Will Ding Dongs, Wonder Bread, and Twinkies disappear? Hostess Brands to file Chapter 11 bankruptcy, again

Saturday, January 14, 2012 by: Ethan A. Huff, staff writer
Tags: Twinkies, chapter 11, bankruptcy

(NaturalNews) Just a few years after barely climbing out of an earlier bankruptcy filing from 2004, Hostess Brands has announced that it is once again filing for Chapter 11 bankruptcy protection. The Wall Street Journal reports that skyrocketing debt and unsustainable labor costs have driven the company's cost structure to out-of-control levels, which have made it difficult for Hostess to maintain a competitive business in today's economic environment.

A purveyor of popular pastime junk foods like Twinkies, Ding Dongs, Ho Hos, and Wonder Bread, Hostess Brands has apparently been struggling for years to maintain a healthy business structure. The company currently employs about 19,000 workers, 83 percent of whom belong to labor unions, in 49 states. In a statement tagged "legacy pension, medical benefit obligations and restrictive work rules for keeping the company in a position of being not competitive."

According to court papers, Hostess was $1.4 billion in debt as of December 10, 2011. Its largest current debtor is the Bakery & Confectionary Union & Industry International Pension Fund, which it reportedly owes roughly $944 million. Through its next set of bankruptcy proceedings, though, the company hopes to establish new labor agreements that will allow it to actually pay off these debts and turn a profit.

The major, ongoing problem for Hostess is that most of the other companies competing in the same food categories hire non-union labor, which is far less expensive and carries with it far less of the "legacy costs" that currently ail Hostess. In other words, Hostess is paying far more for its labor than its competitors because most of its workers are unionized, which is why the company has lost its competitive edge.

Unions were originally formed, of course, to defend the rights of high-quality workers and ensure that they received a fair wage for their labor, which is a good thing. But when union benefits and wages outpace what a company earns in revenues, which appears to be the case with Hostess, then something has to change if the company hopes to remain in business.

In a worst-case scenario, Hostess could be taken over by the government and federalized, as was the case with General Motors. This is not a far-fetched idea, as several of the attorneys representing the Teamsters union during the bankruptcy filings are reportedly the same ones that worked with the Obama Administration during the GM takeover.

Sources for this article include:

http://online.wsj.com/article/SB10001424052970204257504577154402317896574.html

http://www.myfoxdc.com/dpp/money/hostess-brands-maker-of-wonder-bread-and-twinkies-prepping-bankruptcy-report-010112