Hostess CEO on company's bankruptcy: 'It's unacceptable. It's a disaster'

http://www.guardian.co.uk/business/2012/dec/11/hostess-ceo-greg-rayburn-disaster

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Greg Rayburn, the CEO of Hostess Brands, is still baffled at how the company's negotiations with unions went horribly wrong.

"It's a disaster," said Rayburn, when I interviewed him at The Deal Economy conference at the New York Stock Exchange. "Personally, it's a failure. I think it's a failure of everybody involved in this process – from whenever the day one started to now, including me. You just can't have a result like that. It's unacceptable."

Rayburn joined Hostess in February to turn around the company's fortunes. Hostess had many problems – two previous bankruptcies, a cost structure that was out of control, and antiquated plants. He sought a bank or a financier to pour money into the company, or buy it, but he says they backed away from taking on Hostess's pension liabilities.

But it wasn't the pensions that killed Hostess. It was the bad blood between the company and the employees who were members of the baker's union. They were wary and felt betrayed by previous management, Rayburn indicated.

He tells the story of trying to woo the unions by visiting four plants in four states in four days. He wanted to see the plants that had always had the most embattled relationship with Hostess. "Every single plant I went to, they said: 'You're the first CEO we've seen in forever,'" Rayburn recalls. He was shocked by the neglect of the unions by previous management: "I'm sorry, but if you're a bakery and you have 36 plants, you should be in the plants."

He tried to hammer out agreements with two major unions – the Teamsters, who largely drive the company's trucks, and the baker's union. The baker's union, with 5,600 members, wanted Rayburn to strike a deal with the Teamsters and then take the agreement back to the bakers. By the time the bakers got a look, they decided they hated the terms and shut it down, deciding to strike.

Rayburn says he told the bakers that a strike would be catastrophic and would drive the company into bankruptcy. He lobbied the Secretary of Labor and the White House to intervene; neither did.

Ironically, Hostess's strike and ensuing bankruptcy helped the company become very popular. In just five days last week, potential bidders for the company grew to 110 on Friday from 40 on Monday.

<em>Watch the full interview at TheDeal.com.</em>