http://www.examiner.com/article/the-rea ... t-bankruptThe commonly sold story by many media outlets (i.e. Fox News) is that Hostess went bankrupt because of a greedy and stubborn union which increased the company's labor costs beyond all reason. However, a deeper investigation of the facts shows that Hostess failed for a variety of reasons, many of them unrelated to unions.
Decreasing DemandThe number one culprit behind Hostess’ demise was a decrease in demand for many of their products. Hostess has blamed a union strike over the past week, but in reality Hostess has been struggling to make a profit for quite some time, and had already filed for bankruptcy once in 2004.
Hostess itself admitted to decreased demand in a recent statement it released to debtors.
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Hostess primary products are Wonder Bread and “junk food” like Twinkies. Over the past decade carbohydrates and fatty foods have become less popular. Many supermarket chains sell their own brand of bread at cheaper costs, and also feature a bakery to sell freshly baked bread. Parents who used to put a Ding Dong in their child's lunch bag everyday now put an apple or orange in there instead. Many of the consumers rushing to buy Twinkies now have not bought Hostess products in many years, which tells you all you need to know about the company’s struggles.
A Mountain of DebtIn addition to decreasing demand, Hostess has also struggled because it was burdened with over $860 million in debt with just $1 billion in assets. The company has over 100,000 creditors, including the labor unions and pension funds which represent the employees, and will now undoubtedly lose out on some of their claims because of Hostess newest bankruptcy.
Hostess mysteriously tripled the pay of their CEO just months before asking union members to take a pay cut to “save the company.” One could understand how union members found it hard to believe the company was strapped for cash after raising the CEO’s salary from approximately $750,000 to $2,555,000. Nine other executives at the company also received massive pay raises earlier this year, which now appear to be part of a “golden parachute” package. Other CEO's, like the head of American Airlines, freezed or reduced their pay over the past four years when they asked unions to make similar sacrifices.
It is also worth remembering that Hostess executive agreed to pay the labor unions their high wages and generous pensions in an earlier contract. Much like NHL owners, the Hostess executives were trying to take back an earlier contractual promise made to the union.
ConclusionIt is easy to blame the death of Hostess on labor unions, but the reality is that the company was probably going down regardless. But take heart America, Hostess' popular brands like Twinkie surely will be sold off as part of the bankruptcy. The Twinkie will still be on American store shelves in the future, just made by a better run company.
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oskar576
Later, Wonder Bread revealed that it was the number of added nutrients. As I mentioned in the initial posts, I actually disliked -- hated, even -- the flavor of Wonder Bread, so my mom did not buy that brand for our family.
