Controversy Alert: Unions Close Hostess (who is the Ding Dong?)

November 16th, 2012

In school I read The Jungle.  This was an awesome, eye-opening book.  If you haven’t read it I suggest you get it and read it over the holidays.

This book showed me why unions exist.  To battle the atrocities of what a big, abusive company did to employees.  From wages to working condition, unions swoop in to solve problems.

Unions had a very important purpose.  But many have questioned whether that purpose is now in the past, and ask if unions have grown too abusive?

I know a guy who didn’t join the union at the U.S. Post Office.  He left work and the union boss drove after him, harassing and threatening him like a crazy man.

What the heck is that??

I went to school with a guy who was a prison guard in Denver.  He said the union would protect other guards who came to work drunk or high.  They would not ever fear losing their jobs, because the union was there to save them.

That the heck is that??

And today we read that Hostess is saying, because of failed negotiations with multiple unions, they will pull the plug, and 18,500 people will lose their jobs.

My guess: Another company will buy all of the assets of Hostess (patents, trademarks, factories, etc.) and continue production, and hire a lot of people back… but there will be people hurt because two groups (Hostess management and the multiple unions involved) could not come to an agreement.

It sounds like Hostess is saying “Look, we’re hurt.  We’re wounded.  We’re not as financially healthy as you think we are.  We just can’t pay the wages you are demanding.”

And the union is likely saying “Get over yourself.  We know you are rich and wealthy.  We want “fair” pay!  Our union members work really hard for this stuff!”

And Hostess probably says “Competition has taken market share and eaten into our profits.  The cost of goods has gone up.  We simply don’t have the money to cover what you are demanding.

And the union says “We don’t care what you say, and we aren’t willing to work things out.  It’s all or nothing.

And Hostess must have to say “Well, there is nothing there to take from.  We’re done.  We have no choice.

Who loses?  The people.  What about the people who *had* pensions.  If Hostess closes, will anyone who acquires them continue or honor those pensions?  If not, did the unions just make a whole lot of retired people lose everything?

We don’t need another 18,500 people on the streets looking for work.

Unions have got to figure out how to stop bullying companies (and members and non-members).  It seems like right now they act like the spoiled kid who demands more than his parents can give him.  Maybe instead of playing the entitled kid role, the union should play a partner role with the company.

But then again, is it the obligation of the company to share equal footing with unions, who don’t seem to have the long-term, sustainable health of the company in their interest?

A sick company that pays higher-than-fair wages is not sustainable.

This is a lose-lose-lose situation, and I think you can tell where I place the blame.

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9 Responses to “Controversy Alert: Unions Close Hostess (who is the Ding Dong?)”

  1. J Brown says:

    I know there is bad union leadership, just like the potential for bad leadership anywhere. It doesn’t help that the unions started over issues and maltreatment.

    I used to be lazily anti-union back in the 90s, until I worked at a university that had a union for all clerical and technical workers. That union was started to have a voice less than it was about the very real issues workers dealt with. And during the second contract negotiation, the university management pulled the same thing — “we don’t have money” — and had a vigorous campaign on it. It was just a ploy, and we knew it, and we dispelled the misinformation as quickly as it came out.

    Hostess may be dire fiscal straits, but how much of that is because of union action, and how much because of mismanagement and bloated executive salaries?

    There is nothing in this report that indicates why the strike started, or anything about union demands, or on what points the union and Hostess couldn’t agree. It reeks.

  2. How does a company STAY in business if it can’t afford to without making significant CHANGES?
    What bothers me MOST are the fiscal facts:
    1. Hostess was in Chap. 11 bankruptcy because of burdening labor costs
    2. The company has about $860 million in debt (I’m sure it’s much higher at the moment!)
    3. Hostess filed for bankruptcy in 2004 and re-emerged in 2009
    4. The company said a successful reorganization will require it to withdraw from multiemployer pension plans, bring down its cost of long-term worker benefits, and alter the terms of its collective bargaining agreements.
    5. Hostess was undergoing bankruptcy proceedings to restructure itself in order to STAY in business.
    6. The union said that it would strike if “unfair contract terms” are approved as part of its bankruptcy proceedings.
    7. While a strike could be detrimental to the company, Hostess said the consequences of keeping its current labor cost structure are just as severe – they warned the doors would close if they decided to strike.
    8. Hostess told the union before hand that they would shut the doors if they strike.
    Why on earth would a union strike knowing that the company ultimately could NOT afford to stay afloat as-is? It’s one thing for a company to have boat loads of revenues and profits to have a layoff or downsize, but what about a company knee deep in debt that just can’t afford it.
    Recently Raley’s union workers went on strike over contract negotiations. The company and the union agreed on everything BUT additional retirement health benefits AND overtime (triple time) on Sundays and holidays. Raley’s recently underwent some major changes in customer incentives to try to stay competitive with large grocery retailers.

