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  1. #21
    Community Host Alissa_Sal's Avatar
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    Quote Originally Posted by KimPossible View Post
    Lets remember that they lost their CEO and this was a new guy. I'm not saying its justified, but Gloria has a point. How do you attract a CEO to a struggling business that is going through bankruptcy if you can only pay him a fraction of what he would make elsewhere. You are in a tough position as a company. Perhaps that should have been the end of the company at that point?
    Yes, but he accepted the position presumably knowing the financial situation they were in, and how much they were prepared to pay at that time.

    They should have negotiated a deal with a more than usually generous payout and stock options...assuming he could turn the company around. That way it is a gamble, but still attractive.
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  2. #22
    Posting Addict KimPossible's Avatar
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    Quote Originally Posted by Alissa_Sal View Post
    Yes, but he accepted the position presumably knowing the financial situation they were in, and how much they were prepared to pay at that time.

    They should have negotiated a deal with a more than usually generous payout and stock options...assuming he could turn the company around. That way it is a gamble, but still attractive.
    Is this common practice? Does it actually attract CEO's? Ones good enough to recover a huge company in bankruptcy? One good enough that i would imagine someone would be able to pay him an average amount up front somewhere else? I mean...you make it sound easy. I don't know if its that easy. Maybe its common....i would imagine it would depend on the size of the company though and other things.

    Ultimately its all about greed and making as much money as possible. But no one is really under any obligation to take a pay cut to save this company, especially if they can go somewhere else. And when you look at the options on the table and someone is deciding between

    'a normal paying CEO job'

    and

    'a challenge to recover a bankrupt company at a fraction of elsewhere with a promise to pay out only if you are successful'

    you couldn't blame even a CEO for saying they'd rather take the other job, could you?

    SO then we are stuck with where we were before. Why would anyone help bail them out.

    But alternatively, if what you suggest is common practice in struggling companies and actually works...then sure. I agree they should have tried that first if they didn't
    Last edited by KimPossible; 11-19-2012 at 03:17 PM.

  3. #23
    Mega Poster mom3girls's Avatar
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    I would assume they looked at hiring the new guy at the rate that is comparable as an investment. I think he was a last ditch effort to try to keep them afloat.
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  4. #24
    Community Host Alissa_Sal's Avatar
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    But Kim, he already took the job. It's not like they were hiring him fresh, he took the job and then gave himself a raise after the fact. So when he took the job, he agreed to the original salary they offered.

    I'm not sure it's common practice, but I'm also pretty sure I didn't make that strategy up.
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  5. #25
    Posting Addict KimPossible's Avatar
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    Quote Originally Posted by Alissa_Sal View Post
    But Kim, he already took the job. It's not like they were hiring him fresh, he took the job and then gave himself a raise after the fact. So when he took the job, he agreed to the original salary they offered.

    I'm not sure it's common practice, but I'm also pretty sure I didn't make that strategy up.
    I agree that if he was given the job, and the raise was not agreed upon at the time of hire that giving himself one later doesn't make a lot of sense.

  6. #26
    Posting Addict KimPossible's Avatar
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    Latest news says that the bakers union and hostess have been urged to mediate and try to come to an agreement. The NY TImes article below gives a really good lowdown on the two paths that the two different Unions took in this matter. It also clarifies some of the questions we had about how much pay these union workers make and how much it would be cut. The numbers are higher than was originally reported in this thread.

    I still have a really hard time giving the Baker's union a free pass in this whole thing...bad advice given to them or not. I will never deny that greed and money at the top were big players in what went wrong with Hostess...but when you find yourself in the present, working for a company that screwed itself up and you have a role in the decision making or outcome, i think there are some paths that are better than others. Perhaps you feel right in demanding 'xyz' because of the injustices done to you...but what is the point of not trying to reach a compromise if in the end it means you will lose your job and every one elses along with it? No matter what 'should' have been done in the years or even months past, a hurting company can only afford to do so much...in the present

    I really think when reading the article, the Teamsters approach and willingness to compromise even if its not ideal just seems like a better way to go.

    FTR, if i was a Teamster, i'd be pretty PO'd about all of this and the choices of the Baker's union, and i don't think its really irrational to be so.

    At Judge's Urging, Hostess and Union Agree to Mediation - NYTimes.com

    Pushed by a bankruptcy judge eager to save thousands of jobs, Hostess Brands and one of its biggest unions agreed to mediation on Monday, in a last-ditch effort to avoid winding down Hostess, the bankrupt maker of Twinkies and Wonder Bread.

    At the behest of the judge, Hostess Brands and the Bakery, Confectionery, Tobacco Workers and Grain Millers Union, which represents 5,600 Hostess workers, will meet with a mediator on Tuesday to try to narrow their differences toward a labor agreement.

