Sunday, November 18, 2012

The twisted tale of Hostess

As I am sure all have heard this week, the Twinkie is about to die. Well not literally it will probably be bought by some other snack company and sold off with the same name, but the company that makes it Hostess, is going out of business. And it seems that Hostess was extremely in tune to our last election: a company that went into bankruptcy twice, was taken over by wall Street restructuring firms, racked up a lot of debt, asked employees to take a pay cut and possibly had management take a pay raise. Sounds like Romney vs Obama all over again huh.

Now me personally, if a company is asking for employees to take a pay cut I think that MANAGEMENT should face the first axe. The CEO and board should take a year of pay cuts (anywhere from 10-30%) and if the company is still in trouble as they hopefully re-invest this money into the company then come to your employees. This way you show them that "yes I have skin in the game, I was willing to bleed for our company first, but now we need more blood." I think if CEO's took this approach it would probably be easier for them to get concessions from the workers. The approach that probably isn't going to work is to take a pay raise right before you file for bankruptcy as a Forbes article I read claims. In the comments somebody documents what they think is the current pay structure and pay increases but I didn't get a chance to look them up yet. I might but hey this isn't a "business blog" just a "Hmm why fancy wanders across my mind" style thing. I don't know about you but I think somebody making upwards of $1,500,000 dollars can afford to lose $150,000-450,000 a lot easier than somebody making $40,000(on average most of the salaries I could find Glassdoor were between $29,000 to just under $49,000) can give up between $3,200-12,800. I could be wrong but I am pretty sure that while it might take a little belt tightening a guy/gal making a million dollars or more a year has some investments that will help him buy that new car he wanted. somebody making sub $50,000 is now trying to figure out which bill they can afford not to pay this month.



I know unions get this bad wrap about "how hard they are making it on the business man", and how "you don't have a right to anything but the agreed upon wage you are given" but why isn't the CEO of a public company(any company that sells stock is a public company. It doesn't mean it is government owned it just means it sells stock on a publicly accessible market) under the same type of scrutiny or requirement(Private Company for those who wondered the difference). I understand the "wish I was in your shoes" mentality, but seriously other than just wanting to take the money and run why shouldn't a CEO, CFO, or other high level executive be required in the minds of some to also have to keep their heads out of the clouds salary wise? There was a claim in one USA Today article that says these greedy unions were upset that Hostess hadn't made a contribution to their pensions in well over a year . And that 4 years ago the unions had also taken a pay cut, 2004 Hostess goes into bankruptcy, between 07-09 the union workers take a pay and benefits cut, Hostess comes out of bankruptcy in 2009, Management gets pay raises between 2010 and 2011 after union workers gave said concessions, in January of 2012 Hostess files for bankruptcy again and asks workers to take a pay cut. Maybe this is a Liberal vs Conservative thing, but why doesn't this look suspicious to anybody else? Or at least anybody on the right leaning side of the aisle, some Wall Street firm takes over, complains that the employees make too much money, asks for concessions from the employees, racks up debt, gives themselves huge pay raises, and then when the unions strike swear they have to go out of business because the workers are unreasonable.

It's kind of funny because I found an article on Cnn's Money site that says one union(the Teamsters) agreed to take another pay cut while the Bakery, Confectionary, Tobacco Workers, and Grain Millers International union said no more. So it isn't lock step for the unions, one side was willing to give a little bit more but the other side chose to exercise it's freedom to organize and not accept more of what they feel is abuse by insincere management. The Teamsters said that their reorganization people agreed that Hostess's books were in serious trouble, which again begs the question 2 bankruptcies in 10 years what did the management do to earn a raise? It even seems that a few venture firms came in to take over the management. And what is their request to the Bankruptcy Judge now that the BCTGM has said hell no? Hey we want to close the doors and sell off the pieces of Hostess to the highest bidder, a move that probably won't send a dime to employees but will definitely increase profits for management. Which asks an important question: If management has no real incentive to make the company profitable because they will find a way to get money either way exactly why are we protecting them so hard?

