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Re: US Tries To Wrest Control Of Hostess Liquidation As Management Seeks To Pay $1.75 Million In "Incentive" Bonuses

By: capt_nemo in ROUND | Recommend this post (0)
Thu, 22 Nov 12 9:23 PM | 124 view(s)
Boardmark this board | De's Test Board 		Msg. 45021 of 45651
(This msg. is a reply to 44971 by capt_nemo)
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Thanks Mish. My thoughts exactly............


Hostess Fires 15,000 Workers in Liquidation; Twinkies Silliness From Readers

The BBC reports Twinkies firm Hostess Brands wins liquidation bid.

Note that the first step in liquidation will be the firing of 15,000 workers including the closure of 33 bakeries, 565 distribution centers, approximately 5,500 delivery routes and 570 bakery outlet stores.

At least a dozen readers sent emails in response to my previous two posts on Twinkies.

One misguided soul from the Netherlands wrote "Your article on the bankruptcy of Hostess is so extremely biased. I am NOT surprised because you're ALWAYS bashing the unions."

Many emails including the one from the Netherlands pointed to articles such as Vulture capitalism ate your Hostess Twinkies.

One person accused me of being an extreme right-winger. I also received comments about me being an extreme left-wing Obama fan.

Silliness is clearly in the eyes of the beholder as it is impossible for both of those to be true. (In fact, neither is true because I am issue-based, not political party based, and I have huge differences with both major political parties).

I sometimes wonder if people can read.

Regarding Twinkies, I distinctly stated on my blog and I repeat (emphasis added)...

There is plenty of blame to go around, including untenable wages and benefits, leveraged debt, untenable management salaries etc.

However, the enabling factor behind the debt is loose monetary policy by the Fed coupled with fractional reserve lending. Factor in unions and corrupt management and there is no way the company could make it without huge concessions from the union.

Still, it is difficult to have much sympathy for those who vote to have no job in these trying times.

The union will likely see pension benefits slashed by 50% or more when handed over to the Pension Benefit Guarantee Corporation (PBGC). The PBGC is of course US taxpayers who should not have to pick up any of this tab at all (but they will).

The person who accused me of being an extreme right-winger heard me on Coast-to-Coast where I mentioned "vulture capitalists" and leveraged debt.

So yes, I am aware of leverage. I am also aware of huge raises and other poor management decisions.

The facts remain as follows

The Fed's loose monetary policy and fractional reserve lending enable leveraged buyouts
The unions made a piss poor choice


Past is Irrelevant

There was an offer on the table that would have saved 15,000 jobs. The union said no. Are those 15,000 people better off with no job than a job?

That is all that matters. Management salaries and leveraged debt are in effect sunken costs. If the majority of those people can go out and find a better deal, then they made the correct choice. If not, they didn't.

Given that accrued pension benefits went up in smoke in addition to all those jobs, I strongly suggest the union made a very poor choice.

I freely admit that if a majority of those workers can find better jobs with better benefits, then I am mistaken. However, that begs the question: If those workers could do better elsewhere, than why were they working for Hostess in the first place?

Like it or not, nothing else matters. Cutting off your nose (or your job) to spite management is not a smart thing to do.
Read more at http://globaleconomicanalysis.blogspot.com/2012/11/hostess-fires-15000-workers-twinkies.html#k7Bk1psM0zcRurDX.99




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Realist - Everybody in America is soft, and hates conflict. The cure for this, both in politics and social life, is the same -- hardihood. Give them raw truth.


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The above is a reply to the following message:
US Tries To Wrest Control Of Hostess Liquidation As Management Seeks To Pay $1.75 Million In "Incentive" Bonuses
By: capt_nemo in ROUND
Tue, 20 Nov 12 3:16 AM 		Msg. 44971 of 45651

This is what I read was part of the problem. Management thought they were pretty special while the workers were expendable......Guess the workers showed them, I hear unemployment is good for 4 years now. WTG UNIONS,,,,,,,

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Submitted by Tyler Durden on 11/19/2012 17:07 -0500

Creditors
Delphi
Fail
General Motors
Nationalization
None
RCN
Reuters
Tribune

The Hostess bankruptcy liquidation, the result of a bungled negotiation between the company, its equity sponsors, its striking workers, and the labor union, over what has been defined as unsustainable benefits and pension benefits, is rapidly becoming a Ding Ding farce. The latest news in what promises to be an epic Chapter 22 fight is that the judge, pressured by various impaired stakeholders, among which none other than the US trustee, is that the bankruptcy Judge Robert Drain, who has previously presided over such Chapter 11 cases as Loral, RCN, Cornerstone, Refco, Allegiance Telecom, Delphi, Coudert Brothers, Frontier Airlines and Star Tribune, has ordered the company and its unions to seek private mediation to attempt averting what the company has already said is an inevitable unwind of operations.

Per Reuters, "Hostess, its lenders and the Bakery, Confectionery, Tobacco Workers and Grain Millers International Union (BCTGM) agreed to mediation at the urging of Bankruptcy Judge Robert Drain of the Southern District of New York, who advised against a more expensive, public hearing regarding the company's liquidation. "My desire to do this is prompted primarily by the potential loss of over 18,000 jobs as well as my belief that there is a possibility to resolve this matter," Drain said." Sadly, this latest step will almost certainly lead to nothing constructive as it merely extends a status quo which already proved to be unresolvable.

What makes a mediation improbable is that the antagonism between the feuding sides has certainly hit a level of no return:

Several unions also objected to the company's plans, saying they made "a mockery" of laws protecting collective bargaining agreements in bankruptcy. The Teamsters, which represents 7,900 Hostess workers, said the company's plan would improperly cut the ability of remaining workers to use sick days and vacation.

In the off chance that mediation does lead to a reconstruction of the failed company it may ironically benefit from the closeout sale of its products as confused Americans hoarded Twinkies, Ding Dongs and Ho Hos in hopes of selling them on Ebay as collectible items with huge marks up, something we warned previously will fail. Regardless, the firesale will lead to a surge of cash in the company's coffers, which will then lead to a scramble over how it is divided.

Then comes the question of whether or not someone steps up in the liquidation process and

http://www.zerohedge.com/news/2012-11-19/us-tries-wrest-control-hostess-liquidation-management-seeks-pay-175-million-incentiv

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