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Is the Hostess bankruptcy the fault of labor or management?
According to an article on the Businessweek website, Hostess is asking the bankruptcy court for $17.5 million for bonuses for senior management. According to the article:
…The baker estimated that shutting the plants will cost $17.6 million in the next three months. The plants have about $29 million worth of excess product ingredients, Hostess said. About $6.9 million will be spent to close depots, while $8.8 million will be used to idle retail stores and $8.1 million will go to shutting corporate offices…
By my calculation, that adds up to a cost of $58.9 million over the next three months to close the company, plus the costs of rewarding the senior management for incompetence.
The company management claims that rising labor costs, as well as the latest strikes, are to blame for the company’s demise. However, in an article on Forbes website, the possibility is raised that the financial problems are due to a lack of foresight over the past 10 years, involving marketing and financial management.
Is labor being scapegoated here, or is it acceptable to reward executives for killing a company?
—As an aside, I don’t think Twinkies will disappear. I think the brands will be sold to a major buyer, like Grupo Bimbo.