Union strike forces Hostess out of business

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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.

Chronic mismanagement killed the company. Chronic mismanagement causing a strike is what finally pushed it over the edge.

Champthrax:
The parasites have consumed another hostess.

Now now, the bosses at the company may have been incompetent and screwed up a whole lot, but isn't it abit much to call them parasites?

http://www.dailykos.com/story/2012/11/18/1162786/-Inside-the-Hostess-Bankery
(I dunno about how unbiased dailykos is)

"When I received my first paycheck from then Interstate Bakeries in 1999 it had a memo stapled to it. The memo announced that Wonder had just had the most productive quarter in baking history. It stated that the health of the company and brand had never been better. The break room was buzzing with excitement because our contract was soon to be up for renegotiation and this would surely mean smooth sailing. A few weeks later we got the 'oops' letter. Turns out it was all an 'accounting' error and the company was failing miserably.

Conveniently though, CEO Charles Sullivan and the board managed to sell their stock before word got out about the bad news. No jail time of course. In fact, Sullivan was brought back as a consultant after his resignation. Enron happened a few years later and at the bakery we were amazed how much attention they got compared to us."

"In July of 2011 we received a letter from the company. It said 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. The Union was notified of this the same time and method as the individual members. No contact from the company to the Union on a national level.

This money will never be paid back. The company filed for bankruptcy and the judge ruled that the $3+ per hour was a debt the company couldn't repay. The Union continued to work despite this theft of our self-funded pension contributions for over a year. I consider this money stolen. No other word in the English language describes what they have done to this money."

"What was this last/best/final offer? You'd never know by watching the main stream media tell the story. So here you go...
1) 8% hourly pay cut in year 1 with additional cuts totaling 27% over 5 years. Currently, I make $16.12 an hour at TOP rate of pay in the bakery. I would drop to $11.26 in 5 years.
2) They get to keep our $3+ an hour forever.
3) Doubling of weekly insurance premium.
4) Lowering of overall quality of insurance plan.
5) TOTAL withdrawal from ALL pensions. If you don't have it now then you never will.

"
Yeah totally the unions fault that the company went bankrupt.

MrTub:
http://www.dailykos.com/story/2012/11/18/1162786/-Inside-the-Hostess-Bankery
(I dunno about how unbiased dailykos is)]

It's generally considered somewhat left leaning. I think the truth is probably somewhat in the middle.

The pay and pension cuts are often given ridiculous amounts of spin. If the Teamster's union is any indication, the 8% initial pay cut is probably correct. As well as pretty much increasing employee healthcare contributions, and pretty much eliminating pension contributions. The concessions offered by Hostess were to have 2 union reps added to an eight member board and giving employees opportunity to buy take pay in the form of stocks. Pretty awesome, right? Twenty percent control of the board and the ability to invest in a failing company!

Dags90:
Pretty awesome, right? Twenty percent control of the board and the ability to invest in a failing company!

Yes indeed. It's fascinating how keen bosses are for workers to stump up cash and have a real say in the company when it's on the verge of failure. "Socialism for the rich, and capitalism for the poor."

Let's face it, everyone can see the trajectory of this company: and you can quite bet that capitalists would be taking their money out as fast than the workers could put in. In other words, substantial losses of the shareholders and creditors can be transferred onto the workers before the final collapse. Sweet.

I find some of the attitudes in this file quite instructive. Lots people think that corporate failure should not be socialised when the government can bail it out, but should be socialised in the case of workers taking almost infinite pay cuts to keep a company going. And when they don't, it's the unions that did the damage. Ho ho ho.

After all, it can't be explained by the changing face of the market or management failure, can it? That might imply that bad things sometimes happen because of capitalism. It's not that capitalism isn't still better than the alternatives, but people could at least be a little honest that it includes some undeserving losers.

Reason for downfall? Greed. Plain and simple. Greed of management to take million dollar pay raises even as the company is going bankrupt. Greed of unions (not necessarily the workers), trying to force the company's hand while it was going bankrupt.

Another problem is that Hostess employees were represented by TWELVE unions, each with their own agendas. Why in the hell were there TWELVE unions? Why wasn't it just one or two? The Teamsters settled their disputes, and then just when you think things are going in the right direction, BAM, another different union goes on strike. That is just one example of the gross inefficiency that killed the Hostess brand.

Too many people had their hands in the cookie jar. Management, union reps, investors, etc. Everyone except the employees. But let's not kid ourselves. I've worked in the pre-packaged food industry. For the most part, it ain't exactly skilled labor. The people they refer to as "bakers" are little more than warm bodies, standing over an assembly line, watching machines inject cream into Twinkies. Sure, there are technicians and some positions that can genuinely be called "skilled labor". But that's a minority. $20.00/hour, plus benefits is pretty damned good money for unskilled labor in any field.

