Twinkies on the brinky (Updated with news that plants will reopen)

The Big Ragu · Nov 30, 2012

Re: Twinkies on the brinky

Az, I haven't painted any kind of black and white picture, no matter how many stupid, smarmy posts you throw up there. I said early on in this thread that there is no simple narrative with a bad guy and an evil guy in this saga. So when you editorialize with "But that can't be right, because management is always fair and supersmart." you are talking to a wall, not addressing anything I have said. From what you just linked to, which I am thoroughly familiar with:

But in truth there are no black hats or white knights in this tale. It's about shades of gray, where obstinacy, miscalculation, and lousy luck connived to create corporate catastrophe. Almost none of the parties involved would speak on the record. Still, it's clear from court documents and background interviews with a range of sources that practically nobody involved can shoot straight: The Teamsters remain stuck in a time warp, unwilling to sufficiently adapt in a competitive marketplace. The PE firm failed to turn Hostess around after taking it over. The hedgies can't see beyond their internal rates of return. Et cetera, et cetera, et cetera.]But in truth there are no black hats or white knights in this tale. It's about shades of gray, where obstinacy, miscalculation, and lousy luck connived to create corporate catastrophe. Almost none of the parties involved would speak on the record. Still, it's clear from court documents and background interviews with a range of sources that practically nobody involved can shoot straight: The Teamsters remain stuck in a time warp, unwilling to sufficiently adapt in a competitive marketplace. The PE firm failed to turn Hostess around after taking it over. The hedgies can't see beyond their internal rates of return. Et cetera, et cetera, et cetera.
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You can read my posts on this thread. That is all I have said. Over and over again, in fact. You just key on on the part that doesn't fit the narrative you want to create and ignore the other half when I say it.

Azrael · Nov 30, 2012

Re: Twinkies on the brinky

What makes you think that every post is a reply to yours?

And if this were in answer to something you'd posted specifically, sorry, but the one quoted below seems pretty one-sided, does it not? And kindly note I've created no narrative at all on this thread.

The Big Ragu said:

In the case of Hostess, it is fair to assume the unions were aware of the implications of the work rules they won. They won a lot of ridiculous work rules that padded the number of jobs and benefits, but ultimately at the cost of those jobs, because the company wasn't able to operate profitably.

No truck could carry both bread and snacks, even if they were going to the same location.
Drivers weren't permitted to load their own trucks.
Workers who loaded bread were only allowed to load bread trucks. Separate workers had to load snacks.
Bringing product from stock to shelf required an entirely other set of workers.

And that doesn't mention any of the insane multipension mess that had them paying pensions to people who had never even worked for Hostess, funding 40 different pension plans, the 372 distinct collective bargaining agreements -- apparently required to maintain a workforce for a bakery and truck delivery operation, and about 80 different health plans, which could have been streamlined to lower costs.

The actual work condition rules --a team of workers to load a bakery truck, because one guy wasn't allowed to drive the truck and load it, and it required a different truck for every product -- were meant to funnel more jobs and more money to the union at the expense of the company's ability to operate efficiently. The company agreed to those conditions, as you pointed out. But those work rules surely weren't their idea.

Since that is how you feel, you also must then agree that when those conditions predicably contributed to losses of $341 million last year, the natural response was for management to try to get the unions to get rid of those conditions. ... or shut its doors. That is what management did. It tried to get the unions to renegotiate. One of the unions decided it was better not to have a job with Hostess than to accept the terms management offered. So the company shut its doors. The whole thing played out to a pretty natural conclusion, didn't it?
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The Big Ragu · Nov 30, 2012

Re: Twinkies on the brinky

That was in response to your "management agreed to their demands" post. Am I supposed to readdress everything over and over again so you don't think it is "one-sided"? I was addressing you. ... who have actually had a one-sided narrative, and even more annoyingly, you keep trying to attribute some agenda to me with smarmy "Management are saints" posts. There are no winners and losers in this, and in fact, the union that shut the company down aced itself and contributed to what has been a long-term trend -- as unions cost jobs with their corruption, they become less and less relevant. The PE firm -- the thing everyone wants to demonize -- aced itself, by trying to use a political connection to get itself paid and was so incompetent that it lost more than $100 million. And the politician who tried to play kingmaker between the unions and the PE firm (getting his kid a job on the board of directors and getting himself paid with an equity stake) wasn't powerful enough to rig the game. It was impossible because you had too many competing pigs at the trough.

