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Union Rules were Harder to Digest than Twinkies

ilene's picture





 

Myth: Twinkies have a shelf-life of forever. They don't; they stay fresh for about 25 days.

Hostess: Union Rules were Harder to Digest than Twinkies

Courtesy of Dr. Paul Price

Did union workers simply get their 'Just Desserts' for backing Hostess into a corner with too many unreasonable demands? Consider the evidence.

Union workers have now completed their mission. 18,500 jobs are gone forever.

The national labor bosses stood firm. Labor leaders are proud they stood up to those nasty ‘suits’ [see Entourage for definition] who refused to run a money-losing business simply to continue paying salaries and benefits.

Hostess posted a $341 million loss in 2011 on revenues of about $2.5 billion. Contributing to those 2011 losses:

  • $52 million in Workers’ Comp Claims
  • Dealing with 372 Distinct Collective-Bargaining Contracts
  • Administration of 80 Separate Health and Benefits Plans
  • Funding and Tending to 40 Discrete Pension Plans
  • $31 million in year-over-year increases in wages and health care benefits for 2012 v. 2011

Uncounted in the above numbers were the outrageous union-imposed rules that made for a too-high-to-bear cost of sales:

  • No truck could carry both bread and snacks even when going to the same location
  • Drivers were not permitted to load their own trucks
  • Workers who loaded bread were not allowed to also load snacks
  • Bringing products from back rooms to shelves required another set of  union employees
  • Multi-Employer pension obligations made Hostess liable for other, previously bankrupted,  retirement plan contributions from employees that never worked for Hostess at all

America has come to this. The only defense against insane union demands is the willingness to walk away and close shop.

With General Motors and Chrysler we found that even that remedy wouldn’t work.

 

 

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Fri, 11/23/2012 - 12:20 | Link to Comment garyw
garyw's picture

Whatever side you are on you need to realize that the Banking Cartel aka(Rothschilds Group) is backing both sides. They have been pitting the unions against the non unions and the press has been professing poor corporations on for instance fox and cnn has been professing poor unions. It is all the master plan the banking cartel did the same thing to destroy Napoleon. This is not new just our country they are trying to tear apart. They want us to fight each other so we do not see how many gold bars are being converted to tungsten and the wealth of our country is being pilaged by the elite few. We need to stop them as we are many. 

Fri, 11/23/2012 - 10:29 | Link to Comment kaiserhoff
kaiserhoff's picture

Submitted by ilene.

Wonders will never cease;)

Fri, 11/23/2012 - 03:02 | Link to Comment dunce
dunce's picture

I do not know the history of Hostess but it was no doubt started by an entrepeneur way back in at least the 40s who was eventually replaced by "professional" mangers that allowed the company to become unionized. I have seen many of these MBA experts run great companies into the ground. J C Penny is in death throws right now and it was not just because of WAlmart as another example of highly educated formula managers that have retail in their heart, it is just a job to them. HP is another text book example of how to destroy a great company with professional management.

Fri, 11/23/2012 - 01:26 | Link to Comment dolph9
dolph9's picture

You guys don't get it yet, do you.

There's not enough to go around!  How hard is that to understand?  The pie is round, it's finite, it's limited.

 

It has nothing to do with greedy unions or management.  The company died because it's a dinosaur, just like the big banks should have died.  Because there's not enough to go around anymore, and only the strongest can survive.

So management, who is always more connected, took what they can from the carcass and left everybody else to clean it up.

 

GET USED TO IT.  This is not a one time event.  This will be repeated over and over and over and over, to thousands of companies, over the coming decades.

Fri, 11/23/2012 - 01:10 | Link to Comment 57-71
57-71's picture

There is a lot of polarization in the argument here - union this and owner that.

I have enough experience with unions and management from both sides in bargaining and daily operating to know this:

Hostess is the author of their own demise. It had an obligation to shareholders to say NO to union demands going back 10 years or more. Take the pain of strikes at some operations then, or suffer the consequences now. Management abrogated its responsibility by signing contracts it knew it could not afford.

The union is equally complicit in this demise. The books were opened, and the members were offered seats at the table. By refusing and holding out they co-signed the death warrant.

I also agree that after the first bankruptcy, the lender sharks got their teeth in and tore the financial gut out of Hostess.

And yes, that needs to be a financial crime.

Fri, 11/23/2012 - 00:24 | Link to Comment JuicedGamma
JuicedGamma's picture

Quit crying about it already.  Twinkies are about as relevant as Kodak film these days.

