Hostess Strike

33 posts / 0 new
Last post
KimPossible's picture
Offline
Last seen: 1 day 6 hours ago
Joined: 05/24/06
Posts: 3471
Hostess Strike

Hostess has announced it is liquidating today after stating the would do so if the striking baker's union did not return to work yesterday. Yesterday came and went and now Hostess will be closing and 18,000 people will be out of jobs.

Here is an article summarazing the story:
Hostess Brands closing for good due to bakers strike - Nov. 16, 2012

The Teamsters put out a statement, criticizing the Baker's union for their choices yesterday:

Teamsters: Bakery Workers Should Hold Secret Ballot Vote at Hostess | International Brotherhood of Teamsters (IBT)

Unannounced Strike Has Put Thousands of Jobs in Jeopardy

(WASHINGTON) ? Today, the Teamsters Union announced its recommendation to the Bakery, Confectionary, Tobacco and Grain Millers International Union (BCTGM) that a vote of its Hostess members by secret ballot should be held to determine if the workers want to continue their strike of the company and force it into liquidation.

On Wednesday, Nov. 14, Hostess Brands indicated that if it couldn?t resume normal operations by 5 p.m. EST on Thursday, Nov. 15 that it would have to begin the liquidation process. Teamster Hostess members and all Hostess employees should know this is not an empty threat or a negotiating tactic, but the certain outcome if members of the BCTGM continue to strike. This is based on conversations with our financial experts, who, because the Teamsters were involved in the legal process, had access to financial information about the company.

As stated previously, Teamster Hostess members have been frustrated by numerous missteps by a variety of Hostess management teams, but the union has tried to engage constructively to find a solution to preserve jobs. That comprehensive engagement has spanned 18 months.

The Teamsters chose to challenge the company?s path of a worker-only solution, engage constructively so other constituents would be sacrificing and require management changes and oversight so that the same missteps would not be repeated.

In fact, when Hostess attempted to throw out its collective bargaining agreement with the Teamsters in court, the Teamsters fought back and won, ensuring that Hostess could not unilaterally make changes to working conditions during the several months? long legal process that recently ended. Teamster Hostess members were allowed to decide their fate by voting on the final offer conducted by a secret mail ballot. More than two-thirds of Hostess Teamsters members voted with 53 percent voting to approve the final offer.

The BCTGM chose a different path, as is their prerogative, to not substantively look for a solution or engage in the process. BCTGM members were told there were better solutions than the final offer, although Judge Drain stated in his decision in bankruptcy court that no such solutions exist. Without complete information, BCTGM members voted by voice votes in union halls. The BCTGM reported that over 90 percent rejected the final offer and three of its units ratified the final offer.

On Friday, Nov. 9, the BCTGM began to strike at some Hostess production facilities without notice to the Teamsters despite assurances they would not proceed with job actions without contacting the Teamsters Union. This unannounced action put Teamster members in the difficult position of facing picket lines without knowing their right to honor such a line without being disciplined.

As is our longstanding tradition, Teamster members by and large are honoring Bakery Worker picket lines when encountered and complying with their contractual obligations when not encountering picket lines. The BCTGM leaders are putting Teamster members in a horrible position ? asking them to support a strike that will put them out of a job when they haven?t even asked all their members to go on strike.

That strike is now on the verge of forcing the company to liquidate ? it is difficult for Teamster members to believe that is what the BCTGM Hostess members ultimately wanted to accomplish when they went out on strike. We may never know unless the BCTGM members, based on the facts they know today, get to determine their fate in a secret ballot vote. Teamster members would understand that the will of the BCTGM Hostess membership was truly heard if that was the case.

Founded in 1903, the International Brotherhood of Teamsters represents 1.4 million hardworking men and women throughout the United States, Canada and Puerto Rico. Visit International Brotherhood of Teamsters | International Brotherhood of Teamsters (IBT) for more information. Follow us on Twitter @Teamsters and ?like? us on Facebook at www.facebook.com/teamsters.

I snooped on the teamsters facebook page and found a couple of people voicing their opinions that the Baker's union was not in the wrong because the corporations demise was ultimately do to corporate greed and people from the top taking more than their fair share at the employees expenses.