There is nothing "one-sided" about that analysis. Nor about any of my posts on here.

Was this "one-sided"?

The Big Ragu said:

exmediahack said:

What I cannot understand is... how in the world can Hostess not "make a go" of it with $2.5B in sales in America, where morbid obesity has never been higher??
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There is a bigger picture than last year's revenues. This from Forbes:

Hostess has been sold at least three times since the 1980s, racking up debt and shedding profitable assets along the way with each successive merger. The company filed for bankruptcy in 2004, and again in 2011. Little thought was given to the line of products, which, frankly, began to seem a bit dated in the age of the gourmet cupcake. (100 calorie Twinkie Bites? When was the last time you entered Magnolia Bakery and asked about the calorie count?)

As if all this were not enough, Hostess Brands’ management gave themselves several raises, all the while complaining that the workers who actually produced the products that made the firm what money it did earn were grossly overpaid relative to the company’s increasingly dismal financial position.
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http://www.forbes.com/sites/helaineolen/2012/11/16/who-killed-hostess-brands-and-twinkies/
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How about this?

The Big Ragu said:

The point was, as much as ya'll want to make it into simplistic narratives that create good and evil, the world isn't that delineated.

Here was Forbes back in February, when Hostess filed for bankruptcy again.

http://www.forbes.com/sites/kylesmith/2012/02/15/the-teamsters-union-is-taking-away-our-twinkies/

The whole company could have been a mess from it having spent years selling off assets and leveraging itself into oblivion AND at the same time gotten killed by labor laws that created conditions such as these, from the link above:

Union agreements mandate pay raises and other compensation costs that will total $31 million this year. Ridiculous union work rules that are consciously engineered to increase inefficiency and create superfluous jobs are making Hostess uncompetitive with other industry players. If cakes and bread arrive together and are headed to the same place, they must nevertheless be split onto separate trucks; drivers are forbidden to load products onto their trucks.

When the Hostess man delivers product to the store, he isn’t allowed to move items from storage to the shelves; instead, a different employee, called a “pull-up” worker, has to do that job. Oh, and if both cakes and bread are involved? You guessed it: there’s a cake pull-up and a bread pull-up. One guy couldn’t possibly do the same task. If Hostess wants to enter a new market, work rules still apply.

Such Jimmy Hoffa-era scams should have no place in a 21st century economy, and soon they won’t : the Teamsters, once a potent political force, are asleep at the wheel and heading straight for oblivion with the accelerator pressed to the floor. It isn’t Hostess’s snacks that are a relic from another era, it’s Hostess’s unions.
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The two just aren't mutually exclusive.
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How about this?

The Big Ragu said:

A company files for bankruptcy and asks for protection from its creditors from a court. When they propose a plan that gives a sweetheart deal to 20 insiders before the thing winds down, it is perfectly reasonable for the judge to tell them to get bent and assign an independent trustee to do the work -- at whatever the going rate for that kind of work is. They forfeited control over the company, when they filed for bankruptcy. And can anyone imagine that they are so valuable to the unloading of assets that it requires special incentives to get them to stay on? Let them walk. There is so much interest in those brands (supposedly more than 100 buyers ready to bid) that this should be a piece of cake (no pun intended).

This isn't that hard. They have a bunch of iconic brands. There is apparently a lot of interest in those brands. There should be bids, lawyers, fairly quick sales and liquidation of whatever assets remain. Then secured creditors should be paid back, followed by unsecured creditors, etc. You can find a gazillion independent trustees who are perfectly capable of doing it in an orderly fashion and getting full value for what is there.
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Or this?

