Union strike forces Hostess out of business

 Pages 1 2 NEXT
 

In case you weren't aware of the fact your Twinkies are doomed...

http://money.msn.com/top-stocks/post.aspx?post=6d7b095e-e558-4dc4-83e9-1859d177e676

...from my understanding, the Unions rejected the pay and benefit cuts the company suggested in order to weather the economic issues they were facing to keep the company alive.

So... employees demand CEO's take pay cuts but won't do the same? Union actions forcing companies to declare bankruptcy because they're asking for to much? Was it really financial missmanagment as the union ex claims? What do you think about this?

Sounds more like a scapegoat to me.

Bloomberg Article:
The 82-year-old maker of Hostess CupCakes, Ding Dongs and Ho Hos was undone by the strike after changes in American diets led to years of declining sales while ingredient costs and labor expenses climbed. The decision to liquidate capped a weeklong standoff between the company, once the largest U.S. wholesale baker, and a union that called its proposed labor contract "horrendous."

[....]

"Without your own distribution, it's pretty problematic," Ramey said today by telephone. "Twinkies has been on a slow death spiral for a long time. Somebody might decide they want something to do with it, but it's not likely."

[....]

In the past 15 months, Hostess has unilaterally ended contractually obligated payments to the workers' pension plan, and demanded cuts of as much as 32 percent in wages and benefits, the union said in the statement.

Smells like the 1 week strike was less the cause and more the final nail in the coffin for the company.

Hostess declared bankruptcy in 2004 and 2009, so to say that this recent strike killed the company seems pretty absurd. Hostess has been in financial trouble for over a decade so while dealing with unions probably sucks, to say that is the reason they are folding is lazy journalism.

Going to have to agree with The Gentleman and Comocat, it really just seems like the strike was the proverbial straw but the camel was well on it's way to being broken long ago. I mean let's face it, unless you've horrendously mismanaged your company or you are otherwise already struggling to stay solvent, a week long strike and a single rejection of a contract proposal by a union should not put you out of business.

Well now all we have to do is wait for someone to buy the most likely rather profitable recipie and brand for twinkies.

Well, that's how things are when there's freedom to organize on both sides.

And hence exactly how they should be, nobody should be forced to accept employment terms they don't like, any more than a company should be forced to offer employment on terms it doesn't like. Employees had every right to pull the trigger on the company, leaving them unemployed.

This sucks. I live a stones throw (From Heracles, but a stones throw nonetheless) from Irving where they're based. 18,000 people here are going to be out of a job. Even if it is their own fault, I do still feel bad.

They went on strike over a 2% cut in their salary, and now they got a 100% cut. Oh, and their pensions are being liquidated to cover the bankruptcy so they're going to be left with essentially nothing. Again, I'd feel bad, but my sympathy tends to end at self infliction.

DevilWithaHalo:
In case you weren't aware of the fact your Twinkies are doomed...

http://money.msn.com/top-stocks/post.aspx?post=6d7b095e-e558-4dc4-83e9-1859d177e676

...from my understanding, the Unions rejected the pay and benefit cuts the company suggested in order to weather the economic issues they were facing to keep the company alive.

So... employees demand CEO's take pay cuts but won't do the same? Union actions forcing companies to declare bankruptcy because they're asking for to much? Was it really financial missmanagment as the union ex claims? What do you think about this?

Would you take a 1/3rd pay and benefit cut while the ceo still gets to buy gold plated sports cars?

These are not small cuts and for many people 1/3rd of their money is a huge difference. That's like all of a sudden not being able to pay their mortgage. Also, depending on the state, you could get pretty much the same money going on unemployment provided you don't accept the pay cut.

DevilWithaHalo:

So... employees demand CEO's take pay cuts but won't do the same? Union actions forcing companies to declare bankruptcy because they're asking for to much? Was it really financial missmanagment as the union ex claims? What do you think about this?

Employee's wage - tens of thousands of dollars
CEO's wage - millions to tens of millions of dollars

I'd say that's fair since the CEO could probably spare more money than the average worker.

It's also important to know exactly what the offer was before considering if the Union was correct. If it's a 5% cut then maybe I could see it as the union being stubborn (depending on wage levels) but if you're talking 15-20% then no wonder they rejected it.

