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More about Hostess

Original post made by Resident on Nov 29, 2012

I don't agree with the 1.8 million in bonuses Hostess is asking the court to approve (to give to some executives to oversee the closing of the company), but if you look at the pension related costs per month, the 1.8 million is nothing! (and the article only mentions the partial cost of retirees' pensions)

"The company, which stopped contributing to its pension plans last year, will also ask the court to allow it to stop paying additional retiree benefits of $1.1 million a month, Ignon said."

Full article (LA Times)

Web Link

Comments (16)

Posted by Rita, a resident of Another Pleasanton neighborhood
on Nov 29, 2012 at 10:44 am

At least half a dozen companies are preparing to bid on the bankrupt company. Once the managers get their $1.8 in bonuses, the company will be sold off and they'll be able to traipse off back to vultureville where they'll attempt to squeeze money from other work forces. These are the same managers, by the way, who gave themselves 80% raises/bonuses last year when they knew the company was going to be liquidated in the near future. Only a complete dimwit would find some "rationale" for sympathizing with these crooks who have busted up hundreds of American families.

Posted by Resident, a resident of Another Pleasanton neighborhood
on Nov 29, 2012 at 3:52 pm

"Union representatives had opposed the plan, which offers $1.75 million in bonuses ranging from $7,400 to $130,500 for 19 executives, provided they meet certain benchmarks in managing the liquidation. But Judge Robert Drain said the plan was appropriate, citing testimony that it had been independently vetted and was below market value for firms in similar circumstances. "

"The union said its membership was overwhelmingly opposed to the concessions agreed to by other Hostess employees, including the majority of the 6,700 members of the Teamsters' union."

""It's really sad that a lot of people in these bakeries aren't going to find good jobs from here on out,""

Web Link

Posted by Resident, a resident of Another Pleasanton neighborhood
on Nov 29, 2012 at 4:02 pm

Sure, social security will run out soon, but no one is relying on that for retirement, with most of us having saved and also invested in 401ks, but pension retirees relied on their pension which up until now has been a good deal. That good deal seems to be ending not just for Hostess workers but for others as well:

"If you're one of the few remaining Americans with a pension, we've got some good news and some bad news for you.

The good news is that if your pension fails, there's a backstop provided by the Pension Benefit Guaranty Corporation. That U.S. government agency will cover your payments up to a maximum level that's based on your age and accrued benefits when the pension failed. For a 65 year old, that maximum is currently $55,840.92.

The bad news -- pensions are a dying breed. For instance, when Hostess Brands entered bankruptcy liquidation, it became the latest in a long list of companies to terminate its plan. To top it off, while the existing retirees may still be protected by the government backstop, younger Hostess employees aren't so lucky. A 45-year-old, for instance, will be able to get no more than $13,960.20 a year from the guarantee."

Web Link

That may be why most of the now unemployed Hostess workers resent the bakers' union workers strike and its unintended consequences.

Posted by Gordon Gecko, a resident of another community
on Nov 29, 2012 at 4:48 pm

It's always a relief to know that corporations continue to have judges in their pockets.

Posted by Stacey, a resident of Amberwood/Wood Meadows
on Nov 29, 2012 at 6:03 pm

Stacey is a registered user.

There's various reasons why pensions are a dying breed in the private sector. One reason has to do with ERISA in 1974. Prior to that law, private companies did the same things that government does today with public pensions and employees got screwed when the pension fund imploded. Another reason has to do with today's workforce being more mobile than in the past. Employees want portable retirement plans because they don't want to be stuck working for the same company for 30+ years.

Posted by Arroyo, a resident of Another Pleasanton neighborhood
on Nov 29, 2012 at 6:35 pm

It may simply come down to economics. Who among us has not been upset at an insurance company settling some bogus claim, instead of fighting it out in court? The insurance company is seeking the least expensive way to get an impasse resolved.

I realize this goes against the feelings that these executives of Hostess do not deserve additional monies to stick around and assist with the closing, but this is a pretty normal business decision in bankruptcies.

These executives can leave and seek employment elsewhere; but the banks, lenders, and creditors will be stuck with trying to figure out how to make sense of the location and possible recovery of assets. Many times, the executives know so much about the inner workings of a company, that they can assist the banks and creditors with recovering assets that would normally take years of forensic analysis and a great deal of money to accomplish. Hostess executives can leave and go-to-work elsewhere, or stay and get paid by the banks and creditors for their services.

Just think how valuable a Company Controller would be in the recovery of assets.

This is fairly normal situation in bankruptcies; and remember that some of the "executives" were nothing more than highly paid employees of the Corporation, and had little control over what happened. They did not cause the bankruptcy, could've worked elsewhere for the same salary, and may not actually be part of the ownership of the company.

