Hostess Brands, Inc. Is One of the Essay

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Hostess Brands, Inc. is one of the largest wholesale bakers in the United States that operates nearly three dozen bakeries and more than 570 bakery outlet stores. This company delivers baked goods to mass marketers, American supermarkets, and convenience stores through 5,500 delivery routes. Since its inception, Hostess Brand, Inc. has developed to an extent that a hostess would demonstrate her home pride through serving breads and sweet products that are manufactured by Hostess Brands. Nature's Pride, Wonder, and Merita are some of the major bread brands manufactured and delivered by the firm. Moreover, Hostess Brands, Inc. also sells snack cakes such as Ding Dongs, Ho Ho's and Twinkies and other sweet-baked products. Despite of its success in the market, Hostess Brands, which is owned by Ripplewood Holdings, an investment bank, filed for Chapter 11 bankruptcy protection in 2012 and aims to liquidate.

Company Background:

Hostess Brands, Inc. was established in 1930 as Interstate Bakeries Corporation as a wholesale baker and supplier of bakery products in America. For many years in its initial operations, Hostess Brands was based in Kansas City, Missouri. The company's history can be traced back to the period of Nafziger Bakeries that was started by Ralph Leroy Nafziger in 1905. The Interstate Bakeries Corporation was developed in 1930 after Schulze Bakery merged with seven bakers under the Western Bakeries of Los Angeles. During this period, Western Bakeries of Los Angeles was the fifth largest baker in America.

The company emerged as Hostess Brands, Inc. In November 2009 after Interstate Bakeries Corporation filed for Chapter 11 bankruptcy in 2004. During the bankruptcy period, the firm was forced to close nine bakeries and over 300 outlet stores. Furthermore, the firm dropped some of its brands across the region and operating deals. Hostess Brands, Inc. continued its bread product offerings including Wonder bread as some of its subsidiaries continued to display their previous name and logo on Hostess Brands' products.

The company has since developed to become a leading wholesaler baker in the United States with its headquarters in Irving, Texas. Currently, the firm has 39 bakeries and a workforce of approximately 20,000 employees. However, in January 2012, Hostess Brands filed for the second Chapter 11 bankruptcy in its history. This is primarily because the privately-owned packaged goods confectioner was troubled with more than 350 union agreements. The company's union agreements that resulted in its bankruptcy filing were attributed to its restructuring by Ripplewood Holdings during the post-2004 bankruptcy. According to the firm's statistics, 83% of its huge employee base was unionized by January 2012, which resulted in its filing for bankruptcy in November 2012 because of the national strike imposed by its union affiliation.

Union Affiliation:

Hostess Brands, Inc. is affiliated to the Bakery, Confectionery, Tobacco Workers and Grain Millers International Union (BCTGM). By the beginning of the year, more than 80% of the firm's employees were unionized at the BCTGM. This union represents over 80,000 employees in various industries, especially in food processing, tobacco, baking, and grain milling sectors in America and Canada ("Hostess in Current Condition," 2012).

The union affiliation situation at Hostess Brands, Inc. started as a strike by the Bakery, Confectionary, Tobacco Workers and Grain Millers International Union members declined to have more concessions that were forced on them by a bankruptcy company. Since the company was already troubled by the union agreements, it offered a final contract consisting of instant wage cuts, increased costs of healthcare, and other serious concessions. The firm's employees unionized by the BCTGM voted unanimously against these extra and severe concessions.

According to the report issued by this union, the crisis facing Hostess Brands, Inc. was brought by approximately a decade of operational and financial mismanagement that contributed to the two bankruptcies, increasing debt, lessening sales, and lost market share. After the company was taken over by Wall Street investors in attempts to resolve the mess, these investors attacked its most valuable asset i.e. employees. These investors sought to force the employees to absorb greater cuts despite of the fact that they had already taken considerable wage and benefits reductions. The proposed greater cuts by the new owners included the loss of their pension contributions.