Hostess cakes were always kinda bad, though I will probably miss Ding Dongs v:

Now, if this were Tastykake, I'd probably have a day of silent crying.

ShadowKatt:
This sucks. I live a stones throw (From Heracles, but a stones throw nonetheless) from Irving where they're based. 18,000 people here are going to be out of a job. Even if it is their own fault, I do still feel bad.

They went on strike over a 2% cut in their salary, and now they got a 100% cut. Oh, and their pensions are being liquidated to cover the bankruptcy so they're going to be left with essentially nothing. Again, I'd feel bad, but my sympathy tends to end at self infliction.

Where did you get the figure for a 2% paycut, OPs link doesn't specify a number and Gentleman's link said the cuts were as high as 32%, even taking into account the "as high" that implies not all or even the majority reached that magnitude the fact that some cuts reached 32% at all seems like quite a deal breaker.

Comments on OP's link also hurt my head, it's almost like they would be in favour of forcing those workers to work regardless of whether they want to or not.

They in fact did cut the pay of the top 4 executive officers of the company for 2012 to $1 as a gesture of goodwill. This saved MAYBE 4 million dollars. Assuming that the proposed cuts of up to 32% would have saved on average $10,000 per employee, that's 66 million dollars the company would have saved from the members of the BCTGM. The idea that executive compensation had anything to do with the bankruptcy is fucking absurd.

Hopefully this means Tastykake will expand operations.

ravenshrike:
They in fact did cut the pay of the top 4 executive officers of the company for 2012 to $1 as a gesture of goodwill. This saved MAYBE 4 million dollars. Assuming that the proposed cuts of up to 32% would have saved on average $10,000 per employee, that's 66 million dollars the company would have saved from the members of the BCTGM. The idea that executive compensation had anything to do with the bankruptcy is fucking absurd.

Hopefully this means Tastykake will expand operations.

The pay cut for executives was the company trying to make up for trying to raise executive pay while the company was hemorrhaging money. Little pisses workers off more than being told that they need to take a pay cut while the executives are getting raises. Plus the $1 thing was only temporary. The executives were going to get the entire year's worth of pay in the New Year. Also the CEO was going to receive a new contract with a big golden parachute attached, right before he up and quite.

I am not sure why exactly the union rejected the deal but there was a lot of bad faith on the part of the company to sour the negotiations. Three years ago the unions agreed to big pay cuts and layoffs in order to save the company from bankruptcy and the executives still managed to run the company further into the ground.

BlazeRaider:

ShadowKatt:
This sucks. I live a stones throw (From Heracles, but a stones throw nonetheless) from Irving where they're based. 18,000 people here are going to be out of a job. Even if it is their own fault, I do still feel bad.

They went on strike over a 2% cut in their salary, and now they got a 100% cut. Oh, and their pensions are being liquidated to cover the bankruptcy so they're going to be left with essentially nothing. Again, I'd feel bad, but my sympathy tends to end at self infliction.

Where did you get the figure for a 2% paycut, OPs link doesn't specify a number and Gentleman's link said the cuts were as high as 32%, even taking into account the "as high" that implies not all or even the majority reached that magnitude the fact that some cuts reached 32% at all seems like quite a deal breaker.

Comments on OP's link also hurt my head, it's almost like they would be in favour of forcing those workers to work regardless of whether they want to or not.

I wrote without doing the proper research. It wasn't a 2% salary cut. The whole problem revolves around the bakers union. Whereas every worker for Hostess is union, all other unions had accepted their deals except for that one, and it wasn't a 2% cut in their annual salary, but a 2% cut in their pension. They refused to budge on that and kept the strike going until the company was forced to close their doors.

So really, it's a single union that managed to leave the rest of them jobless by keeping up the strike when everyone else had already settled.

Well, the Gentlemen explained this pretty well. I for one have never had a twinkie and their other products are mediocre. Now we may be screwed if their is a nuclear holocaust though.

recruit00:
Well, the Gentlemen explained this pretty well. I for one have never had a twinkie and their other products are mediocre. Now we may be screwed if their is a nuclear holocaust though.

It'll be worth it if it deprives any Peter Griffin-like apocalypse survivors food.

