Thread: Economics Strikes dont always work.
View Single Post
Old 11-16-2012, 10:04 AM   #92

Casino cash: $
What is this silly "it's all the Unions' fault" business about? Sure, they're probably partly to blame, but you guys just leap right to that when, frankly, neither you nor I have 1/1000th of the knowledge to truly understand what happened here. "The unions shut it down" is pretty simplistic thinking. What management did or didn't do in the past to make the company competitive, what the debt load is, what the equity owners were and weren't willing to do -- none of that matters in your simplistic view. It's just crazy.

So, for the sake of it, I decided to spent 10 seconds looking up its history, at least since the 2004 bankruptcy. Here's what Wikipedia has to say.

[quote]2004 Bankruptcy
On September 22, 2004, Interstate Bakeries filed for Chapter 11 bankruptcy. The company also named a new chief executive, Tony Alvarez. Interstate Bakery's stock, which had been at one time $34/share, fell to $2.05/share as they declared bankruptcy. At the time it was the longest bankruptcy in U.S. history. During bankruptcy, Interstate fought a 2007 bid from Mexican baked goods giant Grupo Bimbo and Ron Burkle of the Yucaipa Companies. [11]

With the leadership of Craig Jung, the company emerged from bankruptcy as a private company on February 3, 2009.[12] The plan included a 50 percent equity stake by Ripplewood Holdings and lines/loans by General Electric Capital and GE Capital Markets, Silver Point Finance and Monarch Master Funding. Interstate's union workers made contract concessions in exchange for equity.[13]

During the 2004-2009 bankruptcy period, Interstate closed nine of its 54 bakeries and more than 300 outlet stores. Interstate's work force declined from 32,000 to 22,000 employees. The company also dropped some regional brands and operating agreements, such as the agreement to produce Sunbeam Bread for the northeastern U.S. (now produced by LePage Bakeries of Auburn, Maine)..]/quote]

So it looks like we have a LONG running bankruptcy in which the main owner prior to bankruptcy FOUGHT efforts to have the company sold to other bidders. "We got this" they're saying. They come out of bankruptcy with a slimmed down operation, with unions and debtholders making concessions and getting equity in return.

Now, LESS THAN THREE YEARS after coming out of a 5 year bankruptcy, they're once again forced to file. The equity ownership that the unions got for prior concessions -- yeah, those are gone now.

So what happened? Who knows, other than the obvious fact that their debt-load was too high. It's definitely possible that they overleveraged the company -- that happens all the time -- and the unions weren't interested in another round of cuts. They'd rather see the business die than take it on the chin again.

Maybe it was the union. Maybe it's 100% on them. But without knowing alot more, including how their packages compared to non-union employees, etc., it's certainly hard to say for sure. All we know is they were the final nail in a coffin that was being built for the last 8 years, sicne the company seemingly never really recovered from teh 2004 bankrutpcy.
Posts: n/a
  Reply With Quote