Tuesday, January 29, 2013

A revisionist view of the Hostess bankruptcy

Apparently, Hostess is close to selling off its venerable Twinkie brand to one of two investment firms. You may remember that Hostess filed for bankruptcy last fall, after it was unable to come to terms with the baker's union. ...

The baker's union took a lot of heat for refusing to renegotiate its contracts, even as the company was obviously teetering. Even the teamster's union complained that they were being unreasonable, which seemed to many--including me--like prima facie evidence that they must have lost their mind.

But a few months later, I got to talk to someone who has a lot of experience in labor negotations. They viewed the Hostess story entirely differently from the way that we in the press did: not as a fight between management and their crazy union, but as an internicene dispute between the unions. In this telling, the teamsters had an unreasonably sweet deal, one that was killing the company. And the bakers declined to take cuts in order to keep the teamsters sugared up. They were betting that whoever bought the company would still need the bakers, but not the insane distribution contracts that the teamsters had enjoyed for years.

... as Holman Jenkins of the Wall Street Journal explained:
... Under pressure on Monday from Judge Robert Drain to back down from their strike aimed at forcing the company to liquidate, the bakers themselves pointed to "what everyone in the baking industry knew: Hostess's production costs were neither excessive nor out of line with the market but its distribution costs were—to the tune of between $80 million and $130 million annually."
--Megan McArdle, Daily Beast, on who really killed Hostess