Saturday, November 17, 2012


Hostess company executives fattened themselves up before filing for bankruptcy

by Larry Geller

Labor issues are seldom fairly covered in the commercial media. That was my motivation for posting yesterday’s article, One article blames possible Twinkie demise on union, the other also suggests management responsibility (11/16/2012). I speculated whether the Star-Advertiser would print the same AP article it posted as breaking news, an article which placed the blame for the Hostess company shutdown squarely on the union strike, and followed a typical pattern of reporting such events.

The story ran on page B6 of this morning’s paper, and amazingly, didn’t even mention the strike, much less place blame on the workers.

Is that better?  No, unfortunately for readers, they simply were not presented with the full story. The strike is a fact, and it is important because management is putting the blame for the imminent disappearance of Twinkies and other Hostess products squarely on the union.

If I were reporting on the Hostess bankruptcy story myself, I’d have to also include more details on the Bain-like takeover of the company that saddled it with unmanageable debt. I’d also have to cite the Sacramento Bee story that revealed that the company planned plant closings well in advance of the strike:

In fact, according to the company's 1113 filing with the bankruptcy court earlier this year as well as its last/best/final and non-negotiable proposal to its BCTGM-represented workers, the company was planning to close at least nine bakeries as part of its reorganization plan, although the company refused to disclose which bakeries it intended to close.  This is in addition to the three bakeries that were to be closed as a result of the company's planned sale of its Merita division.

Moreover, St. Louis Mayor Francis Slay was quoted in a November 13 KMOX-CBS St. Louis article stating, "I was told months ago they were planning on closing the site in St. Louis… And there was no indication at that time it had anything to do with the strike the workers were waging."

[Sacremento Bee, Hostess Continues Pattern Of Misinformation, 11/13/2012]

And finally, I’d have to report on the obscene salary increases taken by Hostess executives just prior to filing for bankruptcy:

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.

But I was not reporting on the Hostess story.

I thought the newspaper should do that.

(Disclosure: I am a recovered Twinkie-eater. Many years ago, after filling up my car’s gas tank at a Kalihi gas station, I would visit the cashier to pay for a car wash and pick out a Twinkie to nibble while waiting in line to go through the machine.  I found myself obsessed with car cleanliness. The habit needed breaking. I can proudly say that I went cold turkey and have not had a Twinkie since. And my car isn’t particularly clean any more either.]


Hostess is another example of how pirate equity buys a company, increases CEO pay steals workers pensions, reduces workers wages and destroys the company. It's time we go back to pre-Reagan times and outlaw this practice.

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