Unions May Be Kidding Themselves by Banking on Getting Jobs Back After Hostess Liquidation

Categories: Biz

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Catherine Downes
The bakers union's new president has finally broken his silence following the collapse of Irving-based Hostess, baker of Wonder Bread and Twinkies. It was the bakers, after all, who largely sat out the attempted restructuring in a New York federal bankruptcy court, then dynamited the negotiations by striking last November.

The company folded shortly thereafter and some 18,000 jobs were lost -- the subject of last week's cover story.

Now newly elected bakers union President David Durkee seems downright cocksure that his membership will, somehow, come out on top as bidders seek to buy up the pieces of the former baking empire. "From our perspective, the situation in 2012 comes off as a position of strength," he told The Wall Street Journal, expressing easy confidence that the thousands of out-of-work bakers will find employment with new ownership.

There's a difference between being hopeful and deluded, and Durkee is toeing the line of the latter. The lead bidder for Hostess' bread brands is a company called Flowers Foods, baker of Tastykake and Nature's Own bread, which has pledged $360 million to set the floor for bidding. This is not a terribly unionized company, and in the agreement it hashed out with Hostess management, posted on the U.S. Securities and Exchange Commission website, it doesn't sound like Flowers plans on changing that.

To wit, the "Successor Liability" passage: Flowers assumes no "liability claims related to employment, pension plans, multi-employer pension plans or collective bargaining agreements." This doesn't read like a company that plans on re-establishing a union shop.

"Only our members know how to get that equipment running," Durkee insists. "A workforce off the street will not be able to accomplish that."

For what he calls a "seamless restart" of Hostess' bread brands, he may be right. Question is, will pensions and work rules and a union that has proven itself willing to take to the picket line pose bigger worries to Flowers and other potential suitors?

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11 comments
kfries1
kfries1

This assumes that Phiuladelphia-based Tasty Baking or Natures Own have no capacity to take on the work. TastyKake moved to new digs a few years back at the former Navy Yard in South Philly and haven't been doing all that well for various reasons but has a lot of relatively new equipment. So it's quite likely some of the baking will take place there. There's also a few plants in the Philadelphia area that are idle or could be subcontracted/rented. But get a look at these articles:
http://www.philly.com/philly/blogs/inq-phillydeals/Likely-Hostess-split-Bimbo-gets-Twinkies-Tasty-owner-gets-Wonder-Bread.html
AND
http://www.bsmphilly.com/northeast-times/6382-hostess-calls-it-quits-pickets-leave-bakery.html

Good luck to those put out of work. For a place like Philadelphia, a union town and one of the highest tax rates (a 4%+ *wage tax* in Philly plus state taxes too!*) it's unlikely they'll take on many new workers. It's more likely that any TastyKake workers laid off will be recalled or the baking will take place just outside Philadelphia. 
It's more likely they'll phase out TastyKake items thsat aren't selling and take on anything that was selling for Hostess.

Of course this is one locality, so it's cited as just that. Conditions may differ elsewhere but the unions are going to find tough sledding outside of NE states.

Montemalone
Montemalone topcommenter

A few phone calls to the equipment manufacturers will have it up and running in no time.

JSSS
JSSS

It is nice to know that incompetent management existed both at Hostess and the bakers' union. I am shocked, just shocked, that Hostess managed to go out of business.

Guesty
Guesty

To be fair, the clause you quote doesn't mean the new bidders won't talk to the unions, it only means they are not taking on any of the old union obligations.   

But I think it is fair to assume the unions will not be invited to negotiate.  I would guess most of the products made by Hostess could be made anywhere, including a bidder's current facilities.  To the extent the buyer wants to use the legacy locations and equipment, all they have to do is put out a help wanted sign.  They don't have to negotiate with a union that doesn't yet represent its employees.  The unions will have to go through the process of re-certifying, which probably will be difficult with a workforce of bakers from the buyer, new people off the street, and old bakers from Hostess who just were laid off as the result of a strike.  Even the strongest of union backers lose faith when a strike takes food off the table.   

russp
russp

I would think the buyers would be looking to buy the rights to the name and the recipes; most of them will already be in the bakery business with existing plants and workers.

MikeWestEast
MikeWestEast

Why does the union assume buyers will get anywhere near that legacy equipment?  Per some article I read, the old management did not maintain it well and the equipment was a factor in higher costs.  I cannot believe a shortage of baking capacity exists.  Buyers will likely add the process to existing lower cost factories.  To avoid any taint with union practices, pension funds, former contracts, etc., I'd expect the buyers would be more likely to set up shop in Chernobyl than even visit those legacy factories.  The judge will allow sale of the brands by themselves, cutting any connection with the workers.  I saw a union rep on CNBC threatening a nationwide boycott if the union workers did not get the jobs.  A nationwide boycott against snack food where almost half that nation is obese?  Something tells me it won't work.

everlastingphelps
everlastingphelps topcommenter

-- "Only our members know how to get that equipment running," Durkee insists. "A workforce off the street will not be able to accomplish that." -- 

Security through obscurity is always a recipe for failure.  The training materials will go with the machines, and someone skilled in industrial baking and a knowledge of the English language will get it up and running much cheaper than the long-term costs of rebuilding a union shop.

scottindallas
scottindallas topcommenter

@Guesty So, the Federal Gov't will again bail out private industry through the Federal Pension Benefit Guarantee.  All cause the execs failed to properly and fully fund those pensions, meanwhile, paying themselves a bonus for the genius notion that underfunding pensions would make the bottom line look better, justifying the executive bonuses.  A self scratching back.

brantley.hargrove1
brantley.hargrove1

@Guesty You're right, the clause by itself doesn't, but when paired with the minimal unionization at Flowers it doesn't bespeak of a company eager to take on any of that baggage.

scottindallas
scottindallas topcommenter

@everlastingphelps you're mistaken.  Union labor is quite competitive with non-union labor.  The UAW was more efficient than their non-union competitors.  Your rhetoric here is hackneyed and threadbare, and the facts don't support you. 

everlastingphelps
everlastingphelps topcommenter

@scottindallas @everlastingphelps Your rhetoric implies that corporations hate unions more than they love money.  Corporations would hire Satan if it was more efficient, because they would make more money.

Therefore, the facts don't support you.

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