Whatever the case. This is an example of things to come. From now on, when a union challenges a company, the companies are just going to start going out of business, and start up somewhere else.

Twinkies will survive. 18,500 jobs won't. I hope that management and the union reps will sit down and ask themselves, "Was it worth it to lose the company?"

Agema:
[quote="Dags90" post="528.393973.15957311"]Pretty awesome, right? Twenty percent control of the board and the ability to invest in a failing company!

Yes indeed. It's fascinating how keen bosses are for workers to stump up cash and have a real say in the company when it's on the verge of failure. "Socialism for the rich, and capitalism for the poor."

Let's face it, everyone can see the trajectory of this company: and you can quite bet that capitalists would be taking their money out as fast than the workers could put in. In other words, substantial losses of the shareholders and creditors can be transferred onto the workers before the final collapse. Sweet.

I find some of the attitudes in this file quite instructive. Lots people think that corporate failure should not be socialised when the government can bail it out, but should be socialised in the case of workers taking almost infinite pay cuts to keep a company going. And when they don't, it's the unions that did the damage. Ho ho ho.

After all, it can't be explained by the changing face of the market or management failure, can it? That might imply that bad things sometimes happen because of capitalism. It's not that capitalism isn't still better than the alternatives, but people could at least be a little honest that it includes some undeserving losers.[/quote

Capitalism is supposed to be like nature. Only the strong survive, and the weak are consumed or die. What we have now with these bail outs is socialized capitalism.

GM gets bailed out using MY tax dollars. Why? Will I ever see a return on that investment? Of course not. And recently, when GM tried to pay back its bailout and buy back the remaining shares from the government, the government said no.

http://online.wsj.com/article/SB10000872396390443995604578000754035510658.html

An excerpt: "At GM's Friday share price of $24.14, the U.S. would lose about $15 billion on the GM bailout if it sold its entire stake. While GM stock would need to reach $53 a share for the U.S. to break even, Treasury officials would consider selling at a price in the $30s, people familiar with the government's thinking have said."

It should be noted that GM stock has never, ever traded above $48.

Government should regulate business, not try to run it. Everything the government touches, loses money.

Hop-along Nussbaum:
[

Government should regulate business, not try to run it. Everything the government touches, loses money.

If you cheak the link i posted in this thread you will see that the top bracket was 16$ a hour not 20$ a hour.

And the thing I quoted you on do you mean USAs government or every government in the world?

Hop-along Nussbaum:
Another problem is that Hostess employees were represented by TWELVE unions, each with their own agendas. Why in the hell were there TWELVE unions? Why wasn't it just one or two? The Teamsters settled their disputes, and then just when you think things are going in the right direction, BAM, another different union goes on strike. That is just one example of the gross inefficiency that killed the Hostess brand.

Because it makes sense for workers to organize based on their skills rather than their company? In a company union at Hostess, you'd have bakers voting on workplace safety rules that apply only to their truck drivers. It doesn't make sense.

Hop-along Nussbaum:
Capitalism is supposed to be like nature. Only the strong survive, and the weak are consumed or die. What we have now with these bail outs is socialized capitalism.

Aside from the fact that you're attempting to use a grossly oversimplified depiction of the natural world to try and support you opinion about human developed, implemented, and administered complex systems (which is all kinds of silly all on its own), do you even understand why humans are the dominant species on the planet? I'll give you a hint, it's not because we're the strongest. Even though we're the smartest monkey's on this rock, we didn't get where we are on that alone. Our intelligence not only let us outsmart other creatures and use our wits to survive, it allowed us to socialize and coordinate on a level not seen in other species. Without that we'd be extinct by now. In other words, if you want to get into a debate about the natural state of the world, and what's normal for human survival, the strongest argument would probably be for some level of socialism being natural and conducive to human survival.

Dags90:

Hop-along Nussbaum:
Another problem is that Hostess employees were represented by TWELVE unions, each with their own agendas. Why in the hell were there TWELVE unions? Why wasn't it just one or two? The Teamsters settled their disputes, and then just when you think things are going in the right direction, BAM, another different union goes on strike. That is just one example of the gross inefficiency that killed the Hostess brand.

Because it makes sense for workers to organize based on their skills rather than their company? In a company union at Hostess, you'd have bakers voting on workplace safety rules that apply only to their truck drivers. It doesn't make sense.

