The Toronto Star carries the story of the closing of Hostess, an Iconic American bakery company going belly up…
NEW YORK, N.Y. —Hostess Brands Inc. has made good on its threat to shut down if striking employees didn’t return to work.
The 82-year-old company, weighted down with $1 billion debt and $2 billion in unfunded pension liabilities, collapsed as what Fortune magazine called “obstinacy, miscalculation, and lousy luck connived to create corporate catastrophe.”
With it goes the lore and legend of the snack cake Twinkie, tested for its indestructibility, invoked as a homicide defence and star of a Woody Harrelson movie
“We deeply regret the necessity of today's decision, but we do not have the financial resources to weather an extended nationwide strike,” said Gregory F. Rayburn, chief executive officer of the company that makes Twinkies and Ding Dongs.
“Hostess Brands will move promptly to lay off most of its 18,500-member workforce and focus on selling its assets to the highest bidders.”
Hostess said it will seek bankruptcy court permission to close its business and sell its assets, “including its iconic brands and facilities. Bakery operations have been suspended at all plants.”
The knee-jerk response is to damn the unions, but the demise of Hostess is a case study in corporate bloodsucking and unprincipled capitalists run amok.
For a company, the size of Hostess, to have accumulated $2 billion in underfunded pension liabilities means that the Executive Management (more than likely with the knowledge and approval of the Hostess Board of Directors) has been deliberately withholding funds - and more than likely - the said funds were deducted directly from their employee’s weekly wages – and not deposited against Hostess’ pension obligations.
To accumulate $2 billion in underfunded pension debit is simply impossible to do in a six month or even a year period. This suggests to me that the size of debt reflects long-term corporate mismanagement, and potentially, even corporate negligence by Hostess – which had to have spanned years.
If ever there is an aspiring ambitious Attorney General who needed to look for evidence of potential criminal corporate malfeasance; I would suggest an AG needs to look no further than Hostess. Hostess’ debt totals approximately $3 billion when the company applied for bankruptcy protection for the second time in 8 years. Let me emphasis this; for the second time.
In fact, in January 2012 when Hostess applied for Bankruptcy protection, Hostess requested the court’s permission to shut-down all operation and sell-off what was left of its assets. Consequently, this action suggests neither the Board of Directors nor the Executive management of Hostess had any real intention of keeping the company going or even negotiating with the union in good faith. If anything, it appears far more likely that the Management of Hostess wanted to scapegoat the union by using it as a smokescreen to potentially fend off any suggestions of financial impropriety on the part of Executive Management or Board of Directors in order to have a bankruptcy Judge grant their original motion.
In 2004, when Hostess applied for Chapter 11 Bankruptcy relief the Baker’s Union was very accommodating to the restructuring plans and accepted a significant benefit and wage reduction for their members. It was only through the course of time that the Baker’s Union discovered money which was earmarked for infrastructure, capital improvement - machinery, maintenance and repairs and was financed by the reductions in employees’ wages and benefits was never spent on this. Meanwhile, executive compensation continued to rise significantly despite the company chronically losing money.
I would be remiss if I did not point out - given Hostess' financial track record, that even if all the union members had returned to their jobs by Thursday evening, there was absolutely no guarantee the company could have continued to meet its basic payroll in the foreseeable short-term future.
Too bad we do not tar and feather shysters anymore.
No comments:
Post a Comment