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Hostess: Fire the workers but bump up the executives pay by 80% and triple the CEO's pay
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Robert A. Leffingwell
Nov 18, 2012, 10:03:30 AM11/18/12
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Want to know how Bain Capital and Romney made money bankrupting companies?
Here's how Hostess management pulled it off:
http://americablog.com/2012/11/hostess-twinkie-ceo-salary.html
Former Hostess Twinkies CEO tripled salary to $2.5m while preparing to file
bankruptcy
"Even as it played the numbers game, Hostess had to face chaos in the corner
office at the worst possible time. Driscoll, the CEO, departed suddenly and
without explanation in March. It may have been that the Teamsters no longer
felt it could trust him. In early February, Hostess had asked the bankruptcy
judge to approve a sweet new employment deal for Driscoll. Its terms
guaranteed him a base annual salary of $1.5 million, plus cash incentives
and "'long-term incentive' compensation of up to $2 million. If Hostess
liquidated or Driscoll were fired without cause, he'd still get severance
pay of $1.95 million as long as he honored a noncompete agreement.
"When the Teamsters saw the court motion, Ken Hall, the union's
secretary-treasurer and No. 2 man, was irate. So much, he thought, for what
he described as Driscoll's "happy talk" about 'shared sacrifice.'
"The board replaced Driscoll with Greg Rayburn, a restructuring expert
Hostess had hired as a consultant only nine days earlier. Rayburn was a
serial turnaround specialist who had worked with such high-profile
distressed businesses as WorldCom, Muzak Holdings, and New York City
Off-Track Betting. He became Hostess's sixth CEO in a decade. Within a month
of taking over, Rayburn had to preside over a public-relations fiasco. Some
unsecured creditors had informed the court that last summer - as the company
was crumbling - four top Hostess executives received raises of up to 80%.
(Driscoll had also received a pay raise back then.) The Teamsters saw this
as more management shenanigans. "Looting" is how Hall described it in TV
interviews.
"Rayburn announced that the pay of the four top executives would go down to
$1 for the year, but that their full salaries would be reinstated no later
than Jan. 1. Hostess pays Rayburn $125,000 a month, according to court
filings."
Here's how Hostess management pulled it off:
http://americablog.com/2012/11/hostess-twinkie-ceo-salary.html
Former Hostess Twinkies CEO tripled salary to $2.5m while preparing to file
bankruptcy
"Even as it played the numbers game, Hostess had to face chaos in the corner
office at the worst possible time. Driscoll, the CEO, departed suddenly and
without explanation in March. It may have been that the Teamsters no longer
felt it could trust him. In early February, Hostess had asked the bankruptcy
judge to approve a sweet new employment deal for Driscoll. Its terms
guaranteed him a base annual salary of $1.5 million, plus cash incentives
and "'long-term incentive' compensation of up to $2 million. If Hostess
liquidated or Driscoll were fired without cause, he'd still get severance
pay of $1.95 million as long as he honored a noncompete agreement.
"When the Teamsters saw the court motion, Ken Hall, the union's
secretary-treasurer and No. 2 man, was irate. So much, he thought, for what
he described as Driscoll's "happy talk" about 'shared sacrifice.'
"The board replaced Driscoll with Greg Rayburn, a restructuring expert
Hostess had hired as a consultant only nine days earlier. Rayburn was a
serial turnaround specialist who had worked with such high-profile
distressed businesses as WorldCom, Muzak Holdings, and New York City
Off-Track Betting. He became Hostess's sixth CEO in a decade. Within a month
of taking over, Rayburn had to preside over a public-relations fiasco. Some
unsecured creditors had informed the court that last summer - as the company
was crumbling - four top Hostess executives received raises of up to 80%.
(Driscoll had also received a pay raise back then.) The Teamsters saw this
as more management shenanigans. "Looting" is how Hall described it in TV
interviews.
"Rayburn announced that the pay of the four top executives would go down to
$1 for the year, but that their full salaries would be reinstated no later
than Jan. 1. Hostess pays Rayburn $125,000 a month, according to court
filings."
Fred E Brown
Nov 19, 2012, 9:54:22 AM11/19/12
to
Quit yer whining, two years after the taxpayer bailout of GM and GM's
accumulation huge
cash reserves, GM still has not paid any taxes thanks to the Treasury Dept
waiving section
382 of the Tax Code saying that it did not apply allowing GM to claim
deductions prohibited
by section 382. GM still owes $45 Billion to the US taxpayers.
