Why Hostess' Demise Really Wasn't the Union's Fault

Categories: Biz, Dish

Wonder_Bread_Open.JPG
Wikipedia
Wonder Bread: Once an icon, now a "tired also-ran."
When news broke Friday that Hostess is now effectively out of business, the prevailing narrative, amplified by the right-wing media, was that it was the intransigence of Bakery, Confectionery, Tobacco Workers and Grain Millers International Union, whose members went on strike to protest cuts in pay and benefit cuts, that killed the Irving-based purveyor of Twinkies and other snack cakes.

Over the weekend, a counter-narrative unfolded that portrays Hostess as a poorly managed company that has failed to adapt to the market and shows a union taking a final stand against the American factory worker's demotion from the middle class.

In the Daily Kos, a Hostess employee who has worked at several Wonder Bread plants explains his union's seemingly inexplicable brinksmanship.

He traces his own distrust of Hostess management to his early days on the job, in 1999. Attached to his first paycheck was a memo telling workers that Wonder Bread was having a bumper year. They were later informed that the letter had been a mistake and that sales were miserable, but that was only after the CEO and board had sold their stock.

In 2005, the union accepted a pay cut that reduced the writer's salary by 30 percent. $48,000, last year I made $34,000. My pay changed dramatically but at least I was still contributing to my self-funded pension. Six years later, in July 2011, the company informed workers "that the $3+ per hour that we as a Union contribute to the pension was going to be 'borrowed' by the company until they could be profitable again. Then they would pay it all back."

They never got the money back. Instead, Hostess filed for bankruptcy and demanded more concessions that would have cut pay by more than a quarter over five years, doubled employee contributions to insurance plans, eliminated pensions, and ceded claims to the pension contributions the company had promised to repay.

"It will be hard to replace the job I had, but it will be easy to replace the job they were trying to give me," he writes. "That $3+ per hour they steal totaled $50 million last year that they never paid us. They sold $2.5 BILLION in product last year. If they can't make this profitable without stealing my money then good riddance."

New Yorker economics writer James Surowiecki puts things in a broader context. Greedy union workers didn't bring on their own demise. Instead, unions are concentrated in once thriving industries that are fast becoming obsolete. If it was the Hostess workers' strike that killed the company, the company was already on its deathbed for unrelated reasons.

(T)he hard truth is that it probably should have gone out of business a long time ago. The company has been steadily losing money, and market share, for years. And its core problem has not been excessively high compensation costs or pension contributions. Its core problem has been that the market for its products changed, but it did not. Twinkies and Ding Dongs obviously aren't anyone's idea of the perfect twenty-first-century snack food. More important, the theoretical flagship of Hostess's product line, Wonder Bread, has gone from being a key part of the archetypical American diet to a tired also-ran.
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27 comments
jimlacy2003
jimlacy2003

Damage control, feeble political wrangling attempts, and plain propaganda by the Union.

It's kind of ironic, and slightly humorous that instead of owning up to anything at all the Union starts this campaign.  

 

You are not fooling anyone, okay maybe the idiots, but anyone with half a wit you do not.

 

Lets look at the bare facts:

A) It's none of the Unions business how a company is managed beyond how it's union employees treated.  If there is anything to consider over "management" it's the bungling fools that run the union.

 

B) Hostess, a company, separate entity was already bankrupt.  Bankrupt!  Get it BANKRUPT,

as in not enough money to run as a profitable company.

The BCTGM union directly caused Hostess to finally close it's doors period.

Certainly BCTGM might not be the cause of all Hostess problems.

Maybe the company would have lasted just six months, six, or another 82 years, but the FACT is the company could not operate through a strike.

 

Furthermore, with all the government regulations, fees either direct or through administration costs it's hard to have employees, let alone ~8,500.  One can only wonder if the company would have survived "Obamacare" anyhow.

 

Humm, 8% pay cut or NO pay. What was the logic?

 

At any rate, come on Union. Own up to the mistake and stop spreading this factless propaganda.

 

Whoknows
Whoknows

I don't know that anyone is blaming the "greedy" unions solely for Hostess' demise.  Obviously this was a mismanaged company.

 

What can be placed soley on the bakers union, is Hostess' immediate liquidation.  This company could have been viable under the right structure, but a the union, and the union only, decided now was the time to close the doors.  Mangement didn't decide now was the time, the Teamsters didn't decide now was the time, receptionists didn't decide now was the time.  That decision was placed soley in the lap of the bakers union.

 

I think this entire ordeal makes people roll their eyes for 2 reasons.  The first of which is the guy that said $25k per year jobs are "easily replaceable".  If that was the truth, we wouldn't have 10% unemployment.  On top of that, once said guy leaves his union protected bubble, he will discover a job market where we are all making less than we used to, all of us are now paying more for our health insurance (if we have it at all), and pension plans were eliminated for the rest of us years ago.

 

The second thing that makes this an eye roller to a lot of folks, is if said baker thought he was suddenly working for slave wages and he could easily find another job at what Hostess was offering, why didn't he just go find said new job instead of determining now was the time to close down the entire company, and eliminating the jobs off all the rank and file employees who disagreed with the bakers union, which was the majority of the employees working there?

 

While Hostess' current management cannot be described as anything but inept, the bakers union isn't exactly walking away from this without blood on their hands.  People will lose their homes over this, and that's not entirely Hostess' fault.

kergo1spaceship
kergo1spaceship

First Hostess, and next the Postal Service? What the what!  I guess hard times have a way of weeding out the weak.  

Blake Wilson
Blake Wilson

Maybe its just me, but I have a hard time caring with unskilled labor at a poison factory thinks about the companies demise. Lesson to be learned kiddos, get a skill, master the skill, don't fall victim to someone else's bad choices.

