Unions choke off nation’s Twinkie supply, 18,500 jobs


After weeks of negotiations, Hostess, the snack-maker known for its Twinkies and the Wonder Bread lines, will go into bankruptcy and lay off 18,500 workers because of an ongoing strikes by its major labor unions.

The strike stems from a new pay contract the company had proposed to help keep its doors open. Hostess CEO Gregory Rayburn urged workers to accept lower wages as part of a longer-term plan to stabilize the company. Like many major organizations that employ unionized labor, the Texas-based firm has spent years grappling with high pension and labor costs as a result of past deals with labor bosses.

As of Friday evening, a company website featured this explanation from Rayburn:

[F]or many months the Company has been working with our unions, lenders and other stakeholders to reach a consensual resolution to legacy costs [money promised to retired workers] and labor contracts. Despite everyone’s considerable efforts to move Hostess out of its restructuring, when we began implementing the Company’s last, best and final offer, the Bakers Union chose to stage a crippling strike. This affected Hostess’ ability to continue to make products and service its customers’ needs and pushed Hostess into a Wind Down scenario. As a result, we are forced to proceed with an orderly wind down and sale of our operations and assets. We deeply regret taking this action. But we simply cannot continue to operate without the ability to produce or deliver our products.

The irony here is that instead of improving working conditions for Hostess employees, their largest union has instead destroyed their employer, leaving them jobless. Of course, that’s not how labor leader Richard Trumka sees it. Trumka blamed “Bain-style Wall Street vultures” for the company closure in a statement released shortly after the bankruptcy announcement.

Union boss Richard Trumka (pictured) took to the airwaves to blame Hostess management and “Wall Street vultures” for bankrupting the company.

Apparently, the fact that workers would still be getting paychecks today were it not for the strike is insignificant.

If Trumka’s right about one thing, it’s this: management should get the blame for the massive layoffs – but not for the reasons he’s proposed. Instead of putting up with the Bakers Union for so long, the company ought to have been more aggressive in fighting it. After all, high overhead and pension costs from compromises with the union are what made the company unprofitable  in the end. And while the average worker will walk away from Hostess without so much as severance pay, labor bosses like Trumka (who brings in almost $300,000 a year) will be doing just fine.

The moral of the story: by putting up with big labor, the Hostess let its own people down.

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I'm a young guy with a news addiction. I love engineering, politics, and economics, and I have a mind built for analysis. Also, I write a lot, though I hate the paperwork... You can read my work at www.dynamopolitics.com !

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Posted in Fiscal Policy
8 comments on “Unions choke off nation’s Twinkie supply, 18,500 jobs
  1. Michael Y. Young says:

    They just don’t get it!

  2. geneb527 says:

    Reblogged this on Political Musings-At the Sunset of My Life and commented:
    Add your thoughts here… (optional)

  3. Colby Cline says:

    This is just another reasons why Unions in America just need to go. They only weaken businesses with their demand for higher pay and constantly putting their management in impossible financial situations. Union’s won’t even cooperate when the life of the business is at stake and this constant battle cannot bring prosperity into business. Like Jesus said, ” A household that is divided will not stand.” This division in American business and politics needs to stop. Why do people think the US outsources so many jobs? They don’t have to deal with Unions and OSHA and other programs that make it impossible to be profitable.

    • I think that unions have largely exhausted their usefulness in today’s society. We have OSHA, we have a minimum wage, we have a regulated work week. Unions have achieved all of their historical goals. Now they’re just divisive and obstructive.

  4. zm says:

    Where to begin? First off, a pension is not some freebie that companies hand out because they’re innately generous; pensions, like most benefits, are received in lieu of cash for part of present pay. In other words, workers have earned this money. Companies and governments are generally delighted with this arrangement, since they don’t have to pay all labor costs in cash from present receipts, The pension fund monies are invested, interest and dividends accrue, and retiring workers get the money they earned – and were promised – in periodic payments. Greed doesn’t enter into it. Problems arise, however when management fails to meet its contribution obligations, when private equity comes in and raids the pension fund to pay off the debt they created, etc. .

    Hostess had been in the process of .bankruptcy for about a year, for the 2nd time in a decade. And yes, private equity has been involved in this mess. And in spite of all this, the CEO of Hostess has had his pay tripled; other senior managers have received similar increases.(apparently in appreciation of their extraordinary management skills.) The CEO is receiving (earning?) nearly $1 million per year now, more than 3 times the salary of Mr Trumka, whose employer is not going out of business.

    In response to a couple of the commenters, yes there is a minimum wage and in terms of purchasing power it has barely budged in 30 years. And by the way, do any of you know what the range of pay is for the skilled workers in this industry? Maybe it’s not as much as you think.. Corporate management holds nearly all the cards: they can punish whistleblowers and workers who demand their rights. Among the few protections workers have are the right to organize, to bargain collectively, and if necessary, to take collective action.

    The foregoing barely scratches the surface – you people need to get out more and look at some media that you don’t agree with (like I did here.) – It’s usually the only way to learn what you don’t know.. .(like evolution and stuff)

    Finally: if the posters and commenters on this site wouldn’t like to have their wages and benefits slashed, wouldn’t that make them ‘greedy bastards’ too?

    • Well you certainly raise some good points which is why I’m always open to opposing viewpoints on this site. Do you have a blog on wordpress? If so I’d love to take a look at it.

      Now in one of your points you comment that pensions aren’t naturally made by companies because of innate generosity. Yet shortly thereafter you claim that pensions are in a company’s best interests. So that seems a little contradictory – seems like companies would natural propose a pension plan without the need of unions to help their bottom lines.

      I understand that the minimum wage has barely moved, and that inflation is acting like an additional “tax” on minimum wage earners. But raising the minimum wage enhances inflation, so there’s a vicious cycle there.

      In this particular situation I definitely don’t think the CEO should have received more compensation – but I also don’t see how upper-level pay has that big of an impact when the company’s bleeding cash due to their labor compensation model. That was the main (indirect) reason for their closure.

      Now if we want to get into direct reasons for closure, well, that’s pretty obvious. The company said they’d close if the strike went on. It went on, and they closed.

      I actually read the Daily Kos, HuffPo, the BBC, and the Economist – that last one’s my favorite news source, actually. That’s a pretty diverse group of opinions, and I *never* watch Fox!

      Finally, I work in the auto industry. A lot of our manufacturing is going overseas to China. Why? UAW workers on the line can make $40 an hour, and anywhere from $60 to $120 an hour on overtime/holiday work. I make substantially less than that because I’m non-union. Would I like union-level wages? Absolutely – but my company would not be in business if we were union (lower overhead helps keep us competitive with bigger firms). I’d much rather keep my job and the jobs of my fellow employees than stage a strike for more wages. But then again, I like where I work, and I recognize that might not be true for everyone.

      I hope I hit all your concerns here. Feel free to let me know if I left anything out. And if you’d like to read more please look around the site – labor v. management isn’t the only thing I cover on here!

  5. […] Oh, and by “unconventional solution,” I don’t mean forcing the US over the cliff to get bargaining leverage later. As we discussed Monday, that’s not solution, any more than going on strike is a solution to going out of business. […]

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DYNAMOpolitics

DYNAMOpolitics

I'm a young guy with a news addiction. I love engineering, politics, and economics, and I have a mind built for analysis. Also, I write a lot, though I hate the paperwork... You can read my work at www.dynamopolitics.com !

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