No, that doesn't make sense, but as was said above you have TWELVE different unions all with their own agendas and standards. And in this case is was only ONE of those twelve that refused to settle. And like a sticking cog in the machine nothing else could turn without it so here we are. One union managed to put the other eleven out of work. I know that the escapist is pro-union, but if you don't see something wrong with this...

But...

the Ding Dongs ;____________________;

Hop-along Nussbaum:
Capitalism is supposed to be like nature. Only the strong survive, and the weak are consumed or die.

Really? That's not exactly what I understand from Adam Smith.

GM gets bailed out using MY tax dollars. Why? Will I ever see a return on that investment?

Who knows? Given that GM is a profitable company now, there's no reason why not in the long term. After all, you're not just looking at the direct asset comparison of money in versus current stock capitalisation.

The government is also making money from share dividends, plus the tax on dividends for other US shareholders, plus the taxes from all GM's employees. And then all the tax income from GM's suppliers and distributors, shareholders and employees, who are happily also still employed because it didn't go bust.

* * *

And to go back to the start... who gives a fuck what capitalism is supposed to be?

To hear much talk of this sort is to get the feeling that some people think the point of life is capitalism. What are humans? Agents of capitalism. What is society? A means to carry out capitalism. What should government be? A means by which society organises society to be capitalist.

Surely society is not there to fulfill abstract ideology, it is just to be itself.

If I were to think what sorts of things a society and its government may reasonably do, it includes ameliorating the human cost when capitalism picks the losers - many of them undeserving. It must be nice to think of everything as an abstraction, and any cost acceptable on the road to ideological purity: as Stalin said, "One death is a tragedy, a million deaths is a statistic".

ShadowKatt:

Dags90:

Hop-along Nussbaum:
Another problem is that Hostess employees were represented by TWELVE unions, each with their own agendas. Why in the hell were there TWELVE unions? Why wasn't it just one or two? The Teamsters settled their disputes, and then just when you think things are going in the right direction, BAM, another different union goes on strike. That is just one example of the gross inefficiency that killed the Hostess brand.

Because it makes sense for workers to organize based on their skills rather than their company? In a company union at Hostess, you'd have bakers voting on workplace safety rules that apply only to their truck drivers. It doesn't make sense.

No, that doesn't make sense, but as was said above you have TWELVE different unions all with their own agendas and standards. And in this case is was only ONE of those twelve that refused to settle. And like a sticking cog in the machine nothing else could turn without it so here we are. One union managed to put the other eleven out of work. I know that the escapist is pro-union, but if you don't see something wrong with this...

Have you got any proof that it was in fact the one week long strike that killed the company? Cause to me it seems no matter what the unions agreed to the company would fail anyway..

ShadowKatt:
No, that doesn't make sense, but as was said above you have TWELVE different unions all with their own agendas and standards. And in this case is was only ONE of those twelve that refused to settle. And like a sticking cog in the machine nothing else could turn without it so here we are. One union managed to put the other eleven out of work. I know that the escapist is pro-union, but if you don't see something wrong with this...

The other major union (the Teamsters) only voted to approve the concessions by a fairly narrow margin. It's not as if some small union overturned what was otherwise broadly accepted. The second largest union said no after the first one passed with a 6% margin.[1] And this was a union wide vote, so it's not even like you can blame this entirely on "union bosses", this is how the actual union members felt.

There exists the very real possibility that combining the two major unions may have resulted in a majority against the concessions.

ShadowKatt:
No, that doesn't make sense, but as was said above you have TWELVE different unions all with their own agendas and standards. And in this case is was only ONE of those twelve that refused to settle. And like a sticking cog in the machine nothing else could turn without it so here we are. One union managed to put the other eleven out of work. I know that the escapist is pro-union, but if you don't see something wrong with this...

I'm sorry, but it needs to be repeated apparently because you seem to have missed it: if one union going on strike for one week was costly enough to bring down the company, then it was already failing to begin with. This is like saying the final nail built the coffin, but it doesn't get there on its own. A single union not coming to a settlement in a week does not kill a healthy company. Period. It simply does not happen.

Well it is true that the Union strike prematurely ended a dying company anyways. But beyond that, it really isn't that much of the Union's fault that the company was going to crash anyways, it was already hundreds of millions of dollars in debt, with very little ways to fix the issue. The Union strike just ended it before it tried to drag itself on for even longer.

Vivi22:

ShadowKatt:
No, that doesn't make sense, but as was said above you have TWELVE different unions all with their own agendas and standards. And in this case is was only ONE of those twelve that refused to settle. And like a sticking cog in the machine nothing else could turn without it so here we are. One union managed to put the other eleven out of work. I know that the escapist is pro-union, but if you don't see something wrong with this...