Cliffhanger
Cliffhanger

And while this was going on, Hostess management was giving itself bonuses and basing its recovery on sales projections that had nothing to do with reality, having also structured a bankruptcy relief plan that left it with more debt coming out of bankruptcy than it had going in.

 

But it was all the union's fault.

 

I wouldn't say the union is blameless. But there's certainly plenty of fault with the (mis)management team at Hostess.

Terrence Wilsön
Terrence Wilsön

wonder how much the CEO is getting paid out of this deal? liquidation or not someone's getting paid....

rogernorthup
rogernorthup

Seeing that you hyperlinked right-wing media, The Daily Kos and a New Yorker writer, I know this will be a well-balanced and broadly researched article without even having to read it.  Or...

GuitarPlayer
GuitarPlayer

You are an idiot if you think the American worker can compete with the wages paid in China, Mexico or India. Get a fucking clue. AND YES, a factory worker can make $48,000 a year.  

Jason Lumberg
Jason Lumberg

Who cares...all these union employees can spend Xmas on unemployment. We are talking about unskilled, uneducated workers who think they deserve more than $10 an hour.

pak152
pak152

not surprised that you didn't link to the Teamsters statement http://www.teamster.org/content/teamsters-bakery-workers-should-hold-secret-ballot-vote-hostess

from The Atlantic"As David Kaplan chronicled at length for Fortune earlier this year, the roots of this debacle go back to when Hostess entered its first bankruptcy in 2004. Not unlike the situation automakers would find themselves in a few years later, the company was collapsing under the weight of flagging sales, overly generous union contracts replete with ridiculous work rules, and gobs of debt. But unlike the automakers, the five years Hostess spent trying to fix itself in Chapter 11 didn't fix its fundamental problems."http://www.theatlantic.com/business/archive/2012/11/whos-to-blame-for-the-hostess-bankruptcy-wall-street-unions-or-carbs/265357/"the unions would receive two seats on a restructured nine-member board of directors and 25% of equity. That would make the unions part of Hostess’ capital structure for the first time."http://hotair.com/archives/2012/11/16/twinkies-fall-victim-to-union-management-dispute/

Rudy Cruz
Rudy Cruz

So guess what happens if you don't go back to work? Not the employees fault, huh....

Shannon Adolph
Shannon Adolph

This world could use a lot less junk being passed off as food. Good riddance!

ChrisYu
ChrisYu

he made $48000 early in his career as a factory worker? a factory full of bakers pulling down that salary starting won't last long. i've worked these type of jobs my entire career, did not pull down that salary starting but did advance on my own merits without the help of a union. if the other guy isn't pulling his weight, he shouldn't be advanced. but that's what unions are about today.

FiscalClifford
FiscalClifford

These people are bakers. Their salaries were not being stolen. They were competing against an increasingly large percentage of people that speak little or no English. Their jobs were not becoming 'obsolete', their former pay scales were rapidly becoming obsolete. It is a bi-partisan issue with some Republicans for relaxed immigration laws to shore up business profits and some Democrats for relaxed immigration laws for demographic reasons. Spinning this as a union issue shows a total misconception of the factors at play here.

ScottsMerkin
ScottsMerkin topcommenter

shitty management turned thieves.  unbelievable...actually no its not.  

GuitarPlayer
GuitarPlayer

 @jimlacy2003 "The BCTGM union directly caused Hostess to finally close it's doors period."  --  LMAO --  Bullshit. Maybe it was the 300% raise and other perks the CEO enjoys?

ScottsMerkin
ScottsMerkin topcommenter

 @Whoknows No it is entirely Hostess' fault,  The union was part of Hostess just like the management, they played chicken with each other and mangement won.  as they say in the airline industry or any other unionized industry, the company gets the type of union it deserves.  

jimlacy2003
jimlacy2003

 @GuitarPlayer 

All "black PR"..

 

CEO's generally get paid well. One of the highest paid jobs in the nation, and usually gets some of the best perks (great stock options, etc).

Overpaid? If you think so.

I'm not a CEO but have a family member who is (no not related to Hostess); I know that their position is one, if not the most important role. 

Should a CEO of a multi-billion dollar corporation get a salary of a million or more dollars a year? Your judgement call.

 

Anyhow you are either very confused, or just trying to spread the same false hoods.  

 

How much the CEO gets paid is immaterial. I'm not defending the guy, I don't know him, I don't even know all the details honestly.

But what I do know is fact from fiction.

You along with the BCTGM (and their other shills) are just pulling things out of the air and making a pointless case to put blame on someone/something else.  It's an Apples and Oranges comparison.

 

First reality check:

Lets say the CEO gets paid three million dollars a year.  

Are you saying that's enough to pay for 18,500 workers?

Lets see: $3,000,000 / 18,500 = $162.16

I'm pretty sure all those workers got paid more then $162 and sixteen cents a year. Several times that a week to be sure.

 

Furthermore do you really understand how much it costs to have an employee?

Lets say you pay a person $12 an hour. By the time you pay all the BS insurances, government fees, administration, etc., it is probably more like  $50 dollars to the company.

 

Hostess was already on a very thin profit margin, the CEO said the strike would kill the already crippled company (that was again in bankruptcy). And it did, so they shut it down.

Furthermore, this wouldn't be just the CEO alone making this decision, there are various financial officers and advisers.

 

2nd check:

If a company goes out of business, so does the CEO!

Don't you think if a CEO was getting this great pay he'd want to keep it going?

He'll be out of a job too, plus it probably doesn't look so well for his reputation.

 

The best BCTGM leadership could do is try to pick one person; how ever thin and implausible and blame them. Instead of taking ownership for the mistakes.

 

 

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