AP 's Krisher Marks 2-Year Anniversary of GM's IPO by 'Forgetting' It Pays
No U.S. Income Tax
by Tom Blumer Nov 18 2012
In a Friday report at the Associated Press on Friday with a celebratory
headline ("2 YEARS AFTER IPO, GM IS PILING UP CASH"), Auto Writer Tom
Krisher described bailed-out General Motors as "thriving," but didn't
identify one of the important reasons for that characterization.
In paragraphs about the company's profitability and cash stockpile, Krisher
failed to note that the company still hasn't paid any U.S. income taxes
since emerging from bankruptcy, or why that's the case (bolds are mine
throughout this post):
BIG PROFITS: GM is making money - nearly $4 billion so far this year. Most
of that came from the U.S., where GM cars and trucks are selling for almost
6 percent more than they did in January of 2011.
... CASH PILE: GM, which nearly ran out of cash at the end of 2008, ended
the third quarter with $31.6 billion in cash and securities. Bankruptcy
wiped out old GM's debts and burdensome contracts, and the new company's
cars and trucks have sold well around the world. The cash allows GM to
invest in products and restructuring. It even bought a U.S. auto finance
company, which helps it to offer low-interest loans and cheap leases. GM
also is bidding for international assets of Ally Financial, GM's former
finance arm, to help make cheap loans in Europe and elsewhere.
The "wipeout" of "burdensome contracts" cites is a myth -- at least the
union contracts. The fact is that then-UAW President Ron Gettelfinger
bragged in mid-2009 that that the union's post-bankruptcy contract with GM
required "no loss in your base hourly pay, no reduction in your health care,
and no reduction in pensions" for currently employed members.
A significant portion of the cash stash cited (even before including
interest) is due to a gift from the Obama administration's Treasury
Department, as Curt Levy at Fox News reported in May:
GM's tax break arises from the Obama administration's distortion of
legitimate tax provisions which allow companies to use prior-year losses -
of which the Old GM had plenty - and certain other costs to reduce their
current-year federal income taxes. In Section 382 of the tax code, Congress
limited these "net operating loss" (NOL) carry-forwards to discourage the
buying and selling of tax deductions.
As a result, New GM could not have written off the Old GM losses that were
discharged in the bankruptcy. However, as Harvard Law School Professor J.
Mark Ramseyer and Indiana University's Dalton Professor of Business Eric
Rasmusen explain, the Obama Treasury Department "'solved' this problem by
issuing a series of 'Notices' in which it announced that [Sec. 382] did not
apply [here]."
Because companies like GM that file for fast-track bankruptcy without
affording due process protections to creditors don't normally get to
preserve NOLs, Treasury's unprecedented Notices allowed GM "to retain the
cake while eating it," notes Duke Law Professor Jeffrey Coyne.
... "the Treasury Department 'had no legal or economic justification for
these Notices,' according to Professors Ramseyer and Rasmusen ...
... Are we supposed to be reassured by knowing that GM only stiffs American
taxpayers?
The truth is General Motors and the Obama administration didn't need a
justification, because they counted on this unprecedented tax break being
too arcane for reporters to understand or write about. So far, they've been
right.
That they have. The AP's Krisher probably understands this, but in this case
and many others in the past several years has chosen not to write about it.
Because of his failure to report this tax break, Krisher misrepresented
where U.S. taxpayers stand in terms of their chances of breaking even on the
government's GM "investment":
STOCK PRICE: Shares of GM sold for $33 when the company re-entered the stock
market on November 18, 2010. ... (The stock is) almost 30 percent below the
IPO price. That means the U.S. government can't sell its 500 million shares
in the company without losing billions. The government got its stake in
exchange for a $49.5 billion bailout almost four years ago. But the
taxpayers are still $27 billion in the hole on the investment, and GM shares
would have to sell for $53 each for the government to break even.
That's not true. If the lost taxes due to the government's extralegal
maneuver are included, the tab is currently $45 billion, or about $600 for
every family of four in America -- all to save something on the order of
60,000 GM jobs. Cost: $750,000 per job saved, even before considering other
much smaller costs to the federal government (e.g., the $7,500 tax credit
buyers of the Chevy Volt receive on their returns).
So GM is "stockpiling" cash at taxpayers' expense. Exactly why should the
large majority of Americans be celebrating that?
Read more:
http://newsbusters.org/blogs/tom-blumer/2012/11/18/ap-s-krisher-marks-2-year-anniversary-gms-ipo-forgetting-it-pays-no-us-i#ixzz2Cg9xILuY
accumulation huge
cash reserves, GM still has not paid any taxes thanks to the Treasury Dept
waiving section
382 of the Tax Code saying that it did not apply allowing GM to claim
deductions prohibited
by section 382. GM still owes $45 Billion to the US taxpayers.