    Thankfully for the Raley’s employees, they settled the agreement after a little over a week of striking. YES, I crossed that picket line. Many of the employees at my local store were working. They told me they were “thankful to just have a job” and that the strike was NOT their idea.

    How does a company stay in business if it can’t make the necessary changes to STAY in business? How does that same company make those changes if negotiating with a large union that doesn’t want to make the necessary changes in order to STAY in business?

    Bottom line, the situation sucks.

  3. Sophie Lagacé says:

    I think that’s a hasty description of the situation. Here is another angle: http://seattletimes.com/html/soundeconomywithjontalton/2019696179_what_killed_hostess.html

  4. The media will spin it as they want, but facts are the facts. The hostess site has this posted on their corp site:

    “Hostess Brands is Closed.

    We are sorry to announce that Hostess Brands, Inc. has been forced by a Bakers Union strike to shut down all operations and sell all company assets. For more information, go to hostessbrands.info. Thank you for all of your loyalty and support over the years.”

    They were already on “the cliff”, the union just pushed them off it.

  5. Sophie Lagacé says:

    I don’t want to be adversarial on Jason’s blog, but I must question this. Heather, when you say “The media will spin it as they want, but facts are the facts. The hostess site has this posted on their corp site:[...]” do you mean that what the company posts on its Website constitutes the facts and the benchmark for credibility?

    I’d like people to at least look at other sources, such as an employee’s testimony (http://www.dailykos.com/story/2012/11/18/1162786/-Inside-the-Hostess-Bankery), Forbes (http://www.forbes.com/sites/adamhartung/2012/11/18/hostess-twinkie-defense-is-a-management-failure/), and the Wall Street Journal (http://online.wsj.com/article/SB10001424127887324556304578122632560842670.html):

    From the WSJ article: “The company’s burdensome debt traces back to Hostess’s first trip through bankruptcy in 2004. Missteps by a private-equity firm, hedge funds and managers since burdened the company, despite its more than $2 billion in annual sales. “I think there’s blame to go around everywhere,” said Chief Executive Gregory Rayburn, a turnaround expert hired this year. ”

    From the Forbes article: “The obvious problem is leadership kept trying to sell the same products, using roughly the same business model, long, long, long after the products had become irrelevant. [...] And when they failed, management decided to scapegoat someone else. ”

    From the employee testimony: “Remember how I said I made $48,000 in 2005 and $34,000 last year? I would make $25,000 in 5 years if I took their offer. 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.”

    I invite you to read the entire articles, which are not very long but contain plenty of, ahem, food for thought.

  6. I took a different view of the situation:

    http://www.washingtonpost.com/blogs/right-turn/post/ding-dongs–big-labor-strikes-again/2012/11/16/e2ca4b0e-2fef-11e2-9f50-0308e1e75445_blog.html

    We will have to agree to disagree on this one.

    My heart breaks for the employee you quoted who said his job would be hard to replace and that his salary would cut. But at the same time, isn’t some job better than no job while you look for a new one?

  7. Sophie Lagacé says:

    “We will have to agree to disagree on this one.”

    Why? Can’t we agree on facts before we agree to disagree on conclusions? It seems like many people started with the conclusion that the union was to blame and are working their way back from there. But when you look at the history of the company’s management decisions over the last decade, there are plenty of reasons to distribute the blame at least as much in that direction.

    As for the issue of media spin, I’ll grant that the personal testimony was on Daily Kos which is favourable to unions, but the WSJ and Forbes are hardly hotbeds of union activism.

  8. An alcoholic walks into a bar.

    He tells the bartender he has had far too much to drink – wine earlier in the day, more drinks at a party and more again at an after party.

    The man tells the bartender he needs coffee and water in an effort to sober up.

    In his drunken state he realizes he must make major lifestyle changes in an effort to get sober. He tells the bartender that he plans to attend an AA meeting the next day where he will be given a 50/50 chance of recovery.

    Then the bartender offers the man a shot of whiskey.

    The man declines saying, “If I have one more drink I will die of alcohol poisoning.”

    So the bartender holds the man down and pours the whiskey down his throat. He dies immediately.

    Did the bartender kill the man?

  9. Jason Alba says:

    I knew this was going to be a bit controversial.

    News will never tell us all the truth… depending on where you read it, it will be slanted.

    Even the company won’t tell all the information… no one really will.

    I agree that the company had made bad decisions (which company doesn’t) that led it to where these negotiations would be so harmful. And maybe, if it is their fault, they should take responsibility like Sophie and the links point out. Of the dozens or hundreds of factors to get to this point, I’m sure the union negotiations were not helpful.

    So either they were an easy scapegoat, or they had a “significant” impact on the demise. But yes, I agree there were other factors that contributed to this demise.

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