It also seems that there is a little bit of gamesmanship going on here, I found an article on the Sacramento Bee that says Hostess was already planning to close at least 3 plants (without any mention of the workers strike) as well as had 9 more plant closings scheduled in the reorganization plan. Seems to me like once the employees agreed to take a pay cut Hostess had the shaft waiting for them, so again what were the workers taking a pay cut for?  I mean if the entirety of your reason for asking for a pay cut is because you can't afford to pay everybody , and then everybody is about to shrink and you won't have as many operational costs since you are closing double digit plants, exactly why do you need a massive pay cut if you are about to massively cut the pay roll? It really does seem like you have some incompetent management trying to get bonuses for bankrupting the company and laughing behind the backs of the employees as they allow them to squeeze them dry in hopes of keeping their jobs.

By the way I found proof of Hostess going into bankruptcy twice in the last 10 years on the L.A. Times website first, so this isn't me just finding one website and beating up on Hostess. I decided to check a few different sources as I made up my mind, I have no problem with people using blogs to get their information(I run a blog), I don't have a problem with using Wikipedia to find information, what I do have a problem with is only checking one source and then acting like you know it all. Now yes I did jokingly write a post a while ago about Hostess vs Little Debbie mainly because like most people in their 30's when I was a kid I loved my Twinkies as much as anyone else, yet as an adult I had stopped eating or even thinking about them. And it wasn't because I had stopped eating sweets(thus bringing up little Debbie's) it was because price wise as well as selection wise I found little Debbie's to be more to my liking.  Calling aging test buds, call it me looking for more than just different varieties of sponge cake but the items they had in common I preferred little Debby's price and for items they didn't I liked what little Debby was offering better.

Hell truth be told I miss Tasty Kakes more mainly because it pretty much takes an act of congress to get them anywhere not along the Atlantic ocean(needless to say I gorged myself on my own personal boxes on my last trip to Jersey). Junk food has a place in all of our hearts:Twinkies, Doritos, Cheetos, funyons, now and laters, M & M's, and the list goes on the thing is even if we do the activities that we enjoyed them with doesn't mean we still enjoy them as much as we used to. I can't remember the last time I had a Doritos, it's been months since I had to have some Cheetos(and I am not fond of the flaming hot ones, the jalapenos ones are okay though), Funyons maybe last year. The difference is that Hostess decided that it's brand name was worth exorbitant prices, while I can get a huge bag of everything else for like a dollar Hostess snacks are more than $1.50 which pretty much prices them out of the market that they are normally aiming for KIDS. Yes as an adult I might buy a snack cake here and there if I am going for a quick sugar rush, but kids they buy snack cakes for the tastes. If I only have 2.50 I can get a soda and a little Debby's cake where as I probably need another dollar with Hostess. And I really do see it happen all the time, kids have small amounts of money to play with $5 or less most times and they are trying to get as much as they can. A hand full of loose jolly ranchers is worth more than two cakes that you can only split so many ways before you begin to pout. I have heard that many of the commodities Hostess uses have gotten more expensive, then again Hostess has been creeping up on 2 dollars for a while now.

Okay off that tangent, I have nothing against profits, I have nothing against a successful CEO getting a pay raise if the company he is running is having record profits and is expanding their market share. If all you are doing is draining the company, running it into the ground, and making sure you squeeze every dime out of it while tricking the employees into working back breaking hours for decreasing pay: you are a thief and a liar as well as should probably be looking at jail time. Maybe that is the cure to this rampant mismanagement we seem to have happening once again. You get a big salary, you screw up the books, you forfeit all monies earned while at the company, and if it is obvious that you were just hoarding all the cash at the top you also get jail time. It's one thing if a company has a downturn because the market is changing and you can actually see them reinvesting into their company and workers. If it seems like the guys at the top are just running the company into the ground "clink clink" book em Dan o

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