(Remember, I'm only trying to educate as to what occasionally goes on in bankruptcies -- Save your condemnations of the messenger.)

Posted by cholo, a resident of Another Pleasanton neighborhood
on Nov 29, 2012 at 10:08 pm

unions drove the final nail into the coffin of arguement there.....they could have saved their jobs, but their arrogant union 'leadership' led them into the unemployment lines. Who's going to bail them out now, for their bad decisions?

Posted by Hank, a resident of Another Pleasanton neighborhood
on Nov 29, 2012 at 10:54 pm

(Comment deemed inappropriate by Pleasanton Weekly Online staff)

Posted by woggut, a resident of Pleasanton Valley
on Nov 29, 2012 at 11:04 pm

Interesting article in the WSJ, basically it was the costs from the Teamsters work rules that drove Hostess under. The distribution costs were way out of line, but the bakery operations were fairly efficient. The Baker's union was betting they would get a better deal from the new owners.

"Union-imposed work rules stopped drivers from helping to load their trucks. A separate worker, arriving at the store in a separate vehicle, had to be employed to shift goods from a storage area to a retailer's shelf. Wonder Bread and Twinkies couldn't ride on the same truck."

This was my experience with unions - 4 people to change a light bulb. A laborer to move the ladder, electrician to remove the bulb, safety guy in case a bulb broke (mercury), and a supervisor because there were 3 workers. Probably would have been a 4th worker if a bulb broke, because the cleaners were a separate shop. This is not a joke, it's a real world, first hand experience!

WSJ is behind a paywall, but here's a summary.
Web Link

Posted by Hank, a resident of Another Pleasanton neighborhood
on Nov 30, 2012 at 12:14 am

@woggut/arroyo/fake cholo(because he's so intimidating and really needs to be hated on)/resident/mittens/ etc.
WSJ has become a joke, just like Fox News. So too your continued crusade against unions. Your reasoning is so infantile. Do you really think readers don't know you're the same sicko who was let go by a union because his hate-filled personality was such that he couldn't get along with anyone? Instead of learning from your experiences, you continue to repeat your hackneyed vendetta for no apparent purpose but to 'get back' at those who hurt you. We're sorry for your pain, but you need to seek help. You are in serious disarray. Is there no one in your life whom you might consult to give you some guidence? Please find someone you think you can trust and ask them for their opinion. The next move is yours.

Posted by liberalism is a disease, a resident of Birdland
on Nov 30, 2012 at 8:29 am

liberalism is a disease is a registered user.

Hank, not sure why you're so defensive and hateful. Is it because you're tired of being paid minimum wage to stand in picket lines? Or, is it the fear that people will catch on to the scam of unions trying to get unskilled, uneducated people to be paid wages earned by professionals for jobs that high schoolers could perform?
Except for you, no one posting here would think of working for a union, much less get 'let go' by a union.
Besides, when is that last time a union ever let a paying dues member go? As long at the dues keep rolling in, they don't care about you or the companies they leach off of. You really should pick your allies a little better....they are making you look like a sucker.

Posted by Hank, a resident of Foothill Farms
on Nov 30, 2012 at 9:17 am

(Comment deemed inappropriate by Pleasanton Weekly Online staff)

Posted by Stacey, a resident of Amberwood/Wood Meadows
on Nov 30, 2012 at 10:05 am

Stacey is a registered user.

Are you talking about yourself again? Sounds like it.

Posted by Resident, a resident of Another Pleasanton neighborhood
on Nov 30, 2012 at 10:13 am

Thanks for the WSJ article, this was very interesting:

"Hostess has spent eight of the past 11 years in bankruptcy. As the company explained to its latest judge, the Hostess brands "have not been able to profit from many of their existing delivery stops and have been unable to enter potentially profitable markets, such as dollar stores, vending services and movie theaters."

Sounds like the union was making Hostess spend more than it was bringing in. Why on earth would they need a driver and a worker to unload the truck? The same person could have done both. Even in our school district, I see the guy (driver) who delivers the milk also unloading the truck, as it should be!

Well, those drivers will wish they had not acted like spoiled brats because now they face a very tough job market, and no one is going to hire them under the same rules they had at Hostess.. welcome to the real world!

Posted by woggut, a resident of Pleasanton Valley
on Nov 30, 2012 at 10:18 am

Hank, that would be called an ad-hominem attack, the last defense of a person that doesn't have a counter argument.

No, I have never been employed by a union but was in management during one failed organizing drive. I have had the misfortune of working with unions, and a couple of friends that shut down their businesses because of literally irrational union demands. It was interesting talking to union members, the good performers saw that the union was protecting the slackers at the expense of taking down the organization. One work rule was that the pace of effort should be the same as a slow walk, if you did more you got a grievance - taking someone else's job. The company went down and for the most part only the good workers found new jobs.