Here are a couple of quotes from people on that facebook page. Remember these are just quotes from regular people so i can't confirm the accuracy:

The Hostess problem in a nutshell.
The upper management gave themselves a 30-85% raise with the CEO getting a 300% raise 1 month before filing for bankruptcy. They stopped paying into our pension in July 2011. Now $3 per hour comes out of OUR wages to go to OUR pension. When the company stopped paying into the pension, they did NOT return that $3 to OUR wages. Which means they have STOLEN over $7000 from each employee to date from pension contributions that we voted to come from our pay. That's alot of money any way you look at it. I pay $35 each week for health insurance right now. As of Nov. 18th that will jump to $90 per week for family coverage. The company told us a 17% increase for insurance. Is that 17%???? NO. And the insurance is worst then the insurance we had already. The company has taken from the workers over the last 8 years and has done NOTHING with the money but put it in their pockets. They promised after the last concessions that they would invest that money into the plants and the vehicles. Yet they did neither. They put the money into raises for themselves, hiring more management then the company needs and blowing in about every way possible. Just research the company on the internet and you will see it all for yourself. If you look for the truth, you will find it.

....atleast ceos aren't hungry.....employees have been giving and giving for years....yet still hostess blames workers and thier wages instesd of blaming mngment for crazy salaries that no one cares to talk about

hate it for the brothers i use to work with that are loosing jobs , but glad to see there is still a union ( BCTGM) that will stand up to cooperate greed ..... unlike the teamsters leaders at ibt after the letter they put out to its members........

Teamsters need to back their union brothers at Hostess BCTGM insted of crossing our picket line what a shame

What do you think? Do you think that the Baker's union was irresponsible in their actions, jeapordizing thousands of jobs for people in and outside of their own union? Or do you think they did what needed to be done, as a fight against corporate greed and poor administrative practices?

KimPossible's picture
Offline
Last seen: 1 day 6 hours ago
Joined: 05/24/06
Posts: 3471

For Balance,

Here is a statement put out by the Baker's Union (BCTGM) yesterday

I took the text from the google cache version of the page because the real page is having difficulty being pulled up. It works but its extremely slow

http://bctgm.org/2012/11/hostess-in-current-condition-because-of-failed-management/

Hostess in Current Condition Because of Failed Management

Posted by BCTGM - November 15, 2012 - Hostess Bankruptcy, Hostess Strike

The following statement was issued by BCTGM International Union President Frank Hurt in response to claims by Hostess Brands that it would begin liquidation should union members not end the strike and return immediately to production facilities:

?The crisis facing Hostess Brands is the result of nearly a decade of financial and operational mismanagement that resulted in two bankruptcies, mountains of debt, declining sales and lost market share. The Wall Street investors who took over the company after the last bankruptcy attempted to resolve the mess by attacking the company?s most valuable asset ? its workers.

?They sought to force the workers, who had already taken significant wage and benefit cuts, to absorb even greater cuts including the loss of their pension contributions. I have said consistently throughout this process that the BCTGM is a highly democratic organization and that our Hostess members themselves would determine their future. By an overwhelming majority, 92 percent, these workers rejected the company?s outrageous proposal, fully aware of the potential consequences.

?Our members know that the plans all along of the Wall Street investors currently in control of this company did not include the operation of Hostess Brands any longer than it takes to sell the company in whole ? or in part ? in a way that will maximize the profits of these vulture capitalists regardless of the impact on the workforce.

?The wholesale bread and cake baking business is unique. The most successful and profitable wholesale baking companies share common attributes, most notably being executive leadership with extensive background in the business and a skilled and dedicated workforce. Hostess Brands and its predecessor companies have had the latter for decades.

?Unfortunately however, for the past eight years management of the company has been in the hands of Wall Street investors, ?restructuring experts?, third-tier managers from other non-baking food companies and currently a ?liquidation specialist?. Six CEO?s in eight years, none of whom with any bread and cake baking industry experience, was the prescription for failure.

?Despite Greg Rayburn?s insulting and disingenuous statements of the last several months, the truth is that Hostess workers and their Union have absolutely no responsibility for the failure of this company. That responsibility rests squarely on the shoulders of the company?s decision makers.

?I am sure that our members would be agreeable to return to work as soon as the company rescinds the implementation of the horrendous wage and benefit reductions, including pension, and the restoration of the cuts that have already taken place.?

