The Hostess With The Leastest


Yeah, so suddenly everyone cares, right?  Very few of y’all cared about Hostess, Wonder Bread, Dolly Madison, Blue Ribbon, Butternut Breads, or any of the 27 brands that were part of the Hostess Brands, Inc.  The company was in bankruptcy twice in the last 8 years.  The first time in 2004 and the second time right now, but starting January 10, 2012.  It came out of the first bankruptcy in 2009.  That means, they managed to stay out of bankruptcy for less than three years before going right back in.  Is that a successful company?  No.  And, who does the right blame for this?  The unions, of course.

It’s never management’s fault.  It’s simply astounding how this works from their perspective.  There is always someone to blame, right?  It wasn’t management’s fault that they couldn’t stay current on their $700 million loan.  It wasn’t the fact that their board members gave themselves up to 80% raises.  It wasn’t that the previous management had failed to properly plan to live up to their commitments, and the contracts they had signed, thus leaving themselves with roughly $2 billion in unfunded pension liabilities.  It wasn’t the changing conditions of the Multi-Employer Pension Plans, and overall failure of supply side economics.  It wasn’t competition.  It wasn’t a changing market.  It wasn’t that their sales were down.  (11% from 2008 to 2011, and 28% since 2004)

Nope, it’s all because 92% of a 6600 member union said, “No” to the last offer which included more pay cuts (8% immediately), fewer benefits (27-32% wage and benefit reduction overall), and the hope of maybe something more in the future.

“They’ve already took away our pension and not brought that back; and they’re not negotiating with us on anything we’d like to see negotiated,” Rocha said.

Oh, and that 6600 member union, the Bakery, Confectionery, Tobacco Workers and Grain Millers’ International Union?  Yeah, on its most recent bankruptcy filing, Hostess listed that union’s pension fund, the Bakery & Confectionery Union & Industry International Pension Fund, as its largest unsecured creditor at $944.2 million.

Please read that again.  Out of more than a billion dollars in liabilities, almost $1 billion of that is owed to the union that the right would have you believe is being unreasonable by refusing to accept further cuts and promises of future compensation.  In other words, the group to which Hostess already owes nearly $1,000,000,000 said, “No, we will not extend you any more credit.”

Let me pause for a moment.  I would like you to consider this situation in full.  Consider all of these facts.  Take a moment or three to read through the links provided and any more that you may stumble upon or go looking for.  After you have done that, ask yourself these questions.

Why? Why would the union members have any faith in the management’s ability to lead the company out of a second bankruptcy and into a better position?  Why should they be willing to trust that giving up the now for a promise of the future would be a smart move, when the company isn’t even making good on the previous commitments they’ve made?

Do you continue to trust someone who has betrayed you over and over again?  Is that not why you enter into a contract?  Would you continue to trust someone who has lied and stolen from you?  Better question, would you enter into another contract with someone who has repeatedly broken contracts with you and is massively in debt to you already?

Strictly from a business perspective, what is going to happen here?  Hostess has asked the judge presiding over their bankruptcy for permission to liquidate their assets.  As a result, assuming the judge grants the request which is highly likely, the brand names will be sold off, and most of them will reappear on store shelves.  Likely they will be purchased, lock, stock and barrel, by Grupo Bimbo (the world’s largest bakery group, owner of Entenmann’s) or Yucaipa Companies (an investment firm out of LA), both of which have previously tried to buy Hostess in 2007.  They may wind up splitting the spoils, much like Bain Capital or any other vulture capitalists.

So, then what?  Well, then, all those employees who have been out of work will likely go back to work.  At least the vast majority of them.  And, thanks to the union, they will have had some help getting through the lean times.  Thanks to a strong union, because that is one thing that a union is able to do.


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About Just Torch

Author of the SCIAMAGE column a space devoted to American political and social commentary and analysis. It is unabashedly liberal, but makes every effort to present clear, verifiable facts and sound reasoning. It also makes a commitment to clearly distinguish between facts and opinions. View all posts by Just Torch

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