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Union Rules were Harder to Digest than Twinkies
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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If I could draw a picture instead of writing, it would look like this:
Imagine an emaciated nag that has just collapsed, and is unable to get up. The poor bony thing is near death- in fact, she will die.
Around her head and neck cluster a flock of vampire bats, each with its fangs in her jugular vein. Meanwhile, all over the rest of her body is a thick covering of fleas, leeches, and lice, all sucking blood as best they can.
Why fight about workers vs management, when they all have the same diet? It doesn't seem like anyone was interested in the long-term viability of Hostess. Hostess has long been in ill-health, and ill-health always attracts parasites. As the culture shifts in a company that has no real future, it shifts towards short-term, selfish thinking. This is what took down Hostess. Who eats white bread any more? The snacks were little emore than a drug delivery system, like cigarettes. Hostess was doomed by the greater shifts in society, and all we see here are the inevitable death throes.
Thank you for stripping down the Twinkie defense. It's like the time I saw the Entemann's donuts with the "We'll donate a 1$ to cancer research" promo. Crap food=cancer. I am sure this article has many valid points though, it's patterns in organising that create parasitic instead of symbiotic relationships with workers and employers. In California, the government mandated leech-factor is so massive I can't even imagine starting a business that requires employees, and I've been self-employed for years. I see expansion as making more money for myself without adding any more workers to the Modus Operandi, the people around me who do have workers in this field, well, let's just say that the white middle class has parted ways with each other but kept it friendly. Better be bilingual.
Management did rasie their salaries but then rescinded to $1 per year for the top 4, and others reverted back to their previous salaires. The unions, however, did NOT rescind their idiotic demands that required 4 different workers to load/drive one truck.
How did the top 4 do on those dividends in 2011?
What dividends?
Hostess products have become a joke to the public. They have been made fun of and denigrated for years and the current president has lead the way with its attack on junk food. Who should be shocked that this company failed. We all know the abuses that have been created by unions. They haved used corporate corruption to justify the crazy things they do and it ultimately does nothing but cause their demise. We are living in a world where so many people are in need of a job and union members are denying this reality and demanding more. Where is the economic justice in that? I wonder how all the unemployed shoppers at Walmart feel about strikers in front of the stores?
You can hardly blame Obama for declining Hostess sales, that started way before he crawled into the White House. However, regarding unions it is a case af ticks denying they do any damage due to the existence of larger, fatter leeches. This is a standard argument of the collectivists- "How dare you in the middle complain about a dozen fleas and ticks on your leg, they take so little blood each compared to the leech on your neck".
I want the leech and the little ticks all kicking their last at the bottom of a jar of alcohol, between both groups of parasites the middle class they both feed on is dissolving.
Workers are "ticks" because they expect to actually make a living wage in this inflationary age... nice.
Union workers have now completed their mission. 18,500 jobs are gone forever.
I think Little Debbie & Tastycake and/or other companies will hire extra workers to take up the slack in the long run. I don't think those jobs are gone forever.
The union may have wanted too much, but I've been reading all over the place how the management had been giving themselves raises as the companie was going down. It's a miracle to me that Hostess lasted as long as it did since it has much lower priced competition and because people are waking up to how bad processed food is.
Most likely buyer: Grupo Bimba - a Mexican business. Think the union guys will follow the work?
Those jobs are going, boys, and they aint coming back.
The FTC could disallow an acquisition of Hostess assets by Grupo Bimbo on antitrust grounds. Likely a smaller entity; that said, regardless of what becomes of the Hostess carcass, that which emerges from the ashes shall not retain union involvement.
Unless gummin steps in the GMs them.
Many companies will be glad to own the brand names and recipes.
They will produce the products in non-union shops to avoid the labor abuses Hostess faced.
The 18,500 will now be collecting unemployment dollars from taxpayers for up to 99 weeks. Then many will develop 'permanert disabilties' so they can stay on the dole for the rest of their lives.
With no need to work ever again, why let personal repsonsibility or ethics interfere with a free ride on OPM?
Average pay for drivers is $20 an hour.
For the bakers, the average pay was $16 an hour.
Pensions don't factor into it at all. $3.50 an hour was being deducted from employees and retained by the company since 2011 with no intention on distributing it to the pension plans... which are independent and not a factor at all in this.
The total pension plan obligation (which was going unpaid) was $100m per year from the company.
The average cost per employee per year, including all benefits worked out to around $50k. (but that was prior to the first cut, which knocked it down under $40k)
http://www.privco.com/private-company/hostess-brands-inc
Productivity in 2011 was $128,947 per employee
Cost of sales on 2.45b works out to around 1.26b meaning there's a pile of cash amounting to 1.19b in order to pay other expenses (like labor).