Since the Bakery, Confectionary, Tobacco Workers and Grain Millers International Union is a highly democratic organization, it provided its Hostess Brands members to determine their future through voting on the issue. Given that Hostess members at BCTGM voted unanimously to reject the firm's outrageous proposal while aware of the possible consequences, the union authorized a strike in November 2012.

During the period leading to the incident, long-term union employees at Hostess Brands has seen their salaries eviscerated for several years.

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Moreover, these union workers had seen the upper management award themselves obscene raises. As a result, these employees found no reason to stay at Hostess Brands, especially with the increased wage cut over time. Even though the management at Hostess Brands insisted that the firm became un-profitable due to the union, the management continued to loot from the firm through obscene salary increases. However, the management's explanation appears dubious because of the popularity of its extensive distribution network and products.

Before the company filed for Chapter 11 bankruptcy, it has approximately 19,000 American workers and was almost the size of Enron. When BCTGM union authorized the strike, Hostess Brands unionized members were informed including sales representatives and truck drivers. The firm's management complained about 300 labor contracts including those that required different trucks to deliver products to similar locations (Curtis, 2012). Consequently, approximately 24 Hostess Brands' production facilities went on strike or honored the strike with picket lines that were established by the firm's striking employees at other facilities represented by the union. The union also denied claims by Hostess Brands that unionized workers were crossing picket lines and sustaining production at striking plants.

In attempts to deal with the issue, Hostess Brands responded by establishing a parched earth policy through closing 3 production facilities. This measure was accompanied by the firm's threat more and more facilities could be closed as the strike continues. Nonetheless, the effort proved futile as the unionized members did not return to work and the equity firms and hedge fund managers requested for a wind-down motion to liquidate the company. The requests for liquidation were considered as an effective measure rather than the slow string of closure of facilities. Actually, the slow closure of facilities was regarded as a move to make the striking employees return to work through cruel intimidation.

Negotiations at Hostess Brands:

As a result of the challenges the company has experienced with the union and its employees, Hostess Brands has had negotiations. The negotiations have mainly been geared towards helping to resolve the mess at Hostess Brands, Inc. The negotiations have particularly been used as a measure to ensure that the company finds a solution to the problem, especially with the looming bankruptcy and liquidation.

Hostess Brands, Inc. was pushed toward mediation by a judge in order to save over 18,000 jobs of the striking employees. While in court, the company agreed to enter into negotiations or private mediation with the lenders and leaders of the striking union in attempts to ward off the liquidation of the leading confectionery. The decision to enter into negotiations with the union leaders was at the advice of Bankruptcy Judge, Robert Drain, of the Southern District of New York. The judge advised the parties to enter into private mediation or negotiations instead of a more expensive public hearing about Hostess' liquidation.

Notably, there were numerous expectations that Hostess Brands management and the baker's union could find a middle ground during the mediation or negotiations and to wade off the liquidation. These expectations are based on the fact that the mediations by the parties should be centered on the main issue at stake i.e. The future of more than 18,000 employees and their families. Therefore, the negotiations were not only based on a product or brand but they are based on real people who want to work and provide for their families.

One of the major aspects surrounding the court-sanctioned negotiations is that the baker's union did not contest the firm's action unlike other unions representing workers at the same firm after Hostess sought and won court approval to enforce wage and benefit cuts ("Hostess, Unions Agree to Mediation," 2012). Through the decision not to contest the firm's action, the baker's union in turn rejected a collective bargaining agreement and enforced its offer. As a result, the court-sanctioned negotiations or mediations were regarded as the main measure that could make both parties to be more willing to give.

Challenges during Negotiations:

The court-sanctioned private negotiation between the baker's union and Hostess Brands mainly involved the leaders of the striking union and the management team of the firm. The two parties in the process were faced by two major challenges including …

Need to Consider Employees:

One of the major challenges faced by the baker's union and the management team….....

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