Background

A total of 24 Hostess production facilities are on strike or honoring the strike with picket lines established by striking Hostess workers at other BCTGM-represented facilities. Additionally, BCTGM members at one transport facility also are on strike. Company claims that union members are crossing picket lines and maintaining production at striking plants are vastly untrue.

Over the past 15 months, Hostess workers have seen the company unilaterally end contractually-obligated payments to their pension plan. These workers, many of whom have worked at Hostess and its predecessor companies for decades, struck in response to the company?s unilateral imposition of an unacceptable contract that was rejected by 92 percent of the union?s Hostess members in September.

While the company was demanding major concessions from union workers (wage and benefit cuts amounting to 27- 32% overall), the top ten executives of the company rewarded themselves with compensation increases, with one executive receiving a 300 percent increase.

The BCTGM represents more than 80,000 workers in the baking, food processing, grain milling and tobacco industries in the United States and Canada.

GloriaInTX's picture
Offline
Last seen: 1 day 3 hours ago
Joined: 07/29/08
Posts: 4228

What difference does it make how the company got into that situation? If the employer says that you have to take an 8% pay cut or we are going to go bankrupt and you won't have a job I think I would accept an 8% pay cut.

Offline
Last seen: 4 hours 2 min ago
Joined: 04/12/03
Posts: 1763

I skimmed your articles. I was reading about it yesterday and one of the workers said he makes something like $11.50 an hour. An 8% cut would make it aobut $10.60/hour. He said that coupled with the increase in medical deductions would make it to where he would make more on unemployment.

So I don't know what to think.

Offline
Last seen: 2 months 1 week ago
Joined: 08/17/04
Posts: 2256

I'm with EW...I've had a hard time pinpointing my feelings. Initially, I was very much "blame the union/workers" for not coming back despite threats of closure. They received bad advice too in my opinion to keep striking. I also now blame the company for cutting back sharply on their workers pay/medical deductions etc while top people saw major increases in their pay and bonuses.

Spacers's picture
Offline
Last seen: 6 months 2 weeks ago
Joined: 12/29/03
Posts: 4104

I think it absolutely should matter why the company is in financial trouble. If it's because they've been doing everything right & executive pay raises are consistent with those given to the rank & file employees but costs are just simply going up, that's one thing. To ask your employees to take an 8% pay cut on top of cutting their pension funding, when the top executives have gotten huge raises & bonuses, is just greed and they shouldn't be allowed to get away with it. There is no excuse for a failing company to give one executive a 300% increase when it is asking employees for a 30% DECREASE.

Bye Twinkies, I loved you! :cry:

KimPossible's picture
Offline
Last seen: 1 day 6 hours ago
Joined: 05/24/06
Posts: 3471

I cant' decide on this one. While it may be true that some are making that little, i'm pretty sure all 18,000+ people are not going to be better off on unemployment. Part of me feels like this is a terrible time to be sticking to your guns and inconsiderate, to put it lightly, to those who may not be on board with the strike/non-Baker's Union members.

The other part of me can't ignore the whole corporate greed side of this that most definitely played a huge role in the demise of Hostess.

But i have a problem saying that the union workers have no responsibility in this. Because regardless of the greed that lead them to this point, they knew this was coming and at this point, the company could not whether a strike. They were essentially handing in letters of resignation, but not just for them, for everyone.

And i wonder...if instead, everyone who wanted to find themselves on unemployment and searching for a job instead had actually done just that...how many really would have? (This is why i find the secret ballot push that the Teamsters urged to be a convincing argument) And i acknowledge that you can not collect unemployment if you voluntarily leave.

Ultimately, i question that these 18000 people are better off, and i don't nec. think that the Baker's union holds no blame.

GloriaInTX's picture
Offline
Last seen: 1 day 3 hours ago
Joined: 07/29/08
Posts: 4228

"Spacers" wrote:

I think it absolutely should matter why the company is in financial trouble. If it's because they've been doing everything right & executive pay raises are consistent with those given to the rank & file employees but costs are just simply going up, that's one thing. To ask your employees to take an 8% pay cut on top of cutting their pension funding, when the top executives have gotten huge raises & bonuses, is just greed and they shouldn't be allowed to get away with it. There is no excuse for a failing company to give one executive a 300% increase when it is asking employees for a 30% DECREASE.

