Hostess To Close; No More Twinkies 674
RenderSeven writes "In a press release issued today, baker Hostess Brands asked a bankruptcy court for permission to close all of its plants and sell off their assets, immediately laying off 18,500 workers. Citing high labor and rising health care costs, increasing competition and growing consumer awareness of healthy foods, Hostess says it can no longer operate without union concessions. A crippling strike has already shut down operations at all facilities, and while the Teamsters Union has ratified a new contract to keep Hostess in business, the Bakers Union has refused saying they would rather see the company closed than accept pension cuts. The Teamsters union is urging the bakers union to hold a secret ballot on whether to continue striking; citing its financial experts who had access to the company's books, the Teamsters say that Hostess' warning of liquidation is 'not an empty threat or a negotiating tactic' but a certain outcome if workers keep striking. If your late-night programming is fueled by Twinkies, Ding Dongs and Zingers, better stock up now."
[Editor's note: A whole bunch of users submitted this news. I worry about our readership's cholesterol levels.]
Comment removed (Score:5, Informative)
Re:Right... (Score:5, Informative)
That being said, I've been on the receiving end of a pay cut before and it sucks. But, it was better for me at that time to have a pay cut and search for another job than to have gone entirely without a paycheck. As much as it would've hurt financially the bakers should've seen reason. 90% of a paycheck is definitely better than no paycheck.
Re:GO UNIONS! (Score:4, Informative)
They were probably also thinking of the 300% pay raise that the CEO gave himself while preparing for bankruptcy, along with the lesser raises other executives got at the same time.
I'm still not convinced this was a smart move on the part of the Union, but I can certainly understand what they were thinking!
Re:And nothing of value was lost (Score:5, Informative)
it wasn't Hostess management that did this. it was the Baker's Union. Hostess was in the midst of a managed reorganization to try and save it. Even the Teamsters union was going along with Hostess because they could see that it was this or no more jobs.
The Baker's Union (and possibly you as well) is living in a Marxist fantasy land where behind every "evil proletariat oppressing capitalist" is an endless pile of money that he just won't share. Back in reality the money was gone and it was this, or liquidation. The Baker's union chose liquidation. Not just for themselves (about 5000 people) but for the OTHER 18000 employees (including Management) too! Don't blame management for something they didn't cause.
Hostess will now be entering a court-ordered liquidation, and the brand rights will (if fate has a sense of humor) be sold to a non-union company in a right-to-work state. As it should be.
Re:When Hostess closes.. (Score:5, Informative)
It didn't matter either way petteyg. The pensions were dead anyway. They were utterly unaffordable and had already hit the cutting room floor. At this point it was either "save your job and get a 401k" or "lose your job and get jack squat". The Baker's unions chose jack squat for themselves and the other 18000 employees and management at Hostess.
As an example of how bad it was there, the Teamsters Union, probably one of the strongest Unions in the US took the deal Hostess offered them, which was the same as they offered the Bakers union.
The bakers union refused to face reality, and 5000 people in a union sunk a multi-billion dollar company and put 18000 other people out of work.
Who's the effing dimwit now?
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Re:GO UNIONS! (Score:5, Informative)
They were going to be out of a job anyway, so accepting further cuts would just trap them further in wage slavery; then when the axe did fall, their hourly rate would be even lower for when they applied for unemployment. Hostess has been in bankruptcy twice in the last couple years.
Hostess followed the Bain model: private investors load it with debt, taking that money out in fees to themselves; force workers to make crippling concessions so they can take more fees out; liquidate the company to suck the corpse dry.
The Baker's Union decided not to cooperate in their own rape. The surprise here is that the Teamsters rolled over and said "you'll like it better if you can't hear me whimpering because I'm facing away from you."
Re:GO UNIONS! (Score:5, Informative)
I have to question if they could have stayed in business anyway. If you can't figure out "Hm... people want healthy food, maybe I should make healthy food" or deal with competition in a mostly capitalistic environment, then you probably shouldn't be in business.
If they were less profitable than in the past then there would have been changes they could have made, like laying off a percent of their workforce or closing several factories or bakeries. It sounds like the unions didn't want them to do that, though. So they went back and proposed an 8% wage cut for the workers that would gradually scale back up, and the bakers union went on strike. So now they don't get anything. The people running the business will turn out fine though, they will sell the various brands to someone else and give themselves a nice going-away present, while the unions probably won't get anything (which I'm actually fine with).
Re:GO UNIONS! (Score:5, Informative)
You're just totally wrong on the facts.
All the unions had already made significant concessions in the two prior bankruptcies. No one was asking for more. They'd all taken wage, pension and benefit cuts repeatedly, and management couldn't do anything except give themselves raises.
If you were in that union, you'd have already had two haircuts and been asked for a third. How many times would you let the company bend you over before you said "enough?"
Re:Right... (Score:3, Informative)
It creates a market vacuum and a cheap labor influx. Now another company can fill in the diminished market Hostess is out of, with a smaller operation that's not so expensive and lumbering and more fitted to market forces. These employees can get non-union jobs where they'll be offered more than they were making but less than their prior wages, which were garnered for union dues (i.e. $19/hr minus $5/hr = $14/hr, you get $16/hr instead which is $2/hr more), which thus lowers the economic waste spent in wages but increases the salary delivered to the worker, which increases wealth rather than simply shifting it around (and inflated labor costs actually decrease wealth). It increases wealth because after you hire 6 people at $16/hr rather than at $19/hr, what you have is 6 people receiving total $14/hr more, and enough money to hire another worker at $16/hr, and $2/hr left over in the corporate coffers to spend on economic growth to create more jobs.