Later HoHostess! and good riddance I say.

Fri, 11/23/2012 - 10:48 | Link to Comment outofhere
outofhere's picture

Maybe Hostess should re-tool becoming a clothing factory as clothing sales are apt to increase dramatically when people lose the twinkies around their waist.

Thu, 11/22/2012 - 23:51 | Link to Comment IamtheREALmario
IamtheREALmario's picture

Admittedly those anecdotal unions rules/issues seems counterproductive and against the best interests of the whole. However, please tell us how much the company was paying in interest to the PE companies and the rates and level of debt that the PE companies saddled the company with when they purchased it.

Fri, 11/23/2012 - 00:22 | Link to Comment Longing for the...
Longing for the old America's picture

When a company loses $341 million a year it doesn't take long for interest charges to build up.

No firm can withstand long-term losses like that without pulling the plug if it doesn't appear they can turn profitable in a reasonable time horizon. Hostess was bankrupt when the PE firm took it over. Of course the new iteration had debt from day one.

Thu, 11/22/2012 - 23:04 | Link to Comment Westcoastliberal
Westcoastliberal's picture

I'm really sick of seeing these articles finger-pointing the Union as the culprit in the Hostess fiasco.  Sure the Unions may have made demands that were a little off the chain, but they were trying to protect Union jobs.  And yes there may have been multiple contracts, but who is to say that's the fault of the Union?  Maybe Hostess was playing divide and conquer.

Point of my rambling here is, Hostess was your typical vulture capital meltdown (i.e. Bain capital), and workers ALWAYS LOSE.  Meantime all the execs in their ivory tower get treble bonus money and move on to pillage another company, case closed. 

The Teamsters will probably find other trucking industry jobs, the bakers, no so much.

Fri, 11/23/2012 - 12:18 | Link to Comment btdt
btdt's picture

What is the basis of your premise that anyone was trying to protect union jobs? Who is "they"?

The corrupt union bosses (in this case the union head just got a salary raise to $250K+ - to boost his future pension I would guess) who capture unions for personal plunder and for larger plays with the Democrat Party....

And ironic that you bring up Bain, given that this vulture capitalist was apparently a big Demo Party contributor.

 

 

Fri, 11/23/2012 - 09:49 | Link to Comment myptofvu
myptofvu's picture

 I have NEVER seen a union that protects jobs (except the 1 union in this case that agreed to the paycuts) when it comes down to either cuts or contributing more towards entitlement or laying off employees the unions always vote for the layoffs. 

 

One big problem is that downsizing is sometimes necessary when sales are down but unions make it impossible to do and to make matters worse choose these inoportune times to go on strike.

 

Unions serve no productive purpose other than to leech of their members and increase in their own size and power. In order to do this they institute Feather Bedding that is why you had workers who couldn't load their own trucks or carry both bread and snacks and all the other stupid stipulations that are contrary to running an eficient business.

Thu, 11/22/2012 - 21:23 | Link to Comment Bansters-in-my-...
Bansters-in-my- feces's picture

Is that what you's ladies are calling it these days...
"Don't fry my Twinkie" she said.

Thu, 11/22/2012 - 21:46 | Link to Comment roadhazard
roadhazard's picture

The Union workers were stupid. They should have gone back to work and done 30% less production. Fight a fucking over with a fucking over.

Fri, 11/23/2012 - 11:52 | Link to Comment Lord Blankcheck
Lord Blankcheck's picture

Sounds like they were already at a 75% less producdtion rate.

Thu, 11/22/2012 - 20:04 | Link to Comment shutdown
shutdown's picture

I'm against all unions, except for the one I'm in. So there. 

Thu, 11/22/2012 - 19:28 | Link to Comment lasvegaspersona
lasvegaspersona's picture

Robert Triffin saw the the country with the reserve currency would have to have a negative balance of trade and essentially give up manufacturing. Our government gets all the benefits (ie they sell a butt load of treasuries and spend the proceeds) while the people deal with low wages and fewer jobs.

Our governent also competes with us for borrowing (they want all available investable funds) for buying (they have all the dough so they set many prices by their massive purchasing power and because they have access to infinite money they do not worry about prices.) and they keep things this way by giving poor folk just enough to get re-elected. 

Our government is the killer of the middle class, not Wall Street. WS is just opportunistic and happily facilitates the slaughter.

In the end everything falls apart but no one (who could do anything) cares because they got theirs. 