Bye Twinkies, I loved you! :cry:

Greedy or not ... one employee or even a few top executives getting a pay increase is a drop in the bucket compared to 8% of 18,000 employees pay. I doubt if it made much difference to the bottom line. That still is not a good enough reason for 18,000 employees to be in the unemployment line because they are upset because some CEO got a pay raise or bonus. Life isn't always fair boo hoo. That is not a good enough reason for all these people to walk away from thier jobs especially when they may not be able to find another one.

Offline
Last seen: 2 months 1 week ago
Joined: 08/17/04
Posts: 2256

From what I read Gloria, the workers were advised that there were other options even though the judge said there wasn't. They were holding out for non existent options.

I completely support the reason for striking but when it came down to it...when they were advised the company was going to fold because no one is making their product for an extended product...well that's where the responsibility falls on the workers and the union.

Would you not participate in a strike if you are told you are losing 3% of your pay, on top of already paying more towards your insurance because they reduced how much they contributed, on top of losing the company contribution to your pension so you are having to contribute while a select few are getting raises in excess of 300%. That's disgusting.

GloriaInTX's picture
Offline
Last seen: 1 day 3 hours ago
Joined: 07/29/08
Posts: 4228

"Jessica80" wrote:

From what I read Gloria, the workers were advised that there were other options even though the judge said there wasn't. They were holding out for non existent options.

I completely support the reason for striking but when it came down to it...when they were advised the company was going to fold because no one is making their product for an extended product...well that's where the responsibility falls on the workers and the union.

Would you not participate in a strike if you are told you are losing 3% of your pay, on top of already paying more towards your insurance because they reduced how much they contributed, on top of losing the company contribution to your pension so you are having to contribute while a select few are getting raises in excess of 300%. That's disgusting.

The union did have the information though and knew the company wasn't bluffing. Yet still went ahead knowing these people were going to lose their jobs. That is what is disgusting to me.

On Wednesday, Nov. 14, Hostess Brands indicated that if it couldn?t resume normal operations by 5 p.m. EST on Thursday, Nov. 15 that it would have to begin the liquidation process. Teamster Hostess members and all Hostess employees should know this is not an empty threat or a negotiating tactic, but the certain outcome if members of the BCTGM continue to strike. This is based on conversations with our financial experts, who, because the Teamsters were involved in the legal process, had access to financial information about the company.

Offline
Last seen: 2 months 1 week ago
Joined: 08/17/04
Posts: 2256

Oh that's what I meant about the part where the workers are responsible for their decision along with union to proceed when it was clear that there were no other options.

However, the company would have probably kept happy workers and remained solvent if they weren't greedy jerks for the higher ups.

wlillie's picture
Offline
Last seen: 3 years 6 months ago
Joined: 09/17/07
Posts: 1796

When are people going to realize that comparing your life to the people who have more money is ALWAYS going to end up badly for you. If they hadn't been so hell bent on worrying about what the CEO and the management people were making and had just been happy to have a job they'd still have them. We don't know why the CEO even got the raise. Maybe they were vastly underpaid compared to others in their same positions? Maybe it was in their contracts that they get the raise when they did?

I can't imagine telling someone (let alone my kids) that I lost my job over a portion of my pension and a 3% loss in pay especially since the company was offering concessions including a 25% equity stake for workers and the inclusion of two union representatives on an eight-member board of directors. I really just can't imagine wtf was going through their heads.

Offline
Last seen: 2 months 1 week ago
Joined: 08/17/04
Posts: 2256

We are forgetting (myself included) that often we can't point fingers at the workers. When a union calls a strike they are probably forced to strike and can't go back to work until the union calls of the strike. I didn't think of that initially.

wlillie's picture
Offline
Last seen: 3 years 6 months ago
Joined: 09/17/07
Posts: 1796

Oh, I"m pointing fingers. If people would quit letting unions and other organizations bully them into stupid bullcrap like what just happened, they would go away. Unions and affirmative action are both outdated ideas that are now doing the exact opposite of their original intent. Seems to be a common thread in our country lately.

mom3girls's picture
Offline
Last seen: 10 months 3 weeks ago
Joined: 01/09/07
Posts: 1537

From my understanding the CEO at hostess got the raise to keep him in line with what others in his field were making. (heard that on the radio yesterday, but I cant find transcripts)

The employees made a choice to be unemployed, I really hope that they can all find jobs before their unemployment benefits run out.