Now, here's the tricky part. Why the fuck was there a dividend paid out in 2011 of $609,024,000 to shareholders? Oh right, that's asset stripping!
They've been slashing jobs for years now and funny, how when the company first decided to file bankruptcy, it was just barely having an operating loss. Immediately after being taken over by the vultures, it's been sucked dry. Over $1b in assets have vanished only to be replaced by high-interest debts. Blame it on the unions, blame it on "greedy" workers who are trying to keep their jobs secure. The "deal" that management was trying to force through would have been another 8% cut to pay and a much larger cut to benefits which would have knocked that sub-40k (in total compensation) down under $30k.
Here's a question for ya! Would you be willing to take a 50% cut in compensation, loss of your retirement savings, loss of your healthcare in the time of ONE YEAR, so some fucking wall street asshole could plunder you for over $600m? Because that's literally what happened. And yet... you blame the unions.
When you are generating a net $62k of actual profit for a company, yea... I think asking for $50k in TOTAL compensation is more than fucking fair.
So much sloppy thought here its tough to know where to start. Your source showed a 341 million dollar loss in 2011 for a company that has lost 30% of its sales in the last decade- and you rationally expect them not to cut costs? What?
Considering that they burned previous investors for over 300 million during their first bankruptcy its hardly odd to expect that anyone owing a substantial chunk of stock at this point would want to get back something before it goes under. You call it plundering of workers when dividends were paid- do you consider it also plundering of creditors by workers when Hostess ripped them off for 300 mill a few years before? Also if stock ownership is so obscenely profitable why did the union not leap at the chance of a 25% ownership share and two seats on the board of directors?
Its pretty clear you have never worked in a business, much less manufacturing. Your claim of a 62K "actual profit" per employee is nuts- you took gross revenue per employee, subtracted your arbitrary 50K number and somehow assume that the remainder is "profit". What? This is absolutely childlike reasoning. In multiple places this source refers to their high fixed costs- does that mean anything at all to you or does your abysmal lack of any real knowledge of manufacturing just tune that out as inconvenient background nose?
Even assuming that your 50K number is correct (which is highly debatable but a secondary point) do you even comprehend that a manufacturer like this has massive expenses beyond labor- namely huge fuel bills for the truck fleets and all maintenence costs, huge power bills for manufacturing plants, equipment and building maintenence costs, cost of ingredients, warehousing expenses, etc.? Do production costs outside of labor even exist in your world?
You have never worked in manufacturing in your life and you know it- quit pretending that you have the remotest idea of what you are talking about. Hostess has been dying for years and has been in some form of bankruptcy before this- the writing has been on the wall for some time. Are there cases of stripping blowing up companies and sending the wreckage overseas for a few bucks? Absolutely, but isnt one of them. Declining demand for years, questionable management, and unrealistic employee expectations all put this one under.
It's plundering the workers when management continues to get large salary increases while at the same time the company is losing money, and workers are being asked to give up more and more.
Seriously, when the numbers are laid right the fuck out in front of you and you can see what in any other country would be deemed FRAUD, and you actually back the FRAUDSTERS... well, not much more to say apart from this crap is not sustainable, and the shitstains who have been doing it, along with their supporters will experience the end results together. (it involves fire and sharp things)
Ding!!!! We have a winner. Saying the company was sucked dry by corruption is not a repudiation that the union laws might need to be rewritten or this union assisted in screwing the pooch.
Does it really matter what the facts were in Hostess? This is going on everywhere, and as Laomei says, this crap is not sustainable. We can, and probably should, look at union reform, but that's not usually why the companies are sick. If the unions continue to decline, you can kiss the middle class goodbye. Actually, it's mostly gone already.
You should probably learn how to read a balance sheet before using words like "fraud".
Hey, smart guy!! How much did the unions extract from the rank and file as far as union dues??
About $40 a month for the teamsters. Around $25 for the bakers. And of course, in return fighting for higher wages, actual benefits and not allowing management to just run away with all the profit generated and keeping jobs secure. The shock and horror of stable jobs!
It is unfortunate that the "unions are the root of all evil" crowd is so entrenched in their ideology that your facts are wholly irrelevant. I learned some time ago that true believers such those who even as adults believe Ayn Rand had great wisdom -- when faced with uncontroverted facts that conflict with their worldview -- will simply reject the facts and move on to another subject. They don't actually care if they are right or wrong. Their view is what they believe is in their own self-interest, and that is all they need to know.