Thu, 11/22/2012 - 23:55 | Link to Comment IamtheREALmario
IamtheREALmario's picture

Interesting opinion since it is those who run Wall Street who also run the politicians and the media, who then run our government. Money is the vehicle that makes bankers and politicians into looters of the value adding workers.

Thu, 11/22/2012 - 17:14 | Link to Comment seataka
seataka's picture

  In 1960, in Georgetown, Wash DC, there was Thompson's Dairy.. they delivered milk to every door that wanted it. They also sold Golden Guernsey Milk, a yellow, rich milk. Their Union demanded higher pay, the family explained the numbers to the union, the union did not relent, so the family said to hell with it and closed Thompson's Dairy. I have never tasted Golden Guernsey milk since.

Thu, 11/22/2012 - 17:57 | Link to Comment DumFarmer
DumFarmer's picture

If you are ever near Strafford Vt there is an organic dairy that milks golden guernseys. The milk and associated products are available locally. Family operation. No unions. Just fyi.

Thu, 11/22/2012 - 17:19 | Link to Comment seataka
seataka's picture

And this is indefensible:

"

  • No truck could carry both bread and snacks even when going to the same location
  • Drivers were not permitted to load their own trucks
  • Workers who loaded bread were not allowed to also load snacks

 

Greed without vision of consequence is not exclusive to bankers.

 

 

 

Thu, 11/22/2012 - 15:35 | Link to Comment Vendetta
Vendetta's picture

Yeah, its the unions that made them close up shop /snark

Its really great when I 'get' to work 84 to 96 work weeks regularly with constant sleep deprivation issues having to travel here and there constantly then when there is a temporary slowdown (till next year) I am supposed to take December off without pay. Hooray for the joys of no worker protections whatsoever.   The unions do stupid things but they are such a small percentage of the workforce that I can't imagine why anyone would believe they're the root source of corporate fiscal issues.   I'm quite certain the dirt cheap expendable labor in some asian country is a very tasty corporate treat for the twinkie management.  Hell the twinkie has a shelf life of 25 years so shipping and freshness certainly isn't an issue.

I'm sure twinkies will make a comeback, in the same form we all know and love however made from the same ingredients that China makes their drywall out of and kids will love it.

Thu, 11/22/2012 - 21:33 | Link to Comment ZDRuX
ZDRuX's picture

Why did you continue to work there? Because it's the best job you could have had at the time. You should have been thankful.

Fri, 11/23/2012 - 02:21 | Link to Comment Lord Koos
Lord Koos's picture

You ungrateful slaves should be thanking massa for not whipping you harder.

Thu, 11/22/2012 - 14:34 | Link to Comment brown_hornet
brown_hornet's picture

Why didn't the teamsters buy Hostess and keep all their drivers and baker buddies employed if the profit per worker was so great. They could hire their own CEO and pay him $20 per hour plus bennies.

Thu, 11/22/2012 - 16:40 | Link to Comment laomei
laomei's picture

Because it was loaded up with a billion dollars of pointless debt and had already been picked clean.

Thu, 11/22/2012 - 17:10 | Link to Comment Lednbrass
Lednbrass's picture

And exactly how do you know what debt was pointless? Seriously, do you have access to precise information that shows exactly what needed to be borrowed to cover operating costs? How much equipment needed repair or replacement? How much had to be borrowed because they lost money and therefore had to borrow it to stay afloat and hope they could turn things around? Your source showed that the company had been losing money for years- just how do you think they stayed open after years of nine figure losses other than through borrowing? They show over 500 million lost from 2006-2010, just what do you think companies in such circumstances do to keep the doors open?

I don't think you have any such detailed information, the source you put up certainly does not provide it on that level and without access to interanl company documents it cannot be known- you merely make the assumption that all debt the company had served no purpose whatsoever because it feeds into your 1% vs. 99% mentality that failed businesses fail because evil management stole all the money (and leaving out a huge decline in demand for their products). Having actually spent some years working in manufacturing, it is hardly that simplistic.

Fri, 11/23/2012 - 00:18 | Link to Comment IamtheREALmario
IamtheREALmario's picture

You seem to be blowing smoke and skirting the issue that the poster you are responding to has brought up.,, and I think you know it. Maybe Hostess was different than the typical PE company, but maybe not. With a typical PE buy, the PE company uses the money that investors entrust to it plus money that they borrow from banks at very favorable rates, maybe 1.25%. They then put as much debt as possible on the balance sheet of the acquired company and charge rates of interest that are very high. The secured debt might have a market rate of 5% to 8%, but the unsecured debt may be on the balance sheet at 15%. The company management then has to figure out how to survive with the huge debt service burden. Generally, first they scavenge the balance sheet, inventory, receivables, payables, facilities, IP, etc. to release cash to make their debt payments. But then they have to reduce their payroll and cut growth initiatives.