AP 's Krisher Marks 2-Year Anniversary of GM's IPO by 'Forgetting' It Pays
No U.S. Income Tax
by Tom Blumer Nov 18 2012
In a Friday report at the Associated Press on Friday with a celebratory
headline ("2 YEARS AFTER IPO, GM IS PILING UP CASH"), Auto Writer Tom
Krisher described bailed-out General Motors as "thriving," but didn't
identify one of the important reasons for that characterization.
In paragraphs about the company's profitability and cash stockpile, Krisher
failed to note that the company still hasn't paid any U.S. income taxes
since emerging from bankruptcy, or why that's the case (bolds are mine
throughout this post):
BIG PROFITS: GM is making money - nearly $4 billion so far this year. Most
of that came from the U.S., where GM cars and trucks are selling for almost
6 percent more than they did in January of 2011.
... CASH PILE: GM, which nearly ran out of cash at the end of 2008, ended
the third quarter with $31.6 billion in cash and securities. Bankruptcy
wiped out old GM's debts and burdensome contracts, and the new company's
cars and trucks have sold well around the world. The cash allows GM to
invest in products and restructuring. It even bought a U.S. auto finance
company, which helps it to offer low-interest loans and cheap leases. GM
also is bidding for international assets of Ally Financial, GM's former
finance arm, to help make cheap loans in Europe and elsewhere.
The "wipeout" of "burdensome contracts" cites is a myth -- at least the
union contracts. The fact is that then-UAW President Ron Gettelfinger
bragged in mid-2009 that that the union's post-bankruptcy contract with GM
required "no loss in your base hourly pay, no reduction in your health care,
and no reduction in pensions" for currently employed members.
A significant portion of the cash stash cited (even before including
interest) is due to a gift from the Obama administration's Treasury
Department, as Curt Levy at Fox News reported in May:
GM's tax break arises from the Obama administration's distortion of
legitimate tax provisions which allow companies to use prior-year losses -
of which the Old GM had plenty - and certain other costs to reduce their
current-year federal income taxes. In Section 382 of the tax code, Congress
limited these "net operating loss" (NOL) carry-forwards to discourage the
buying and selling of tax deductions.
As a result, New GM could not have written off the Old GM losses that were
discharged in the bankruptcy. However, as Harvard Law School Professor J.
Mark Ramseyer and Indiana University's Dalton Professor of Business Eric
Rasmusen explain, the Obama Treasury Department "'solved' this problem by
issuing a series of 'Notices' in which it announced that [Sec. 382] did not
apply [here]."
Because companies like GM that file for fast-track bankruptcy without
affording due process protections to creditors don't normally get to
preserve NOLs, Treasury's unprecedented Notices allowed GM "to retain the
cake while eating it," notes Duke Law Professor Jeffrey Coyne.
... "the Treasury Department 'had no legal or economic justification for
these Notices,' according to Professors Ramseyer and Rasmusen ...
... Are we supposed to be reassured by knowing that GM only stiffs American
taxpayers?
The truth is General Motors and the Obama administration didn't need a
justification, because they counted on this unprecedented tax break being
too arcane for reporters to understand or write about. So far, they've been
right.
That they have. The AP's Krisher probably understands this, but in this case
and many others in the past several years has chosen not to write about it.
Because of his failure to report this tax break, Krisher misrepresented
where U.S. taxpayers stand in terms of their chances of breaking even on the
government's GM "investment":
STOCK PRICE: Shares of GM sold for $33 when the company re-entered the stock
market on November 18, 2010. ... (The stock is) almost 30 percent below the
IPO price. That means the U.S. government can't sell its 500 million shares
in the company without losing billions. The government got its stake in
exchange for a $49.5 billion bailout almost four years ago. But the
taxpayers are still $27 billion in the hole on the investment, and GM shares
would have to sell for $53 each for the government to break even.
That's not true. If the lost taxes due to the government's extralegal
maneuver are included, the tab is currently $45 billion, or about $600 for
every family of four in America -- all to save something on the order of
60,000 GM jobs. Cost: $750,000 per job saved, even before considering other
much smaller costs to the federal government (e.g., the $7,500 tax credit
buyers of the Chevy Volt receive on their returns).
So GM is "stockpiling" cash at taxpayers' expense. Exactly why should the
large majority of Americans be celebrating that?
Read more:
http://newsbusters.org/blogs/tom-blumer/2012/11/18/ap-s-krisher-marks-2-year-anniversary-gms-ipo-forgetting-it-pays-no-us-i#ixzz2Cg9xILuY
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