LTER, don't hurt yourself by jumping to your own conclusions. I once belonged to the IBEW and was content to sell my life for an hourly wage. The union offered me the best option for maximizing my time for most value. At some point I realized that no matter how hard I worked my income was limited by some thing I had no control over, someone elses negotiating ability and the limits of time.
Under the union, I was constrained to a finite income and lifestyle. When I made the decision to become my own employer, my fortunes became limitless. No safety net, but no limits either. 30 years later, my fortunes are still limitless and my lifestyle and wealth have increased far beyond my fomer union limitations.
DaddyO
Yes... and without that union you wouldn't have gotten even that. Trying to compare this to "working for yourself" is like apples and oranges. There is no comparison at all to be made. Regardless of union or not, when you are working for others, the only motive for the other party is to extract as much value from you as possible and compensate as little as possible. Without the ability to bargain collectively, you have zero power unless you entrench yourself so much as to become a critical cog in the machine. A union gives you that same power without having to screw over everyone around you and dance and sing for slivers of the profit you were generating anyways. Working for yourself? You get it all and work how and when you want. Two entirely different things.
DO,
As a business owner myself, I understand your point but you suffer from "if I did it then everyone else can" syndrome. The reality is that most people will never own a business. Most people who work in factories or the like either don't have the aptitude or self-discipline to be self-employed, or they don't have access to capital, or a myriad of other reasons including that they just don't want to do anything else. If everyone did what we did, we would hardly be special or have that limitless potential you mention. As you note, the union helped you maximize your earnings when you were an hourly worker for someone else, and did not deprive you of the ability to leave the flock and go out on your own when you decided that was your desired path. What I can't understand is why anyone -- least of all you -- sees fault with that, or why you would deprive others of the benefits you admittedly received.
The only fault I alluded to was the all or nothing attitude of the Baker's union boss who went against the wishes of his member's and his brother Teamsters who were clearly not behind him. I'll have to go find the video of a Baker's union member who was pissed off and letting the news anchor now it. The union member said they never got to vote, they were at the mercy of the union boss who had made a decision against the will of his members.
DaddyO
I'll give even money that the Baker's union boss ends up with a nice chunk of the action in the revitalized Twinkco, LLC for services rendered.
It wasn't an "all or nothing" position, and the teamster vote was very narrowly passed. The teamsters were also starting from a better position in terms of compensation. The bakers were going to be stripped of their pensions entirely and see their benefits dropped down to practically nothing.
And this is *after* recent cuts being made earlier in the year. And this is *after* promises back in 2009 to invest $110m in new equipment which were immediately broken. They were effectively turning living wage jobs that could support a family into mcjobs that would put everyone on food stamps. And for what? What could possibly have caused this? Once you remove the massive dividends and insane debt servicing on loans (that were only required due to the massive dividends), you have actual god honest profit. This was not the end to it at all, and it would have just happened yet again a few months down the road with even more painful cuts and the same line being played. Sometimes you just need to draw a line in the sand and say enough.
If it wasn't an all or nothing position, why did the rank and file turn on their union boss? My step father is a retired Teamster and he was not in agreement with the position taken by the baker's, his words were "Dumbasses, got nothing now!"
DaddyO
edit: It is becoming clearer that the union leadership is as out of touch with rank and file as the politicos are with the voters.
Is this a contest to see just how far we can lower the bar on the American worker? At some point when you are getting screwed badly enough, someone has to say FUCK YOU and walk away. Got principles?
So what do the unions have now? It looks like they have their "Moral" victory in the unemployment line.
DaddyO
What do you suggest -- allowing wages to keep going down the drain until the US can really "compete" with China?
"America has come to this. The only defense against insane union demands is the willingness to walk away and close shop"
Where is John Gault? Having more than a lick of sense he left town...
.......Galt.
You left out the costs of management looting the corp.
You beat me to it ! The costs of union shenanigans were probably rivaled only by the costs of management perks and bonuses.
True...and in the interests of honesty...this line in the article is a little misleading...
"The national labor bosses stood firm."
The Teamsters went for the offer while the Bakers/Confection union went on strike and blew the whole thing up. The company would have eventually gone tango uniform anyways by the looks of it but in the short term...the Bakers union intransigence is what stopped the paychecks and/or looting.
Its on the Teamsters website...
http://www.teamster.org/content/teamsters-bakery-workers-should-hold-secret-ballot-vote-hostess
True Story, I listened to a Hottess(Merita Bread) delivery person talking about this very thing two weeks ago in my local coner Kangaroo Market. She was beside herself because the Baker's union had taken an unpopular position of all or nothing on their contract demands. The Teamsters were willing to work things out to continue their jobs while management tried to gain more funding or sell a going concern rather than shut it down and sell off the assets.
