Hostess had 18,500 Teamsters and Baker’s union workers in 36 plants and 600 distribution centers. Hostess had 372 collective bargaining agreements, 12 separate unions, 5,500 delivery routes and over 40 pension plans.
Hostess first filed for bankruptcy in 2004 and was purchased by Ripplewood, a Private Equity firm run by Tim Collins, a major Democrat donor. Former Democrat Speaker Dick Gephardt, now running Gephardt Group, provided “labor advisory services.” Gephardt’s son Matthew became a $100,000 a year “Independent” Hostess Director.
Killing Companies and destroying worker’s livelihoods is a very lucrative Democrat sport. Democrat Unions destroy companies with unreasonable demands. The company goes under. Then, PE firms like Ripplewood and Hedge Funds work with Democrats who can persuade unions to give concessions, which will enable the new company to run profitably. No matter what happens the union leaders, the PE and Hedge Funds, their attorneys and the Democrats make money. If the company dies, they all blame “rich” Republicans!!
Ripplewood put in $130 and another $40 million, the two Hedge funds lent about $360 million and the unions’ concessions were valued at $110 million. But Hostess still owed $670 million when it exited bankruptcy in 2009.
By 2011, Hostess had $1.5 Billion liabilities and only $1 Billion assets. It was losing $2 Million a week. It filed for bankruptcy again in January 2012. Union demands made it very likely that Hostess would fail. With the risk of losing their jobs very high, no senior executive would work for Hostess without high pay. In February, Hostess asked the Judge to authorize $1.5 Million salary for its CEO Driscoll. The Teamsters objected. The CEO quit. Hostess then hired Rayburn, its sixth CEO in ten years.
Hostess’s Teamster distribution operations cost $80-$130 million more than necessary. Trucks carrying Wonder Bread wouldn’t carry Twinkies, so each trip required two sets of trucks. Union drivers wouldn’t load their trucks; so each loading required two sets of workers. Essentially, four or more Teamsters were receiving very high pay and benefits for doing what one could do.
Union agreements required Hostess to contribute to over 40 multi-employer pension plans (MEPPs). Hostess asked to contribute to just one or a few MEPPs because this would reduce its contributions from $100 million a year to $25 million. The Teamsters rejected Hostess’s request.
Meantime, the Baker’s union, upset with pay raises for executives, decided to strike, causing Hostess to be unable to maintain its bakery operations and also causing it to lose even more money. Hostess made a valiant effort to find another buyer. But nobody was willing to take on the unions, their high salaries, their gold plated pensions and their restrictive work rules.
Apparently, Grupo Bimbo of Mexico will now acquire Hostess. Free of union rules, it will make big profits for its new owners. Mexican workers will get great jobs. American union leaders, who jointly collect $18 Billion a year, will also be fine.
Meantime, 18,500 American families are without a job right in the middle of Christmas.
— Rohini DeSilva
November 26, 2012