the highest bidder while laying off most of its 18,500 workers.
There are two important things to realize about this rather sad situation. First: Twinkie, Wonder, and all the other high-calorie marvels of culinary science Hostess sells aren't going to disappear from shelves for good. One of its competitors will likely swoop in, buy them up, and restart production. So you can stop bidding on $100 boxes of Sno Balls on eBay.
Second: This is not a simple story that anybody should try to slot neatly into their political talking points. It's not just about Wall Street preying on Main Street, or big bad labor unions sucking a wholesome American company dry. It's about an entire galaxy of bad decisions that will cost many people their jobs and money.
As David Kaplan chronicled at length for Fortune earlier this year, the roots of this debacle go back to when Hostess entered its first bankruptcy in 2004. Not unlike the situation automakers would find themselves in a few years later, the company was collapsing under the weight of flagging sales, overly generous union contracts replete with ridiculous work rules, and gobs of debt. But unlike the automakers, the five years Hostess spent trying to fix itself in Chapter 11 didn't fix its fundamental problems.
Instead, they set the stage for its eventual demise. A private equity company, Ripplewood Holdings, paid about $130 million dollars to take Hostess private, and the company's two major unions, the Teamsters and the Bakery, Confectionary, Tobacco Workers and Grain Millers International Union, sacrificed about $110 million in annual wages and benefits. But its labor contracts were still deeply flawed. Worse yet, the company left bankruptcy saddled with more debt than it went in with -- "an unusual circumstance that the company justified on expectations of 'growing' into its capital structure," as Kaplan put it.
Suffice to say, Hostess didn't do much growing.
It continued to lose hundreds of millions of dollars making and selling starchy snacks that much of the public had lost its taste for, while failing to launch any great new products. The interest on its loans swelled the company's debt. By January 2012, it was back in Chapter 11, trying to wrestle a new contract with more concessions from its unions.
Hostess insisted that unless workers accepted further cuts, the company would have to shut its doors for good. That's the sort of threat that distressed companies often make in labor negotiations, and unions are inclined to consider it a bluff. But after getting a look inside Hostess' books, the Teamsters concluded that the threat was serious. Its members narrowly approved the contract in September. "
Who's to Blame for the Hostess Bankruptcy: Wall Street, Unions, or Carbs? - Jordan Weissmann - The Atlantic
