United Liberty
Union strike takes out the Twinkie
Fri, 11/16/2012 - 12:50pm | posted by Jason Pye
That delicious, spongy, creme-filled snack may be no more thanks to a strike by workers. Hostess, which makes the Twinkie and other confections, went through bankruptcy earlier this year and, as a result, had to renegotiate labor deals with unions.
While the International Brotherhood of Teamsters signed off on the proposed agreement, which allowed Hostess to cut salaries and benefits, the workers belonging to the Bakery, Confectionery, Tobacco Workers and Grain Millers International Union have refused to sign off:
Striking Hostess Brands workers remained on the picket lines across the country Thursday night, refusing a company ultimatum to return to work or face the liquidation of the national baker.
[…]
The Bakery, Confectionery, Tobacco Workers and Grain Millers International Union said the company stopped contributing to workers’ pensions last year, and the union wants pension benefits restored.Production at about a dozen of the company’s 33 plants has been seriously affected by the strike, said Lance Ignon, a Hostess spokesman.
He said a decision on liquidating the company may not come until Friday morning after it’s had a chance to assess plant operations late Thursday.
The deal Hostess was offering wasn’t that bad given the economy. They’re asked workers to accept an 8% cut in salary and a 17% reduction in the company’s contribution to health insurance benefits, a combination that would have saved Hostess up to $200 million.
Unfortunately, Hostess announced earlier today that it would follow through on its threat to liquidate and shut down, eliminating some 18,500 jobs in
Hostess said a national strike by members of the Bakery, Confectionery, Tobacco Workers, and Grain Millers International Union that began last week had crippled its ability to produce and deliver products at several facilities.
The liquidation of the company will mean that most of its 18,500 employees will lose their jobs, Hostess said on Friday.
The 82-year-old company said it took the decision to shut down after determining that not enough employees had returned to work by a deadline on Thursday.
[…]
“We deeply regret the necessity of today’s decision, but we do not have the financial resources to weather an extended nationwide strike,” Chief Executive Gregory Rayburn said in a statement. “Hostess Brands will move promptly to lay off most of its 18,500-member workforce and focus on selling its assets to the highest bidders.”
This doesn’t wipe away some of the company’s financial problems, but the labor deals that were in place made it very difficult to compete in the business. Sothere you go, folks. Unions killed the Twinkie.
One union killed twinkies. The Teamsters agreed to the deal and tried to get the other one to take it too.
“While the International Brotherhood of Teamsters signed off on the proposed agreement, which allowed Hostess to cut salaries and benefits, the workers belonging to the Bakery, Confectionery, Tobacco Workers and Grain Millers International Union have refused to sign off.”
AFL-CIO is defending the bakers’ union.
As I said…
I tend to disagree that the Baker’s Union is solely responsible for the death of Hostess Brands, Inc., a company that traces its roots back to the founding of International Bakeries Corporation in 1930. Obviously, the failure of this union to agree to contract concessions led to today’s news, but there’s every reason to believe that Hostess would have ended up here anyway even it had gotten a deal with the union.
Consider these facts. First, this is the second time that Hostess was in Chapter 11. The first time lasted from 2004-2009. In all honesty, most company’s that file for Chapter 11 protection do not make it out successfully so they were arguably lucky to get out the first time. Unfortunately, it was barely two years before the company was falling behind again. It wasn’t making a profit, and it had defaulted on a $700 million post-bankruptcy loan. The present Chapter 11 case started in January of this year.
Clearly, labor costs were a huge problem for this company, but there were a number of other factors that appear to have contributed to their troubles. Among these are what seems to be a rather antiquated distribution system and the fact that consumer tastes have changed significantly over the years. These aren’t the 1970s when Hostess snacks were a ubiquitous part every kids lunch box. The bread side of the business was likely suffering from the fact that that particular market is saturated right now and that a lot of grocery store consumers are preferring to purchase breads made fresh on-sire rather than branded products.
So, yea, the Union was the proximate cause of today’s decision but my feeling is that it would’ve happened anyway.
I need to find more ways to use “proximate cause”
It’s a fun phrase to use
don’t suppose that high labor costs due to union excess could have had anything to do wtih the FIRST bankruptcy do you?
Maybe the 80% raise senior exec. gave themselves last year was a factor the $3 million exit bonus to former CEO and $1.5 million salary for current CEO helped a lot.
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