Many companies don't make it, but the PE owner company will generally get its money and be able to pay off their investors and earn large amounts for themselves just in the payback of those loans with the high levels of interest. If the managment team is able to run the PE vampyric gauntlet in the target 5 to 7 year timeframe then the company can be shown to have an improved EBITDA, be sold to another PE firm Ponzi style or "clueless strategic buyer" and give the management team its payout. However, the company that emerges is generally leaner, much meaner and often with no future ... those growth initiatives having been terminated or sold off long before.

While I am sure the union has done stupid things, one should not be too quick to point fingers in their direction. It is likely that if not for the heavy debt load and high interest rates, the management team would not have been forced into conflict with the unions.

Fri, 11/23/2012 - 14:12 | Link to Comment Lednbrass
Lednbrass's picture

I skirted nothing, merely pointed out the very high degree of what your response is also loaded with- speculation. The maybes, may haves, and generallys are so frequent as to have questionable value.

My central rebuttal was against his claim that everything above labor cost was profit- this is inherently silly to anyone who has ever worked in manufacturing (and I do). It is even more misguided to make that statement with a company that has been posting clear losses for years and burned investors for $300 million just a few years ago in a previous bankruptcy restructuring. He also made the erroneous assumption that all company debt was pointless. Did they take out debt- well clearly they did, but when you are bleeding nine figures a year how else do you keep the doors open? I mean really, what other option exists for any business under those circumstances besides borrow or close?

Look at the posted losses and tell me how they were to remain open besides borrowing? I would say the writing was on the wall long ago and they should have shut down 6-8 years ago instead of protracting things through bankruptcy.

Fri, 11/23/2012 - 12:29 | Link to Comment garyw
garyw's picture

Thanks!

Fri, 11/23/2012 - 06:14 | Link to Comment Urban Redneck
Urban Redneck's picture

Talk about blowing smoke... "the typical PE"

Thu, 11/22/2012 - 16:00 | Link to Comment Ness.
Ness.'s picture

I agree.  Why is it the unions will spend hundreds of millions of dollars in member dues to support corrupt politicians (see Chicago) in local elections but NEVER take that money to step in, take over, and turn-around a failing company?

This would have been a great opportunity for them to put their (member dues) money and people to work - now 18,500 are out of work.  

 

Thu, 11/22/2012 - 15:14 | Link to Comment Lednbrass
Lednbrass's picture

Quite so. This is one of things in this fiasco that stands out to me- as part of their concessions the union was to receive a 25% share of the company.  Were it a profitable venture I fail to see what should have stopped them from taking this offer then accumulating additional stock until they owned a controlling interest- unless of course they knew that in reality it was a tired old dog that couldnt hunt any more.

Thu, 11/22/2012 - 14:32 | Link to Comment ATG
ATG's picture

Divide and conquer means at least half lose.

Principles mean everyone benefits.

Thu, 11/22/2012 - 13:59 | Link to Comment northerngirl
northerngirl's picture

As a former Union member, I learned that Union leaders will screw you over faster than the company management. 

Fri, 11/23/2012 - 00:20 | Link to Comment IamtheREALmario
IamtheREALmario's picture

Yes, the same kind of people are attracted to union "so called" leadership as to company or government positions of power. They are typically the last people one would ever trust to work in their best interest.

Thu, 11/22/2012 - 17:32 | Link to Comment NidStyles
NidStyles's picture

Management needs you so they can make money. Unions just need people to believe their shit long enough so the leaders can cover their want's.

 

One is a natural situation, the other is a disaster waiting to happen.

Thu, 11/22/2012 - 17:24 | Link to Comment Whalley World
Whalley World's picture

I used to be a tradesman in the 80's, sheet metal.  Have you ever heard of the Shipyard shuffle.  My journeyman would say, I need a smoke, so he would waddle across the jobsite to find his smokes, come back and say, shoot  forgot my lighter.

When I asked why don't we work faster, he said cause we want to make the job last.  Even back then i felt that was unsustainable and said hey, why don't we work faster and get on to another job?

The union movement in BC is now relagated to public employees for the most part.

Fri, 11/23/2012 - 12:31 | Link to Comment blueb
blueb's picture

As the former owner of a union sheet metal shop in BC (just sold and retired), I have to agree. There's no way in hell that unions can keep increasing demands, even when the economy cannot warrant it.