The Big Ragu said:

Gehrig, Those "bonuses" aren't contractual. They are making a claim that they are vital to the unloading of the company's assets and asking for an incentive to stay on, rather than walk. They have no power anymore to determine their pay. They forfeited control to a court when they filed for bankruptcy. In the grand scheme of things, they are not asking for a ton of money -- it's less than $100,000 per person. But the question really is, what is so vital about them in a bankruptcy case like this that you have to pay them their salary plus a bonus to retain them? There are bidders lined up to buy these brand names. That is essentially the value the company has. A monkey could wind this company down. Ask for bids. Sell off the various brands to the competitors interested in them. Sell off any hard assets remaining. And use the money to start paying back creditors in order. Unless there are details that none of us can guess, there can't be any reason to pay those 19 executives a penny more than their salary to get them to stay on, so why should the judge OK that?
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Or this?

The Big Ragu said:

Ripplewood is a private equity firm that thought it could ride Dick Gephardt's labor union connections into a turnaround situation at Hostess.

They not only didn't get the unions to roll back their ridiculous work rules, they also overpaid management and generally had no strategy for making Hostess profitable.

They took a heavily indebted company, injected some equity into it, and due to their cluelessness lost their equity when the company went bankrupt all over again. Before it went bankrupt, they tried to get the unions to negotiate with them, and one of the unions decided it was better to shut the company down than it was to try to save the jobs. Fair choice. They didn't owe it to anyone to accept work terms they didn't want. But now Hostess is in bankruptcy, the unions are going to be out a lot more than if they had negotiated, and there will hopefully be an orderly bankruptcy in which the assets that are worth something get sold off and the secured creditors get paid back. Unsecured creditors, the workers, the PE firm and other equity holders. ... they will all lose.
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Azrael · Nov 30, 2012

Re: Twinkies on the brinky

The Big Ragu said:

That was in response to your "management agreed to their demands" post.
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Then you should have quoted my post to indicate same.

The Big Ragu · Nov 30, 2012

Re: Twinkies on the brinky

OK. Thought it followed from the conversation between you and AQB right above it. Sorry if it didn't.

Azrael · Nov 30, 2012

Re: Twinkies on the brinky

Thanks. Sorry for the confusion.

Riptide · Nov 30, 2012

Re: Twinkies on the brinky

"Unions were good in the beginning. But they went too far." -- Marge Schott.

novelist_wannabe · Apr 24, 2013

Re: Twinkies on the brinky

UPDATE: They're baaaaaack ...

http://www.ledger-enquirer.com/2013/04/23/2475918/hostess-plant-on-victory-drive.html#storylink=cpy

The Big Ragu · Nov 4, 2016

Good story in the WSJ today on Hostess and the investors doing the turnaround. I thought all along that at the right price this was a good investment. The problem wasn't the product or the market. It was a poorly run company that was ran into the ground.

The Secret to Hostess’s Comeback: Making the Same Old Twinkies

The company is going to trade publicly, symbol: TWNK. Instead of doing an IPO, they did what is known as a SPAC (Special-purpose acquisition company), selling a majority stake to an investment firm called Gores Group, which will form a shell company around Hostess. It is a type of deal that allows stock market investors to invest in private equity deals.

Starman · Nov 4, 2016

The Big Ragu said: ↑

Good story in the WSJ today on Hostess and the investors doing the turnaround. I thought all along that at the right price this was a good investment. The problem wasn't the product or the market. It was a poorly run company that was ran into the ground.

The Secret to Hostess’s Comeback: Making the Same Old Twinkies

The company is going to trade publicly, symbol: TWNK. Instead of doing an IPO, they did what is known as a SPAC (Special-purpose acquisition company), selling a majority stake to an investment firm called Gores Group, which will form a shell company around Hostess. It is a type of deal that allows stock market investors to invest in private equity deals.
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Is the Gores Group associated with Tom Gores, owner of the Detroit Pistons?

Free Twinkies if they score over 100?

The Big Ragu · Nov 4, 2016

Starman said: ↑

Is the Gores Group associated with Tom Gores, owner of the Detroit Pistons?

Free Twinkies if they score over 100?
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Good call. It is Alec Gores' firm. ... brother of Tom Gores.

Starman · Nov 4, 2016

The Big Ragu said: ↑

Good call. It is Alec Gores' firm. ... brother of Tom Gores.
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Yeah, I knew Tom Gores had his own equity group, Platinum Equity; I figured there was probably some connection.

Maybe they'll serve King Dons at The Palace.

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Twinkies on the brinky (Updated with news that plants will reopen)

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