Video Killed the Radio Star. Will Unions or Corporate Greed Kill the Twinkie…

Hostess Twinkies. Yellow snack cake with cream...
Hostess Twinkies. Yellow snack cake with cream filling. (Photo credit: Wikipedia)

The first part of my title is correct.  The video killed the radio star, but the second part of my title is still playing out, although all rhetoric seems to indicate that the end of the Twinkie – and Hostess Foods, is near. 

It’s an interesting scenario playing out and after reading this, you tell me which side you think is at fault and if you were the other side would you blame them?

Start with these ingredients;

Enriched wheat flour, sugar, corn syrup, niacin, water, high fructose corn syrup, vegetable and/or animal shortening –  – containing one or more of partially hydrogenated soybean, cottonseed, canola oil and beef fat, dextrose, whole eggs, modified corn starch, cellulose gum, whey, leavenings (sodium acid pyrophosphate, baking soda, monocalcium phosphate), salt, con starch, corn flour, corn syrup, solids, mono and diglycerides, soy lecithin, polysorbate 60, dexterin, calcium, calcium caseinate, sodium stearoyl lactlate, wheat gluten, calcium sulphate, natural and artificial flavors, caramel color, yellow #5, red #40.

Put that all together and you get a Twinkie, which was invented in 1930 by a baker at the Continental Baking Company when they realized that several machines used to make cream-filled strawberry shortcake sat idle when strawberries were out of season.  So the bakers created a snack cake filled with banana cream, and called it a Twinkie.  During World War II when bananas became rationed, the company switched to a vanilla cream filling.  In 2007, banana-cream Twinkies were  permanently restored (although I have never had one).  

On January 11th, 2012, Twinkie manufacturer Hostess filed for Chapter 11 bankruptcy protection.  Hostess – maker of Twinkies, Ho Ho‘s, Wonder Bread, etc., blamed in on their customers deciding to consume healthier foods.  On the brink of closing down, Hostess hired a new CEO who accepted a wage of $1.00 to see them through bankruptcy protection, which may all be for not as workers at Hostess Brands have threatened to strike if the company imposes “unfair” contract terms, including wage cuts.

The workers are members of the Teamsters Union which represents about 7,500 of the company’s 19,000 employees, said that more than 90 percent of its Hostess members voted to authorize a strike if “unfair contract terms” are approved as part of its bankruptcy proceedings.

Now bankruptcy is nothing new for Hostess which – founded in 1930 – previously filed for bankruptcy in 2004 and re-emerged in 2009. The company has about $860 million in debt.

Here is the hold up; The company’s new CEO, Gregory F. Rayburn – who dispels the myth that their industry is bound to fail as consumers reach for healthier and healthier foods, citing booming markets in chocolate – said Hostess wants to cut annual pension contributions from $103 million to $25 million. Hostess also wants to change work rules that sometimes require two trucks instead of one, and they want to outsource deliveries to small stores.

The union has announced they will reject the offer, make a new proposal, and are willing to strike which could spell the end of Hostess and would ultimately see the 7,500 unionized workers put the other 12,500 workers out of jobs too by their actions.  

Apparently employees already accepted big concessions back in 2008 and back in February then union voted to authorize a strike, and the union vowed Saturday that workers would walk off the job if the bankruptcy judge agrees to the company’s cuts.

Hostess countered by saying if workers strike, they will be forced to shut down the company and liquidate assets.

Amazing, eh?

I read through several articles but could not figure out why the union was digging in their heels and taking such a harsh stance which would ultimately shut down the company and force both unionized and non-unionized workers out of jobs.  I worked in a unionized environment for almost 11 years and say what you will about unions, they are looking out for the best for the employees…

The I found this missing tidbit of information: 

Before the company filed for bankruptcy protection, eight top executives got pay raises last year of up to 80%.

In April, some of the executives sided with the CEO and agreed to accept $1 a year in income until the company comes out of bankruptcy or December 31st, presumably with all these reduced pension costs, whichever comes first.  some of the other executives wisely gave up their pay raises altogether.

Boy, the optics here look bad.  Why votes yourselves a raise if the company is heading into bankruptcy?  That looks bad to the employees, it looks bad to the creditors who are getting $0.10 on the dollar and it looks bad publicly.  Then again, the unions need to understand by striking they are not looking out for the 7,500 employees they represent but their actions are impacting 15,000 employees and because there are non-unionized workers does that mean no one looks out for them too?

This is an ugly battle and the outcome will be playing out in the media over time.

Stay tuned.

(P.S. It’s an urban legend that Twinkies have a shelf life of 25 years.  According to experts a Twinkie has a shelf life of 7-10 days.)

Who knew?

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Author: Warren Orlans

Welcome to inTAXicating. My name is Warren Orlans and this is my blog. With over 17-years experience in the taxation industry, 11 of them working for the Canada Revenue Agency (CRA), and the rest working in the private sector at large financial institutions responsible for resolving tax issues for corporations and individuals and the Canadian lead for a large US bank on FATCA implementation. My tax career began pretty much out of university at the CRA, in Collections, where I moved up, across, over and up again through their division with stops in Enforcement, Taxpayer Relief (then Fairness), Audit, Directors Liability, Training, Mentoring, GST, GST/HST, Payroll, Corporate Tax, Personal tax, and probably much more. If you have a collections, compliance or audit issue with the CRA, MRQ, IRS or with the CRTC, WSIB or any aspect of those agencies, inTAXicating is the place you need to contact. inTAXicating has entered into a strategic partnership with Goldhar and Associates, to create Goldhar Tax Solutions. This partnership allows my team to include amazing tax lawyers, insolvency practitioners, mortgage brokers, debt counselling experts and much more. When dealing with governments, knowledge is power. We possess strong understanding of government so we know what the next step is before the government does. When you have a collections problem with the CRA, do you hire a graphic artist? No, you get a former collector who trained the staff, and who worked as a resource officer for 5 years. Then you know you are on the right track to resolving your tax problem(s). Others offer suggestions. We offer solutions! tax@goldhar.ca

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