You'll notice that the initial situation is that there is less demand in this market, so market forces caused shrinkage and poverty. More unemployment. This restructuring as outlined removes the unions and shows an end where less money is spent to produce a product, while workers receive more in pay. The role of the unions here was to erode wealth (via wage inflation, which becomes general inflation); removing them may generate a larger or smaller swing than I've shown (I've seen $50/mo union dues on $5000/mo salaries and I've seen union dues where you make $20/hr and you get $14/hr with the rest going to the union), but it'll always eliminate a waste element no matter how small. There is a short-term cost here now: more unemployed labor. The market is, however, now slightly more flexible and new jobs can grow.
A single incident like this would be just a straight loss. Constant incidents like this are typical of economic shifts. This may or may not require retraining. For example, Hostess cites competition with the current trend toward 'healthy' food. People perceive organic foods as healthy, as well as whole grains. So the bakers may move to small bread shops producing more artisan breads with unbleached, unmodified dough. Such a shift would of course then weaken the major bread mass producers; however they're highly automated and would likely have production scalebacks that resulted in reduced expense and less in reduced staffing. They would get fewer major machines, less maintenance, and thus the machine manufacturers and maintenance staff and management would shift out (in smaller numbers), which then moves the economic changes out of the baker's micro-economy and into pressure on the machinist economy. The machinists will supply wind turbines and other such stuff in the growing renewables economy, and so on.
Re:GO UNIONS! (Score:5, Informative)
The CEO, Greg Rayburn, cut his and the three other top executives salary cut to $1 this year. How much more of a concession do you want?
As for the private equity firm, Ripplewood Holdings is going to lose most, if not all of the $170 million investment it made in Hostess.
After a WHOLE week? (Score:5, Informative)
What company has to close if workers are on strike for a WHOLE WEEK? The company doesn't have to pay hourly workers who don't show up to work...
This looks to me like a corporate version of "suicide by cop"--run your company into the ground (6 CEOs in 10 years, many executives getting big raises, company owned by hedge funds and venture capitalists, company has big debt), and then keep cutting workers pay until they have to say "enough". And then blame the unions.
If you're a company, which is failing and cannot be saved, and you have union workers, how else do you expect the company to finally close up shop? This is what it looks like--try to blame the unions.
The union says they already had half their members laid off, have already cut their pay to below industry average, etc. The union website before the strike started said the following (see http://bctgm.org/PDFs/HostessFactSheet.pdf [bctgm.org]):
Hostess is not and will not be viable: If Hostess emerges from bankruptcy under its present plan,
it will still have too much debt, too high costs and not enough access to cash to stay in business for
the long term. It will not be able to invest in its plants, in new products and in new technology.
---
I hope someone buys Drake's.
Re:GO UNIONS! (Score:5, Informative)
It's much more than just "a cut"
http://socialistworker.org/2012/11/15/hostess-workers-draw-a-line [socialistworker.org]
Re:GO UNIONS! (Score:4, Informative)
they already declared bankruptcy. They had a judge give them permission under chapter 11 to impose changes to the contracts. Some of the laborers thought that this was a bluff, where the management was actually in good faith when they said they couldnt afford to live through a strike.
Re:GO UNIONS! (Score:2, Informative)
Sadly for your precious union that was on strike has just screwed all of their members. With the liquidation those striking workers will not be eligible for unemployment benefits. Additionally, good luck trying to find another job that pays $20/hr with benefits in that line of work.
Re:One of these things is not like the other (Score:5, Informative)
The workers thought management was bluffing but oddly they really did not have large bags of gold they slept on.
Some of them did:
"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%."
"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"
Source: http://management.fortune.cnn.com/2012/07/26/hostess-twinkies-bankrupt/ [cnn.com]
And this was going on last year at the same time that the company was headed into bankruptcy again and management was asking for even more deep concessions from workers. From this and other things I have read, I get the impression that Hostess is a typical large company dealing with typical liability and productivity problems that couldn't manage through it.
Re:Zombieland... (Score:5, Informative)
By the way, last time the same union agreed to a benefits cut, Hostess then welched on their word and went back into Chapter 11 hearings anyways...
http://m.washingtonpost.com/national/on-leadership/why-didnt-hostess-workers-believe-the-threats/2012/11/16/0638138e-302f-11e2-a30e-5ca76eeec857_story.html [washingtonpost.com]
Re:Zombieland... (Score:5, Informative)
Or a long series of unions taking a bigger and bigger piece of the pie till not enough was left to run the business on.
Your point of view is directly contradicted by reality, as the average American wage has stayed mostly flat since the late 60s and union membership has never been lower.
The claim that if unions went away today those laws would go away is totally wrong. That is what many people think. If unions would go away, companies would force their workers to work 20 hours a day 7 days a week for 30 hours of pay at a really low rate. Their pensions would go away. That is not going to happen. Unions keep on repeating this to get people to vote the union way.
The economy has grown in leaps and bounds since [arbitrary date], the stock market is higher than ever, unions are weaker than ever,
pensions are almost entirely nonexistent, and out of all that wealth... workers have been paid just enough to keep up with inflation.
Oh yea, worker productivity has almost doubled over the same period of time and black lung is making a comeback in amongst coal miners.
Something is rotten in the state of Denmark and it ain't the unions.