Look like things didn't go her way...
DaddyO
Fortunately, I learned my lesson very early in life. I became "mercenary" I guess, having discovered no one can look after my interests better than myself.
For frrrrrreeeee! ;-)
Yes, but most people can't be bothered to google anything basic about their lives for research before they act, let alone that level of awareness. When our system is invested in a "Us vs. them" mentality, everyone loses. MGMT should have made the unions 50% owner, and seen how it went. I manage small businesses and consult for a living, and I always work with employees as a partner. I believe that I have three bosses, the employees, the clients, and the shareholders. If I balance these three fairly, and explain the stakes to these groups, the outcome is often good. Hostess turned into the "who has the big dick" party, and everyone lost.
"I believe that I have three bosses, the employees, the clients, and the shareholders."
There's a lot of truth in that.
When I had direct reports under me (22 guys), I treated them all fairly, probably too lenient in many ways, in my opinion. But I know for a fact at least three of them thought I was the biggest prick in the world (I fired them after multiple warnings)...never a fun thing.
With me, the customer always comes first. Without them there is no business. Some can be real pains in the butt, but that goes with the territory. The employee has to fairly compensated for the work performed. Without that, they can make managements job a living hell and disloyalty impacts customers perceptions of the company they work for. And managers should always be aware that they themselves are one paycheck away from the unemployment line standing next to the guy they fired. There is nothing worse than the stereotypical egomaniacal boss who can't find his own ass with both hands.
The shareholders I have mixed feelings on. In a publicly traded company, secured debt holders have rights the common stock holder does not, though they act like they're "owners". Common stock holders bought a reciept hoping the value of the reciept will go up, it's little more than gambling.
In a private company, it's different. My wife is a stock holder along with her partner...there are only two stock holders in that company and both obviously have a vested interest in both time, their savings (money) and sweat in seeing the company being profitable. That's a little different than watching the "reciept" on the ticker all day...IMHO.
There is a balance to be struck as you say. Without a useful product or service there is no profit and no jobs. Finding that balance between profit and employee can be challenging once you get past small business. Everyone is naturally looking after their own interests once you go large, as the connection between the guy on the dock and the guy upstairs in the air conditioning gets longer and thinner...a few layers of mid-level managers looking after their little fieifdoms within and it really gets complicated.
By far, the best bosses are owner/operators as they are not afraid to get their hands dirty showing you a better way to do your job, they want you to be successful as it means more profit for them, translatiing to better wages for the employee.
Management, in many cases, where people who had funded the company when they bought Interstate Bakeries out of bankruptcy the first time.
They were paying themselves witrh their own money. You can't really 'loot' your own capital.
The union had put up nothing.
"The union had put up nothing."
Really -- ever heard of sweat equity, motherfucker? A company is NOTHING without people that actually do the work.
Sweat equity is meaningless, when the people doing that work can be replaced at a far lower cost.
However, the financial contributions of the Unions can be quantified, by anyone wanting to do the necessary work
An not surprisingly, no one here claiming that management has looted the company has put forth any analysis to support their claim - since apparently it's not just unions members that are lazy, but also their supporters in the peanut gallery.
But you would rather just regurgitate Trumka's "blame Romney BS" and Huffpo's 300% salary increase (which even they have corrected).
Bullshit first grader . Uper Management borrows the equity created by management and labor loot the corp. equity and take huge salaries,bonuses.dividend and retirement packages . Pension thefts contiunes on Wall Street . Watch there will be hunderds of millions in banking and consulting fees while the "looters" owners declare poverty the same con has play out thousands ot times over the past 30 years . Leverage steal blame the workers dump the pension on the tax payer .
How do I get into this vulture capitalist thing? Seems all I have to do is buy a company with someone else's money, take a big juicy loan out and pocket the cash while dumping that loan on the company. Then, if the company can't pay off that loan, I start sucking money out of the worker's pensions, then blame the workers for being greedy. What a sweet deal. Who will loan me a few million so I can get started?
On a smaller scale you could start a home foreclosure rescue company. Refinance the home steal the equity and leave the owner with a bigger bill . It helps if you're a psychopath.
That's not being a psychopath. That's being a go-getter. All great wealth is built upon great crimes. The sooner you're willing to just destroy lives and hurt people, the faster you'll be rich.
"All great wealth is built upon great crimes"
Many but not all great individual concentrations are built on great crimes.
If there were fewer criminals, inventors would be better represented among the wealthy.
Wealth is built on ideas and hard work. Not only the inventors and
workers benefit, we all do.
Yes, be a memeber of the "job creator" class.