But in truth there are no black hats or white knights in this tale. It’s about shades of gray, where obstinacy, miscalculation, and lousy luck connived to create corporate catastrophe. Almost none of the parties involved would speak on the record. Still, it’s clear from court documents and background interviews with a range of sources that practically nobody involved can shoot straight: The Teamsters remain stuck in a time warp, unwilling to sufficiently adapt in a competitive marketplace. The PE firm failed to turn Hostess around after taking it over. The hedgies can’t see beyond their internal rates of return. Et cetera, et cetera, et cetera.The Beginning Of the End
Also in July, the New York Post reported that Hostess and the Teamsters were close to a deal
. Under the terms of the proposed deal, the company would continue its contributions to the pension plans, and workers would agree to substantial pay and benefit cuts. The article quoted a Brooklyn Hostess delivery driver who said
“I am not taking another hit…I am making about $65,000. That is the same as I was making 10 years ago.”
He pointed to a Stroehmann’s bread truck driver delivering to the same supermarket who he said gets a guaranteed $300 a week — compared to his $195 — and earns much more in commissions.
This month the 6,600 Hostess employees who are members of the Bakery, Confectionery, Tobacco Workers and Grain Millers’ International Union voted to strike after the latest contract proposal from Hostess was rejected by 92% of its membership. Hostess management issued the following statement:
A widespread strike will cause Hostess brands to liquidate if we are unable to produce or deliver products. If that’s the case, the company will move promptly to lay off most of its 18,300-member workforce and focus on selling its assets to the highest bidders. We urge our employees to remain on the job to rebuild the company.
In response to the strike, Hostess announced on November 16 that it would be laying off most of its 18,500 employees and liquidating its assets. In order to do so, it will require the approval of U.S. Bankruptcy Court Judge Robert Drain. Consumers who may be fretting about the loss of their Twinkies, Ho Ho’s, Wonder Bread and other brands will probably not have to do without them for too long, as it is expected that other companies will be willing to purchase them from Hostess.
What We Learned
In recent days a variety of pundits and news sources have laid the blame for Hostess’s demise squarely at the feet of unions and their contracts. But a close examination reveals that were the workers to agree to work for free the company would probably not have survived; all the strike did was hasten the inevitable. Those on the right are quick to point to “greedy unions” in these situations, but it must be pointed out that in collective bargaining both sides come to an agreement that they believe that everyone can live with. Unions represent the wishes of their members, and it is only human nature to ask for as much as they can get in negotiations. Companies have the responsibility to share accurate financial information with the unions, and should draw a line in the sand when the unions ask for more than the company feels it can comfortably provide. No matter whether you are talking about a $50,000 a year employee or a $5,000,000 CEO, people get used to living on the salary they receive, and asking workers to give back substantial amounts of pay and benefits not once, but twice in a period of less than ten years while at the same time boosting executive salaries is not the way to achieve a good and peaceful relationship with labor.
Hostess workers were not asking for more; like many other workers in many similar situations in recent times they were merely trying to hold onto what they had. It was not the fault of the workers or their unions that Hostess suffered from years of inept management and failed ideas, but now their jobs are gone and they are left holding the blame.