Comocat:
Hostess declared bankruptcy in 2004 and 2009, so to say that this recent strike killed the company seems pretty absurd. Hostess has been in financial trouble for over a decade so while dealing with unions probably sucks, to say that is the reason they are folding is lazy journalism.

So, the only constant has been the unions. But its not possibly the unions.

MmmmmmHmmmmm.

The concessions management was trying to impose on the union was approx 27-32% wage and benefit reduction to employees who are making $11-16/hr... all the while stating they will still be closing 3-9 plants, but wouldn't disclose which plants...

All the while the CEO got a 300%+ raise last year from approx. $750k to $2.5M, and many other top level executives saw their pay basically double...

Now the executives make out like bandits while regular workers lose their future security and frame it all on the unions for good measure to help out their rich buddies next time around to the ignorant public.

Government can be incompetent but corporations actively try to be evil in the name of profit.

Karma168:

DevilWithaHalo:

So... employees demand CEO's take pay cuts but won't do the same? Union actions forcing companies to declare bankruptcy because they're asking for to much? Was it really financial missmanagment as the union ex claims? What do you think about this?

Employee's wage - tens of thousands of dollars
CEO's wage - millions to tens of millions of dollars

I'd say that's fair since the CEO could probably spare more money than the average worker.

It's also important to know exactly what the offer was before considering if the Union was correct. If it's a 5% cut then maybe I could see it as the union being stubborn (depending on wage levels) but if you're talking 15-20% then no wonder they rejected it.

Lets say the average worker made 30k at hostess. Since its a union, that wouldn't shock me. This is not counting benefits, pensions, etc.

30k X 18,000 = 540,000,000

And lets go crazy and say say the CEO makes 50 million. I doubt it, but lets say so just for arguments sake.

Even if the CEO took a 25 million dollar paycut, it would not have been as much savings as the 8% (which is what the paycut they asked them to take was) they needed to take to make the company solvent.

People REALLY need to get over how much the big CEO's make and take a look at how much and how the unions get paid. A CEO strikes a deal without having to use any coercion methods what so ever. What threat always looms and is pulled out every time the union doesn't get what they want? Strike. The unions and union workers ever think they aren't actually that valuable of workers?

But honestly, the union bosses not taking the deal does not surprise me. Its not about helping the little guy, its about power. The UNIONS are the bullies and get to demand money their way, not the CEOS. We'll show them, we wont take it! And now a lot of people are out of work. But its ok, those out of work people can sleep soundly at night knowing that the union leaders won a moral victory, right?

The parasites have consumed another hostess.

girzwald:

Comocat:
Hostess declared bankruptcy in 2004 and 2009, so to say that this recent strike killed the company seems pretty absurd. Hostess has been in financial trouble for over a decade so while dealing with unions probably sucks, to say that is the reason they are folding is lazy journalism.

So, the only constant has been the unions. But its not possibly the unions.

MmmmmmHmmmmm.

Lots of things have changed, commondities have increased dramitically, for example. Take sugar, looking at the 10 year average per pound here

http://www.indexmundi.com/commodities/?commodity=sugar&months=120

the price has gone up 3 or 4 fold in the last 10 years.

White bread has decreased significantly in consumption, most likely due to an inability to dance. I can't source this but I think it's widely known.

You dont just fold an 80 year old company with 100s of millions of dollars in revenue because unions make you sad. Unions are part of the equation, but with rising prices and decreasing demand it's probably not worth the fight.

girzwald:
So, the only constant has been the unions. But its not possibly the unions.

MmmmmmHmmmmm.

Wow! With your almost superhuman deductive skills and irrefutable logic you have conclusively demonstrated that because employees were unionized the last few times Hostess was in trouble, they must be the sole cause of all of their financial problems. Well done sir. You have found the real story buried in all of the political posturing and partisan bullshit. Thank you for enlightening us all.

But seriously, this is possibly the most ridiculous argument I've seen on these boards in a while. Kudos to you because that is truly impressive. Do you honestly believe that there can't be other explanations for it? Because if that's the case then you probably lack imagination. Luckily, Comocat has helped you out in his last post.

Champthrax:
The parasites have consumed another hostess.

Well at least we can always feed off of the tears of objectivists crying at the "filthy mooching parasites", I imagine those would be quite delicious if a little fattening.

Witty Name Here:

Champthrax:
The parasites have consumed another hostess.