My "all-in cost" was $53.00/hour last year, while the average non-union tradesman's wage is $26/hour. Guess which sheet metal shop's going to be in existence in 10 years?

While I value what unions have done in the past.. something needs to be done. Union "officials" have overstepped their workers needs and replaced them with their own greed.

Fri, 11/23/2012 - 00:25 | Link to Comment IamtheREALmario
IamtheREALmario's picture

Yes, people who have no power of self determination quickly lose interest in working for the benefit of the company. I suppose this could be applied to other situations as well, such as a country. When government takes away the power of self determination of a people, the people quickly lose interest in supporting the government and the government must use force to control the people if it wishes to keep enjoying its parasitic high stature.

Thu, 11/22/2012 - 14:10 | Link to Comment ATG
ATG's picture

At GM they were the company management, sitting on the board like Animal Farm.

Thu, 11/22/2012 - 13:49 | Link to Comment Iam_Silverman
Iam_Silverman's picture

What a conundrum.

On the very pages of this financially-oriented site, posters wring their hands lamenting over the fact that the current dollar buys far less than it did years ago.  There have been pages devoted to the fact that real wages taken home by the workers of our country have actually declined.

 

Yet, when workers exercise their legal rights to join together and use collective bargaining to overcome these issues, they are now villainized.

 

Where is the middle ground?  Stupid union rules were agreed to by stupid management, all in order to take away in some other area.  There is plenty of blame to go around here for all sides

Thu, 11/22/2012 - 15:25 | Link to Comment Tijuana Donkey Show
Tijuana Donkey Show's picture

Two wrongs don't make a right. Your wrong for the right reasons, and the unions are right for the wrong reasons. I say make the unions the owner, and let them fight themselves. That's what they did with GM, and it at least shut up the UAW. (Unemployed Auto Workers)

Thu, 11/22/2012 - 15:04 | Link to Comment PGR88
PGR88's picture

Stupid union rules were agreed to by stupid management to keep the peace and muddle through

Thu, 11/22/2012 - 13:35 | Link to Comment Joebloinvestor
Joebloinvestor's picture

So much for unions.

As long as they make their point, everyone else can pound sand.

Thu, 11/22/2012 - 13:16 | Link to Comment blunderdog
blunderdog's picture

Interesting that this post, which is clearly just an anti-union essay, has no financial details, while the other ones which laid out a lot of specifics are far less one-sided in the treatment of what went wrong at Hostess.

It's always nice to see where an author is coming from, anyway.

Thu, 11/22/2012 - 14:04 | Link to Comment ebworthen
ebworthen's picture

"BCTGM members are well aware that as the company was preparing to file for bankruptcy earlier this year, the then CEO of Hostess was awarded a 300 percent raise (from approximately $750,000 to $2,550,000) and at least nine other top executives of the company received massive pay raises. One such executive received a pay increase from $500,000 to $900,000 and another received one taking his salary from $375,000 to $656,256."

http://thinkprogress.org/economy/2012/11/16/1203151/why-unions-dont-shoulder-the-blame-for-hostesss-downfall/?mobile=nc

Thu, 11/22/2012 - 16:39 | Link to Comment ebworthen
ebworthen's picture

Lednbrass and Long for the...

Two sides to the coin.

Just like the Republicrat versus Demican false flag choice, I believe it is greed at both management and labor that cause tragedies such as this.

We have entered into parasitism versus production.  Nearly everything is being offshored, and what isn't is being bled to death to support the unsupportable expectations of a declining post-Industrial post-Information age society.

There are not enough resources and assets for everyone to have the standard of living they feel entitled to, so everything is being torn down in a desperate attempt to retain or regain that which has been lost.

Left/Right or Conservative/Progressive arguments are moot; both have squandered the nation and are busy sucking it dry.

Fri, 11/23/2012 - 01:21 | Link to Comment MeBizarro
MeBizarro's picture

Bingo

Thu, 11/22/2012 - 18:11 | Link to Comment Binko
Binko's picture

This is very true.

Unions are great in theory. But in practice they become a power base for union leadership. Hence the relentless drive towards restrictive work rules that require more and more workers.

Management is great in theory. But in practice it warps the enterprise so it is little more than a short term feeding trough for the sole purpose of enriching top executives.

As you said, everybody is trying to feed off the dying carcess of american manufacturing in order to support standards of living and patterns of greed that are simply not sustainable.

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