I'm sorry, but it needs to be repeated apparently because you seem to have missed it: if one union going on strike for one week was costly enough to bring down the company, then it was already failing to begin with. This is like saying the final nail built the coffin, but it doesn't get there on its own. A single union not coming to a settlement in a week does not kill a healthy company. Period. It simply does not happen.

Apparently the other unions decided to work anyway so it seems very odd if that would be enough for to break a company.

""Nobody thought that Hostess was ever going to recover, but the Teamsters looked at their books," he said. "We brought in the same restructuring specialist used in the General Motor restructuring. We had shared sacrifice and we got two seats on the [Hostess] board as part of the negotiations."

Even the Teamsters who had voted against the concessions "started to understand that the job they had was better than any other job" available in today's tough economy.

Last week, as a result of their decision, the Teamsters wound up in the awkward situation of having to cross picket lines. Robert Ryder didn't like that idea. He called his higher-ups to complain.

Story continues below."

Source

Company isn't doing well: must be the fault of employees and their excessive demands-- not management and certainly not the CEO.
Company is doing well: The CEO is such a visionary! He's great! Glad we spent 50 bazillion dollars on him!

Employees have no duty whatsoever to accept a bad deal from a failing company. If a company can't make money given the market conditions-- including the labor market-- it should close. Attempting to get a better deal from employees is one way in which a company can attempt to become profitable or more profitable. But, just like in the case of raising the price of your product, the people concerned can decline to accept that altered deal.

People who didn't like Hostess products are as much responsible as Hostess employees for the company's failure.

completely OT but my brother and me had a Twinkie tasting session just about a month ago...he only had the two and i have no idea where he got them but was all like "you'll never guess what ive got for eatin'"...you kinda have to understand that being from the UK we had only heard of them from American movies and TV etc so as we scrutinously nibbled them with mugs of tea it was a moment of fabled foreign food exploration :P

anyway on topic if the product is still in demand (which i assume it is given its a snack food culturally synonymous with the US to a certain extent) the market demand will pull the product back into marketplace.

i highly doubt that even if Hostess does go out of business Twinkies will disappear.

someone will buy the name, the manufacturing plant, and maybe even the current production plants themselves and continue to make and sell them as long as people want to buy them and there is (some) profit to be made.

Seanchaidh:
Company isn't doing well: must be the fault of employees and their excessive demands-- not management and certainly not the CEO.
Company is doing well: The CEO is such a visionary! He's great! Glad we spent 50 bazillion dollars on him!

Adding to that...

Company isn't doing well; Well we better cut wages and workers' benefits! Company is doing well; Obviously the management deserves a big fat Xmas bonus!

But how does that one go again...

Maxim 21: Give a man a fish, feed him for a day. Take his fish away and tell him he's lucky just to be alive, and he'll figure out how to catch another one for you to take tomorrow.

(courtesy of my favorite webcomic)

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?

Yes, employees demand CEOs to take pay cuts but won't do the same. That makes perfect sense. CEOs have a lot more money to spare. Their paychecks are already way bigger, and will still be way bigger even if they did take pay cuts. So what, they can only afford one solid gold humvee instead of two? They'll live. But expecting a regular worker to take a pay cut? That's a much bigger deal, because they need that money more.

The company probably didn't have to close shop. I bet the guys at the top could've afforded to take care of the loss out of their own pockets, but they didn't want to give up that money. So yeah, I definitely agree with the Union ex.

Belated:

The company probably didn't have to close shop. I bet the guys at the top could've afforded to take care of the loss out of their own pockets, but they didn't want to give up that money. So yeah, I definitely agree with the Union ex.

I'd take that bet.
Easiest money I'd ever make.

DevilWithaHalo:

So... employees demand CEO's take pay cuts but won't do the same?

What's with the apparent false implication that a pay cut for one is equal to a pay cut for the other? If it's freezing and I have 10 blankets, you have 2, and a 3rd guy comes up and needs a few, should we give him equal amounts?

If labor can force a major company out of business, it will gain an upper hand in future negotiations.
This overall is a good thing.

2012 Wont Happen:
If labor can force a major company out of business, it will gain an upper hand in future negotiations.
This overall is a good thing.

Please explain how giving unions the power to kill companies is in any way a good thing. It certainly sounds like a very bad thing. "Oh, you won't give us a 30% raise? We'll just shut you down."

Ravinoff:

2012 Wont Happen:
If labor can force a major company out of business, it will gain an upper hand in future negotiations.
This overall is a good thing.