Well at least we can always feed off of the tears of objectivists crying at the "filthy mooching parasites", I imagine those would be quite delicious if a little fattening.

image

Care to join me for a glass? It's quite refreshing.

Ohh, look this week the media is bashing the unions for trying to maintain low paid worker's salaries and conditions.

Will it be 'unemployed moochers' or 'welfare cheats' in next weeks cycle?

girzwald:
But honestly, the union bosses not taking the deal does not surprise me. Its not about helping the little guy, its about power. The UNIONS are the bullies and get to demand money their way, not the CEOS.

Clearly you have never had to negotiate your next pay rise in a room full of corprate suits (lawyers, accountants and your superiors).

I can tell you from experience only one person in the room feels intimidated (and that is by design)...

girzwald:
We'll show them, we wont take it! And now a lot of people are out of work. But its ok, those out of work people can sleep soundly at night knowing that the union leaders won a moral victory, right?

If the unions accepted a large cut to the workers salary it would have two results;

dropping these people below the poverty line, so the tax payer has to support them. How do you feel about having to pay your tax dollars to keep Hostess afloat, while the CEO gets US$ millions?

setting a precident for other similar companies drop workers remuneration, using the excuse that Hostest has lower costs and they need to lower their costs to compete.

Its funny how the German auto industry makes twice the number of cars as the US does and makes a profit doing so (unlike the US auto industry with needs tax payer funds to survive).

Clearly it is not about worker's wages being too high or too unionised in the US, as the 100% unionised Germans are paid twice as much as the US workers...

Could it be the different, non confrontational managment style?

http://www.remappingdebate.org/article/tale-two-systems

"Forbes: Hostess Exited Bankruptcy Because Of "Substantial Concessions By The Two Big Unions." Forbes explained that Hostess was able to exit bankruptcy in 2009 for three reasons, including that "substantial concessions" were made "by the two big unions" -- the Teamsters and the Bakery, Confectionery, Tobacco Workers and Grain Millers International Union. Forbes further explained that "annual labor cost savings to the company were about $110 million" and that "thousands of union members lost their jobs." [Forbes, 7/26/12]

"The bakery workers union said the contract would cut wages and benefits by 27 to 32 percent, including an immediate 8 percent wage cut.

[...]

Union officials said the company stopped contributing to the workers' pensions last year, and 92 percent of union members voted to reject the contract in September. A bankruptcy court judge allowed the company to force the union to accept the new collective bargaining agreement.

"Hostess Brands is making a mockery of the labor relations system that has been in place for nearly 100 years," said Frank Hurt, international president of the union. [The Kansas City Star, 11/12/12]"

Hostess Had Stopped Contributing To Pensions And Wanted To Cut Worker Pay Further. According to The Kansas City Star, union leaders reported that Hostess had stopped contributing to workers' pensions and wanted to cut wages and benefits "by 27 to 32 percent":"

Source
Dunno how unbiased mediamatters is tho.

If I remember correctly the CEO wanted to raise his salary while cutting wages for workers. Hostess fell due to mismanagement not some Union Strike.

MrTub:
Source
Dunno how unbiased mediamatters is tho.

Media Matters is a liberal media watch group, and they're fairly up front about that. However, they tend to source their articles pretty well, so it's relatively easy to verify their claims accuracy.

Frission:
If I remember correctly the CEO wanted to raise his salary while cutting wages for workers. Hostess fell due to mismanagement not some Union Strike.

ShadowKatt:
snip

"Hostess Raised Executive Salary By 35% To 80%. According to The Wall Street Journal, in April Hostess' creditors noted that Hostess had dramatically increased executive pay, including increasing CEO compensation from $750,000 to $2.25 million. According to the Journal, Hostess' creditors called the move "a possible effort to 'sidestep' Bankruptcy Code compensation programs":

Last July, the court documents said, the compensation committee of Hostess's board approved an increase in then-chief executive Brian Driscoll's salary from to $2.55 million from around $750,000. The company had hired restructuring lawyers in March 2011, the creditors said, and filed for bankruptcy protection on Jan. 11.

[...]