    If the mediation succeeds, it could prevent the liquidation of the company and save 18,500 jobs. Otherwise, Hostess is likely to auction off its well-known brands, leaving the fates of those workers in limbo.

    In January, Hostess, an 82-year-old company, filed for Chapter 11, just three years after emerging from bankruptcy. At the time, the company said it was unable to pay its debts and needed to make deep cuts in labor costs to survive.

    Hostess was able to reach a new contract with the Teamsters, its largest union. But talks between the company and the bakery workers deadlocked, and the union went on strike on Nov. 9. With production slowing and its finances dwindling, the company announced plans on Friday to liquidate.

    Judge Robert D. Drain of the Federal Bankruptcy Court for the Southern District of New York pushed hard for the two sides to try one last round of talks. The judge expressed worry that neither side had exhausted all efforts to avoid liquidation. He especially urged the bakery union to seek mediation, suggesting that it might face significant legal claims if Hostess is forced to liquidate.

    ?I?m giving the union, as well as the debtor and their lenders, a chance to work out their issues in private,? Judge Drain said. ?If they don?t take it, it?s not that the issues won?t be worked out. They will, but it will be done in public and in an expensive way.?

    The unions have been at the center of the struggle for Hostess?s survival.

    When Hostess filed for bankruptcy, the company insisted that its labor costs and union rules were unsustainable, and it moved to renegotiate the contracts. One work rule required that two separate trucks be used to ship bread and cake products to a single retailer. The company also indicated that it faced $52 million in workers? compensation claims.

    The two main unions, the bakery workers and Teamsters, countered that years of mismanagement were to blame. The private equity backers had loaded the company with debt, the unions said, making it difficult to modernize Hostess?s bakeries or product offerings. The bakery workers? president, Frank Hurt, called the private equity owners ?vulture capitalists.?

    The two unions took different approaches to the labor negotiations.

    The Teamsters hired a financial consultant, Harry J. Wilson, who had worked on the General Motors restructuring. He laid out just how much the union could get and still allow for a recovery of the company.

    ?We?re pragmatic when it comes to this situation,? said Ken Hall, the Teamsters? secretary-treasurer. ?We know that it?s a tough situation. We knew that because of mismanagement, the company was in a real hole.?

    After eight months, the Teamsters eventually reached an agreement with the company. The union agreed to a contract that cut pay by 8 percent immediately ? with that cut shrinking to 5 percent next year. The Teamster workers, most of whom drive trucks for Hostess, average about $20 an hour; the bakery union workers, $16 an hour.

    The Teamsters contract reduced the company?s health contributions by 17 percent and suspended its pension contributions until 2015. The company had originally insisted on freezing the pension plan permanently and ceasing all contributions.

    The Teamsters insisted on numerous concessions from management. The company eventually agreed to give Hostess?s unions two seats on its board, a 25 percent share of company stock and a $100 million claim in bankruptcy. Last March, the Teamsters helped push out Hostess?s former chief executive after the board proposed tripling his salary even as he was demanding steep concessions from the workers.

    In September, the Teamsters members voted narrowly to approve the deal, 53 percent to 47 percent.

    The bakery workers union took a far more adversarial stance.

    After Hostess?s unions had agreed to more than $100 million in annual cost concessions during Hostess?s previous bankruptcy, the bakery union thought it made little sense to agree to further cuts. It feared a deal would pull down wages and benefits throughout the industry, without saving Hostess.

    ?Our consultant said the debt load on the company was too heavy, and that we would be back in bankruptcy and facing liquidation in 12 to 16 months from now, even if we took more concessions,? David B. Durkee, the union?s secretary-treasurer, said.

    The bakery union often derided Hostess?s management, saying it was composed of Wall Street investors and ?third-tier managers? from nonbaking companies. It said the investors were trying to ?resolve the mess by attacking the company?s most valuable asset ? its workers.?

    Both sides refused to budge, and the bakery union went on strike at 24 of the company?s 33 bakeries.

    With the threat of liquidation looming, the Teamsters, in an unusual move, called on the bakery workers to hold a vote to determine whether the rank-and-file workers wanted to end their strike and accept Hostess?s offer ? or face layoffs. Last Thursday, Mr. Hall of the Teamsters told the bakery workers that Teamsters members could not believe liquidation and layoffs were what the bakery workers ?ultimately wanted to accomplish when they went out on strike.?

    But the bakery union declined to hold such a vote. The next day, the company announced plans to liquidate and sell off its assets.

    ?There was this whole theory that the company was bluffing about liquidation and there was some white knight that was going to come and buy the company? Mr. Hall said.

