Hostess Brands, the maker of everything I used to love about lunchtime as a kid such as Cup Cakes, Twinkies, and sandwiches made of Wonder Bread, is nearing the end of its existence. Though there are a number of mixed opinions and stories to point blame for the Hostess bankruptcy, most official news reports are citing inability to come to an agreement with the Union. However in contrast, CNN Money quotes Union officials as stating that “Hostess failed because its six management teams over the last eight years were unable to make it a profitable, successful business enterprise.”
Ultimately the recipes, brands, and even possibly the Hostess name could be resold to other companies throughout the liquidation process as a way of creating funds to pay creditors. Therefore, a company in Mexico or China could suddenly own the rights to one of the Hostess products like Twinkies. So even if these products made it back on the shelves of stores, it is unlikely it would result in the re-hiring of any of the 18,500 Hostess employees.
Reflecting on the Hostess Bankruptcy:
So even though the economy isn’t fantastic, we’re still a long ways away from the woes of the Great Recession. With that, who is to blame for the Hostess bankruptcy? Popular opinion blames the following:
• The Union’s demands
• Incompetent management
• Private equity ran it into the ground
Though the real reason may be a combination of each of these elements, I think smaller businesses can learn a great deal from this dilemma. Despite its size and popularity, the opinion of the workers and the Union which represents them is still enough to bring down a company of this magnitude. From their perspective, management may have squeezed them too hard for profitability and forced them into conditions that were no longer desirable. In a smaller business, it is important to recognize that the culture the business creates and promotes is one that all levels of employees can find as inclusive. To do anything to the contrary could, just like in the Hostess bankruptcy, cripple the company from carrying on forward any further.
Though Hostess may be beyond saving, smaller companies could benefit from reaching out for help. They could try a business rescue website or seek private consultants to see what options are left to save the business. The use of fresh ideas or people who specialize in such practices as business recovery may prove useful to a business in need.
Readers – Who do you feel is to blame for the Hostess bankruptcy? Did the company go wrong, or are the Union workers to blame?
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I read a lot about this situation because we have a lot of Hostess employees in my area. It sounds like they were poorly managed and had many many CEOs over the years who all failed miserably. On top of that, they were asking for employees to make more concessions and pay cuts this year even though they had already several years ago.
Here are a few stories that I found interesting:
http://www.dailykos.com/story/2012/11/19/1163141/-Hostess-wants-to-give-1-75-million-in-bonuses-to-top-managers
http://www.dailykos.com/story/2012/11/18/1162786/-Inside-the-Hostess-Bankery
Holly@ClubThrifty recently posted..Things I’d Rather Hire Somebody Else to Do
Interesting .. I had read that private equity took over and poorly mismanaged the whole operation.
Good post. I have not followed it a whole lot, but I would wager to say it’s probably a combination of the parties leading to the demise. Some of the names are too big I think not to be picked up by someone, although it would be fitting I guess for a Chinese company to make Twinkies.
John S @ Frugal Rules recently posted..Frugal Family: How I Sacrifice “Stuff” to Give My Kids Everything They Need
Thanks John. On the Chinese company subject, don’t they kind of already make them when you consider all the knock-offs and generic versions of these treats?
In situations like this, I think it is almost always a combination of things. Any company that goes through six management teams in eight years obviously isn’t doing something right. On the flip side, maybe one of the reasons the management teams weren’t having success was due to the inflexibility of the labor unions.
And of course there are also the issues of increased competition in the marketplace and an overall push for healthier snacks.
Whatever the case, corporations exists for the purpose of maximizing shareholder wealth. If the company isn’t profitable and doesn’t forsee achieving profitability in the future, it only makes sense to close up shop.
Justin @ The Family Finances recently posted..Christmas Gifts for Toddlers
I agree Justin. I think it is probably a combination of many things, but it is hard to know unless you can look at the books and see if the union fees are unmanageable, or if the management is being paid excessive, or if it is a combination of both with lower sales.
Probably all three and no one wants to cowboy up and make the right choices for the company which will save these jobs.
Jason Clayton | frugal habits recently posted..Save Thousands of Dollars with this One little Rule
It seems like if it was the Union, we would have heard more about this. But you’re right – both sides think they are right. And until we have all the facts, we’ll never really know.
Good points Justin. Even though the media is framing this as a Union inflexibility, I would suspect that it has more to do with the poor management than anything. Its a shame because it will be all the workers that lose in the end.
I think if management and unions worked together more and compromised it might have worked but sometimes it is just time for a company to fail.
Lance @ Money Life and More recently posted..2013 Standard Mileage Rates Announced by IRS
I agree. Like a machine, without the proper maintenance and care, it will inevitably break down. Too bad though for the workers though. Despite who is to blame, they lose.
Everyone involved, with the exception of the Bakery Workers Union, realized the need to cut costs and worked to save the company. One union, about 5,000 workers, destroyed their jobs and 13,000 others. Not real bright. That’s why I refuse to get a job: I’ll control my destiny, not be at another’s mercy.
Rod J. Rogers (@FreeAgentRogers) recently posted..Now is the PERFECT time to start an Office Cleaning Business
Thanks for the input Rod. I know a lot of other people feel that way about their future, and if you can make it work, do it!
Kind of like our government. No one wants to give. I think this is a great example of what to do wrong on every front. I’m sure the unions must feel like they have a bit of a feather in their cap for helping with the demise of the company, but now their workers have no job, so who is the winner? I think the world will do fine without Ho Ho’s and Ding Dongs, but I really feel for anyone out of a job and benefits.
Kim@Eyesonthdollar recently posted..!Obesity: Taxes In and Taxes Out
I’m glad you broke this down a little better. The news seems to be all over the place. I’m sad that Hostess couldn’t make it but I’m not sad about Twinkies not being produced anymore. I don’t really like them (blasphemy I know!).
Carrie Smith recently posted..How to Get Back into the Work Groove After Time Off
They were a “sometimes” food for sure. I was always more of a fan of the cupcakes. Those things were so good!!
Typical in companies with a union workforce. Unions blame management and management blames unions. In the end, now everybody loses their jobs. I absolutely blame the union in this case. Not the union workers, per se, the union leaders. If a private union vote was allowed, I bet the majority would have voted to end the strike and keep their jobs. Since their union votes are public, the workers felt intimidated and threatened and were scared to vote to end the strike.
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