Besides Mr. Driscoll, "other executives' salaries were increased by from 35% to 80%," the creditors said. The documents said that Mr. Driscoll subsequently renounced a portion of the increase while "other executives did not appear to have done so." Besides Mr. Driscoll, two other executives who saw their salaries increase have also left the company, according to the spokesman.[The Wall Street Journal, 4/4/12]"

"Reuters: Hostess "Spent More Than $170 Million On Professional Fees" In Its First Bankruptcy. Reuters further reported that in its first bankruptcy, Hostess spent more than $170 million on professional fees:

Each time a company goes bankrupt, it must pay for lawyers and advisers not only for itself, but for its major creditors. In its first bankruptcy, Hostess spent more than $170 million on professional fees, based on its monthly operating reports. [Reuters, 3/6/12]"

Source

Well what were they? Some $870,000,000 in debt at this point? It doesn't surprise me that they wouldn't have been able to cut enough cost to become profitable again, especially with a strike going on. Still feel bad for the some 18,000 jobs that it provided.

BlazeRaider:

recruit00:
Well, the Gentlemen explained this pretty well. I for one have never had a twinkie and their other products are mediocre. Now we may be screwed if their is a nuclear holocaust though.

It'll be worth it if it deprives any Peter Griffin-like apocalypse survivors food.

Oh great. Now i'm torn between hating you for the pony avatar and complimenting the anti-Family Guy joke.

As for the article itself i'm not surprised to see the union being turned into a scapegoat. I remember Hostess declaring bankruptcy earlier so even though i think it was bullshit to demand the employees take such a massive pay cut, i doubt slicing the swollen budget of the CEO would have saved anything anyway.
Can't say i'll miss Hostess. If the nuclear apocalypse did arrive and my only dining options were twinkies or squirrel, then i will gladly feast on rodent.

Comocat:
Hostess declared bankruptcy in 2004 and 2009, so to say that this recent strike killed the company seems pretty absurd. Hostess has been in financial trouble for over a decade so while dealing with unions probably sucks, to say that is the reason they are folding is lazy journalism.

You're way too kind. It's not simply lazy, it's misleading and quite purposeful at that. The unions have been a media boogeyman in the USA for a long time. They stand in the way of more efficient exploitation.

Anyway, I doubt Twinkies are going to go extinct. Even though I never had one, even I as a non-USAsian know of them. That tells you something about the power of their brand. That brand in itself is worth a lot of money.
They will be bought out and the product will continue to be made. Will a lot of people lose their jobs in the transition, though? Probably, yes.

Misleading title. The topic title should've been "Failing business goes bankrupt". Because as everyone has read, they already needed to cut back heavily on wages in order to try and rescue the company, meaning they were already going bankrupt.

Not being able to run 19th century policies on their workers isn't a relevant factor. Sure, if sweatshop labour was still allowed, this badly run bakery might've survived. Then again, it's not something you must want to consider.

This is not an argument against that union for the same reason as "But if slavery was still allowed, the clothing-making industry in the US wouldn't have gone to low-wage countries" isn't a valid argument to re-instate slavery.


Safe bet: The CEO and board of the company paid themselves millions and millions a year, and likely these expenses are at least as much and probably more, than they'd receive from the proposed cuts on salaries of honest employees.

BlazeRaider:

Where did you get the figure for a 2% paycut, OPs link doesn't specify a number and Gentleman's link said the cuts were as high as 32%, even taking into account the "as high" that implies not all or even the majority reached that magnitude the fact that some cuts reached 32% at all seems like quite a deal breaker.

Comments on OP's link also hurt my head, it's almost like they would be in favour of forcing those workers to work regardless of whether they want to or not.

There were sevaral Unions in play, the packing Union was fine with the pay cuts so I assume it's them getting a 2% cut but the bakers Union went on strike and that is what killed the company.

Warforger:
There were sevaral Unions in play, the packing Union was fine with the pay cuts so I assume it's them getting a 2% cut but the bakers Union went on strike and that is what killed the company.

As has already been stated, the strike didn't kill the company. If a multi-million dollar corporation can't handle a one week strike without going bust, they're completely fucked, strike or no strike.

 Pages 1 2 NEXT

Reply to Thread

Log in or Register to Comment
Have an account? Login below:
With Facebook:Login With Facebook
or
Username:  
Password:  
  
Not registered? To sign up for an account with The Escapist:
Register With Facebook
Register With Facebook
or
Registered for a free account here