When Union Busting Goes Bad

Hostess Brands Inc., makers of the ubiquitous Twinkies, Ding Dongs and Wonder Bread, is going out of business. The management claims it is because the associated workers’ unions would not accept a pay cut, and not enough scabs crossed the picket lines to keep production going:

Hostess Brands Inc. had earlier warned employees that it would file to unwind its business and sell off assets if plant operations didn’t return to normal levels by 5 p.m. Thursday. In announcing its decision, Hostess said its wind down would mean the closure of 33 bakeries, 565 distribution centers, approximately 5,500 delivery routes and 570 bakery outlet stores in the United States.

The Irving, Texas-based company had already reached a contract agreement with its largest union, the International Brotherhood of Teamsters. But thousands of members in its second-biggest union went on strike late last week after rejecting in September a contract offer that cut wages and benefits. Officials for the Bakery, Confectionery, Tobacco Workers and Grain Millers International Union say the company stopped contributing to workers’ pensions last year.

He denied that the decision to shut down could be a last ditch negotiation tactic to get the union back to the table.

[CEO Greg] Rayburn, who first joined Hostess earlier this year as a restructuring expert, had earlier said that many workers crossed picket lines this week to go back to work despite warnings by union leadership that they’d be fined.

“The problem is we don’t have enough crossing those lines to maintain normal production,” Rayburn told Fox Business.

And that last paragraph is the tell.

What’s interesting in the article is that it barely mentions any other factors that might be involved, like price increases of ingredients or that the demand for these “treats” has dropped in what is a highly competitive market segment.

Which is cold comfort to all those people who are losing their jobs. We are sure Rayburn will be feted as a principled Job Creator and move onto another gig.

Update 1: Gawker notes that: Out of 18,500 individuals employed by Hostess, only 5,000 belong to the bakers’ union. The strikes began on Nov. 9, when the company imposed a contract that would cut workers’ wages by 8 percent. The Bakery, Confectionery, Tobacco Workers and Grain Millers International Union (BCTGM) said the contract would also cut benefits by 27 to 32 percent.

Update 2: Fortune has an article from August that is interesting; essentially Hostess got “Bained”:

“… Within a month of taking over, Rayburn had to preside over a public-relations fiasco. Some unsecured creditors had informed the court that last summer — as the company was crumbling — four top Hostess executives received raises of up to 80%. (Driscoll had also received a pay raise back then.) The Teamsters saw this as more management shenanigans. “Looting” is how Hall described it in TV interviews.

Rayburn announced that the pay of the four top executives would go down to $1 for the year, but that their full salaries would be reinstated no later than Jan. 1 (2012). Hostess pays Rayburn $125,000 a month, according to court filings. At the same time Rayburn became CEO, Gephardt’s son Matthew, 41, the COO of the Gephardt Group, was put on the Hostess board as a $100,000-a-year independent director.

[snip]

What the hedge funds want is some degree of capitulation from a union whose members will otherwise lose thousands of jobs in liquidation. If the hedge funds don’t get it, they’ve concluded, the company isn’t worth saving.”

(NBC)

0 thoughts on “When Union Busting Goes Bad

  1. This the traditional union tactic. The union members must be willing to put their jobs on the line to challenge management. This strike thingie is the only threat management understands.

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  2. Really, Smoke and mirrors, I don’t think this has got a thing to do with the few union employees they have. The world will be a healthier if not better place without the the junk food they produce. I hope the workers can find something better like producing something healthy that might be a benefit to mankind rather than kill food that resembles cigarettes in it’s effect on the people’s lives who partake. I hope the management (owners, vulture capitalists) can find their way to hell where they belong.

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    • The thing that is bugging me is that it instantly turned into a talking point for how Unions are destroying jobs, and without looking any deeper at what has been going on for years (it started when went private with hedge-fund money, and it has followed in the predictable Bain Capital path).

      The share holders will sell off the brandnames (and probably whatever proprietary recipes that they have) to some third party, probably the Mexian baking conglomerate Bimbo.

      Anyway, it is a freaking shame, even if the food was crap, for these people to be fired in a recession and the right to have another mindless Unions=BAD talking point.

      Rgds,

      TG

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  3. This is how it’s done in the U.S.of Freakin’A. It’s a question of in your mouth or up your butt, you don’t have to choose because they ain’t askin’.

    What most astonishes me is the significant number of working people who think this is the path we should follow.

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  4. If you walked into a job, worked there for 20 years, but never really obtained any meaningful skill or competitive advantage over your colleagues would you expect to still be employed? Its business, not charity.

    These union contracts are used as weapons against development of unionized employees. If regular training (and subsequently the accountability that comes with you being more knowledgeable) isn’t a regular part of your work, you should not expect to be paid more. Period.

    Productivity is a must, people. Gains in dollars spent on labor have to come from some where… Let it be from you and your ability to perform a job better year after year rather than cuts to your pay.

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  5. CEOs must always be compensated because they are of the proper gentlemen class which must always be deferred to… Now, if you’re one of those lowly serfs who somehow managed to get an evil Union to provide you benefits why you are destroying America.

    I mean think how much easier it would be for children with their tiny fingers to stuff a ding dong with yummy gooey filling? And you Unions and liberals have made that illegal!?!?!?

    If a company wants to use slaves and children to make a more efficient product who is government to interfere???

    Vultures gonna Vulture.

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  6. One thing that never gets mentioned in the MSM coverage of unions in the U.S. is that nations like Germany, Japan and South Korea have very powerful unions and yet those countries have world-class economies.
    Germany’s unions are vastly more powerful than anything that exists in the U.S. What’s more, many German workers belong to two unions, which includes a works council. By law, labor is also represented on every board of directors at German corporations, (an arrangement that would be unheard of in the U.S.)
    ALL German workers enjoy a minimum of 6 weeks paid vacation by law. (U.S. law requires a grand total of zero vacation days, sick days, and holidays for U.S. workers). In fact, what few labor laws that exist in the U.S. are weakly enforced—and have been since the Reagan era.
    Despite powerful unions and strong pro-worker laws, Germany’s economy is very powerful and has currently has a lower jobless rate than the U.S. has. Germany regularly vies with China as the world’s biggest exporter. German products are noted worldwide as being very sophisticated and well-made. What’s more, since German products typically have very high entry barriers, Germany has little to fear from low-wage nations like China (unlike the U.S., which in many cases is competing head-to-head with Chinese companies).
    I’ve long believed that Germany is a world-class economy BECAUSE it treats its workers well. You don’t get high-quality, well-made products like Porsches if your workforce is overworked, unhappy, and burned out.

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  7. Ten: I think that even the business press is calling bullshit on this one. These hedge funds/vulture capitalists are scaring the other monied assholes, because they keep pushing the envelope. Do that enough and eventually even lazy and scared Americans might cue the tumbrels. Especially when the tv “news” can’t hide what is going on in Europe any longer.

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