Please explain how giving unions the power to kill companies is in any way a good thing. It certainly sounds like a very bad thing. "Oh, you won't give us a 30% raise? We'll just shut you down."

That's exactly why it's a good thing. Unions have a real bargaining tool with ownership now. "Look what happened to Hostess" should become the rallying call of labor in the days to come.

Ownership deals the cards and holds the majority of the chips. Labor has recently proven that if it doesn't get enough of the chips, it has a take my ball home option in that it can set everyone's chips to zero if pushed.

Ravinoff:

2012 Wont Happen:
If labor can force a major company out of business, it will gain an upper hand in future negotiations.
This overall is a good thing.

Please explain how giving unions the power to kill companies is in any way a good thing. It certainly sounds like a very bad thing. "Oh, you won't give us a 30% raise? We'll just shut you down."

Please explain how showing the people that they have the power to overthrow the goverment is in anyway a good thing? It certainly sounds like a very bad thing. "Oh, you wont give in to our demands? We will just replace your forcefully"

Ravinoff:
Please explain how giving unions the power to kill companies is in any way a good thing.

It ensures companies can't first be mismanaged for years, and then take it out on their employees in a 19th century style.

I mean, Hostess sells on such a large scale that only heavy incompetence at the highest level could've forced them into bankruptcy (loss of revenue can't have been the issue if they're still selling). It's natural, and a part of the free market, if companies whose management is that incompetent, will fail. If you curtail unions, they'll take it out on their employees, and you're effectively rewarding incompetence.

And in this case, it's not unreasonable. They demanded a huge pay cut, no more pensions, and less healthcare. Which is about as big a deal as it gets as far as labour conditions are concerned. So big an issue that in most countries, such measures are in breach of the law. Not paying pension obligations for instance in the Netherlands is a form of fraud. Everybody contributes, so nobody ends up dirt poor when they retire. If you allow companies to not fulfill those obligations, you're effectively undermining society.

Ravinoff:

Please explain how giving unions the power to kill companies is in any way a good thing. It certainly sounds like a very bad thing. "Oh, you won't give us a 30% raise? We'll just shut you down."

This is unrealistic: workers do not want to bargain their companies into destruction. Absurd, company-wrecking pay demands are exceptions to the rule, if they occur at all. Over the long-term, unions might achieve many successive small improvements which whilst okay in isolation sum up to cause problems. But then unions are usually also accommodating to reductions when the company is struggling.

It's important to allow and encourage free negotiations so employers and employees can sort their own stuff out. A reasonably strong labour force can negotiate suitable protections and wage demands; where labour relations are healthy unions and companies have a good chance of understanding each others' position and coming to a reasonable deal. The alternative to good labour relations, respect and power parity is government, as workers or businesses will seek to constrain the other by law rather than negotiation.

I find it quite ridiculous that a baker at Hostess that had been there for 25 years earned significantly less than the minimum wage here...and they wanted to cut that by 30%...on top of the 25% that was cut in the last bankruptcy in 2004. A Hostess employee in 2005, before the first round of bankruptcy cuts kicked in, was earning $48,000. By 2011 it was $34,000. If they accepted the offer proposed to them it would go down to $25,000 in 2017. This does not include the fact that they received less health coverage for higher cost and lost their pension. At some point employees have to say enough is enough. Even with bad economic times the average wage in the US has only dropped a few percent since 2004, so a drop of nearly 50% is just unacceptable.

This is an example of the total lack of market understanding that so many US corporations have at the moment. From what I have read the demand for Hostess products has been in decline for well over a decade due to a shift in US eating habits as well as a decline in the quality of the product.

Any responsible company would cut back production on what they have and accept less revenue or begin a new product line in an effort to re-expand. Instead Hostess pumped out the same old stuff that was not selling and they didn't downsize to match demand. By reports their factories were working at below 50% production capability. In other words they were paying to operate 33 factories when market demand dictated they only needed around 15. Tell me again how the employees are the problem?

Ravinoff:

2012 Wont Happen:
If labor can force a major company out of business, it will gain an upper hand in future negotiations.
This overall is a good thing.

Please explain how giving unions the power to kill companies is in any way a good thing. It certainly sounds like a very bad thing. "Oh, you won't give us a 30% raise? We'll just shut you down."

Businesses are not entitled to having employees at whatever conditions the business owner thinks is appropriate. It's not the union gestapo coming in and shutting down an otherwise healthy business, it is one side of an agreement deciding that they want a better deal than is being offered by the other side. So basically, you're right: slavery was a better system. Send in the army to break the strike.

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