    Now, Hostess and the bakery union will meet at the offices of the company?s lawyers. Representatives for the Teamsters and the company?s bankruptcy lenders were also invited to attend. If the two sides cannot agree, Hostess?s lawyers are expected to appear in court on Wednesday morning to seek approval of their liquidation plan.

    Potential suitors are already lining up.

    Some of Hostess?s rivals may pursue deals for the company?s most popular brands, especially Twinkies. One possible buyer, Flowers Foods, disclosed on Monday that recent revisions to its bank lending agreements would allow the bakery company to borrow up to $700 million. That additional cash may help finance a deal, analysts said. A spokesman for Flowers did not return a call for comment.

    Industry analysts say Grupo Bimbo, the world?s largest bread-baking company, is also in the mix. Bimbo, which already owns parts of Entenmann?s, Thomas? English muffins and Sara Lee bakery, made ? and then withdrew ? a $540 million bid for Hostess during its previous bankruptcy. The company might just buy pieces, because it could face antitrust issues.

    Financial investors like Sun Capital Partners and Metropoulos & Company have also said that they are interested in pursuing a deal for Hostess. Sun?s co-chief executive, Marc Leder, told Fortune, ?I think that we could offer a slightly better, more labor-friendly deal than what was on the table last week.?
    Last edited by KimPossible; 11-20-2012 at 11:54 AM.

  7. #27
    Community Host wlillie's Avatar
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  8. #28
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    By the way, Pinterest is running wild with Hostess copycat recipes....
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  9. #29
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    When you read these details it is no wonder that Hostess went under. I wonder how many more union shops will follow before they wise up? And they really want to blame it on the pay one CEO got?

    Compare the union attempts at Wal-Mart to what happened at now bankrupt Hostess Brands, maker of Twinkies, Ding Dongs, Dolly Madison cakes and Wonder Bread. The 82-year old business will now be liquidated after a national strike by the Bakery, Confectionery, Tobacco Workers and Grain Millers Union, the company’s second -largest union that started on Nov. 9. This is the second bankruptcy in a decade for Hostess, as sales plummeted from $3.1 billion in 2006 to just $2.45 billion in 2011, a 20% drop, according to PrivCo, a financial research company. Hostess’s balance sheet was underwater, carrying debt of over $1.43 billion, $2 billion in unfunded pension liabilities and just $40.4 million in cash. Net losses nearly tripled from 2006 to 2010, from $128 million to $341 million, PrivCo says.

    But while Hostess hammered out an eleventh-hour agreement in bankruptcy court with its largest union, the Teamsters, to cut workers' pay and benefits, the bakery union balked and went on strike.

    The details are ugly when you see what was going on behind the scenes at Hostess. It reportedly was dealing with 372 separate collective-bargaining contracts, 80 separate health and benefits plans, and 40 different pension plans.

    Union rules said no Hostess delivery trucks could have both bread and snacks on board, despite the fact the goods were going to the same stores. Drivers were not allowed to load the snacks onto their trucks, certain workers could only load snacks not bread, and vice versa. PrivCo notes that potential suitors for Hostess may include the owner of the Sara Lee, Entenmann's and Arnold brands, and Flowers Foods, which owns Tastykakes, Nature's Own, Dandee, and Sunbeam brands. C. Dean Metropoulos, a private equity firm, has been hovering too -- it owns brands like Pabst Blue Ribbon beer, Chef Boyardee and Bumblebee Tuna. PrivCo estimates Hostess' brands “could fetch about $1 billion in an asset sale based on comparable private M&A deal multiples on the PrivCo data platform.” The unfunded $2 billion pension liability “will be picked up by the government controlled Pension Benefit Guarantee Corp. (PBGC), as well as other corporations participating in its multi-employer pension plan,” PrivCo notes.

    PrivCo CEO Sam Hamadeh said in a statement: "As Americans both cut back spending on baked goods as well as move toward healthier eating options, Hostess Brands failed to innovate and offer fresher, healthier baked goods, resulting in 9 straight years of revenue declines. With just $40 million in cash remaining, over $1.4 billion in total liabilities, its high fixed cost and distribution structure – which Hostess was unable to reduce due to strict legacy union contracts - and another $2 billion in unfunded pension obligations, Hostess was doomed without significant concessions from its unions.”

    Read more: Wal-Mart and Hostess: Two Union Stories | Fox Business
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  10. #30
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    Unions can be tough to deal with I'll give them that but to really assess what was happening on the union side you would have to go back and see what other union negotiations went down and what contracts were signed. Many times employees give up something in order to get something and the company gives somewhere else (may be the case with the trucks delivering only 1 type of food...to ensure workers have jobs and not eliminating). That may have been in their contract for ages and they may have given up things like floating personal days or something.

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