I am not opposed private sector unions, I just see them acting irrationally from a long term perspective. My grandfather was a union steward and ran the union paper back in the hard core days of Pinkerton guards and plant takeovers.

I see a potential huge value in skilled trades if they promote a merit & skills based approach rather than strict seniority. We have an extreme shortage of skilled trades - welders, machinists, pipefitters, industrial electricians & mechanics, etc. A merit based training & certification program would be a great solution, along the lines of what Mike Rowe (of Dirty Jobs fame) is advocating. But 1 year of experience repeated 20 times isn't the same as 20 years of experience. The current seniority model just extracts rents from existing invested capital, unfortunately in the long term the capital moves and the rent seekers are out of a job.

On the public sector side I agree with Franklin Roosevelt that public employee unions are intolerable. For all intents and purposes, public school policy and practices have been taken over by a private organization - teachers unions (hostile takeover??). Why does the NEA have a bigger say in education policy than parents? Why can't I move my child out of a class when he has a bad teacher?

The public employees, and teachers in particular, are fighting a rearguard action, along the lines of 60's era steelworkers or 80's telephone operators. Take a look at Salman Khan's (of Khan academy) TED presentation Web Link.

In 10 years the current stand and deliver classroom at least grade 6-12 will be bottom tier for people with no other options, along the lines of medicaid (or our current woefully under-performing inner city schools).

We'll also see the adoption of IT in government that the private sector lived through in the 90's & 00's and we're seeing now in health care. Paper pushers and process compliance oriented middle management will be basically gone. The looming pension crisis will force the issue, we'll have to cut current services to pay retiree benefits (along the lines of Stockton, LA & San Jose), we won't have any choice than improve productivity of the remaining employees. But just like the private sector, the remaining employees will need a different skills mix.
It would be less chaotic to begin working on the transition rather than waiting for the crisis before we get started.

Posted by Hank, a resident of Another Pleasanton neighborhood
on Nov 30, 2012 at 10:52 pm

(Comment deemed inappropriate by Pleasanton Weekly Online staff) The recent go-rounds regarding Hostess are a case in point. Blame the unions! It's the unions' fault! It doesn't matter that Hostess management stunk; that its product quality stunk; that it failed to modernize while robbing workers' pension funds to line their own pockets with raises and bonuses; that other competitors with roughly similar union contracts with workers are doing quite well. Unions are bad! And because some corrupt and incompetent managers have said such to the right-wing business journals, it must be true. And the facts? Who needs them. Facts:

Hostess management's efforts to blame union intransigence for the company's collapse persisted right through to the Thanksgiving eve press release announcing Hostess' liquidation, when it cited a nationwide strike by bakery workers that "crippled its operations."

That overlooks the years of union givebacks and management bad faith. Example: Just before declaring bankruptcy for the second time in eight years Jan. 11, Hostess trebled the compensation of then-Chief Executive Brian Driscoll and raised other executives' pay up to twofold. At the same time, the company was demanding lower wages from workers and stiffing employee pension funds of $8 million a month in payment obligations.

Hostess management hasn't been able entirely to erase the paper trail pointing to its own derelictions. Consider a 163-page affidavit filed as part of the second bankruptcy petition.

There Driscoll outlined a "Turnaround Plan" to get the firm back on its feet. The steps included closing outmoded plants and improving the efficiency of those that remain; upgrading the company's "aging vehicle fleet" and merging its distribution warehouses for efficiency; installing software at the warehouses to allow it to track inventory; and closing unprofitable retail stores. It also proposed to restore its advertising budget and establish an R&D program to develop new products to "maintain existing customers and attract new ones."

None of these steps, Driscoll attested, required consultation with the unions. That raises the following question: You mean to tell me that as of January 2012, Hostess still hadn't gotten around to any of this?

The company had known for a decade or more that its market was changing, but had done nothing to modernize its product line or distribution system. Its trucks were breaking down. It was keeping unprofitable stores open and having trouble figuring out how to move inventory to customers and when. It had cut back advertising and marketing to the point where it was barely communicating with customers. It had gotten hundreds of millions of dollars in concessions from its unions, and spent none of it on these essential improvements.

Hostess first entered bankruptcy in 2004, when it was known as Interstate Bakeries. During its five years in Chapter 11, the firm obtained concessions from its unions worth $110 million a year. The unions accepted layoffs that brought the workforce down to about 19,000 from more than 30,000. There were cuts in wages, pension and health benefits. The Teamsters committed to negotiations over changes in antiquated work rules. The givebacks helped reduce Hostess' labor costs to the point where they were roughly equal to or even lower than some of its major competitors'.

But, heck, let's disregard all these facts and try to create something along the lines of Bangladesh. Would the tragedy involving 112 dead workers have occurred had those workers been unionized? I think not.

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