I do wonder though if there could be a case made for not giving them unemployment benefits since they essentially quit voluntarily?

Offline
Last seen: 2 months 1 week ago
Joined: 08/17/04
Posts: 2256

I don't disagree with you Lillie but unions are powerful and these people were forced to strike I'm sure of it. I think that takes less power out of their hands to make the decisions.

The union tries to get into dh's company all the time and so far they've kept them out. Some of his coworkers like it but they have it too good to bring that crap in.

Alissa_Sal's picture
Offline
Last seen: 2 years 5 months ago
Joined: 06/29/06
Posts: 6427

"mom3girls" wrote:

From my understanding the CEO at hostess got the raise to keep him in line with what others in his field were making. (heard that on the radio yesterday, but I cant find transcripts)

If your company is on the verge of insolvency, it makes no sense to give the CEO a 7MM dollar raise at that time. Let him earn his raise by bringing the company into the black first.

Somebody mentioned that these employees were making about $11.50 per hour. Assuming that number is correct (too lazy to look it up), that means they were pulling in a little less than $24K per year (pre-tax!).

18,000 employees X 24K per year X a 3% pay decrease = $12,960,000. Over half of their "sacrifice" would have gone towards funding dude's 7mm raise. He could have forgone the raise and offered a 1.5% pay decrease and everyone would have been in better shape. Well, everyone but him, of course. Wink

GloriaInTX's picture
Offline
Last seen: 1 day 3 hours ago
Joined: 07/29/08
Posts: 4228

"Alissa_Sal" wrote:

If your company is on the verge of insolvency, it makes no sense to give the CEO a 7MM dollar raise at that time. Let him earn his raise by bringing the company into the black first.

Somebody mentioned that these employees were making about $11.50 per hour. Assuming that number is correct (too lazy to look it up), that means they were pulling in a little less than $24K per year (pre-tax!).

18,000 employees X 24K per year X a 3% pay decrease = $12,960,000. Over half of their "sacrifice" would have gone towards funding dude's 7mm raise. He could have forgone the raise and offered a 1.5% pay decrease and everyone would have been in better shape. Well, everyone but him, of course. Wink

But why would he want to do that if he could just go get a job somewhere else for that amount? If you had a job where you were making $60k but most others in your field were making $100k. You get a job offer at another company for $100k, so your employer offers you $100k to stay. Would you forgo the pay raise because your employer is in financial trouble and stay anyway?

Alissa_Sal's picture
Offline
Last seen: 2 years 5 months ago
Joined: 06/29/06
Posts: 6427

This is why people think the conservatives only care about rich people. It makes sense to you to give a CEO a huge raise even when his company is in the tank, at the expense of people who are probably living paycheck to paycheck on $24K, and let it be on their heads if they try to protest.

I bet this dude was already making a lot more than $60K or even $100K. If his company can't afford his raise (without cutting the amount that they had agreed to pay their other workers) then he doesn't get the raise. Same as you or I. If your company is struggling along, do you really think they'll give YOU a raise, no matter what other people in your field are making? (Hint: they won't.) That's how it works.

KimPossible's picture
Offline
Last seen: 1 day 6 hours ago
Joined: 05/24/06
Posts: 3471

Lets remember that they lost their CEO and this was a new guy. I'm not saying its justified, but Gloria has a point. How do you attract a CEO to a struggling business that is going through bankruptcy if you can only pay him a fraction of what he would make elsewhere. You are in a tough position as a company. Perhaps that should have been the end of the company at that point?

Alissa_Sal's picture
Offline
Last seen: 2 years 5 months ago
Joined: 06/29/06
Posts: 6427

"KimPossible" wrote:

Lets remember that they lost their CEO and this was a new guy. I'm not saying its justified, but Gloria has a point. How do you attract a CEO to a struggling business that is going through bankruptcy if you can only pay him a fraction of what he would make elsewhere. You are in a tough position as a company. Perhaps that should have been the end of the company at that point?

Yes, but he accepted the position presumably knowing the financial situation they were in, and how much they were prepared to pay at that time.

They should have negotiated a deal with a more than usually generous payout and stock options...assuming he could turn the company around. That way it is a gamble, but still attractive.

KimPossible's picture
Offline
Last seen: 1 day 6 hours ago
Joined: 05/24/06
Posts: 3471

"Alissa_Sal" wrote:

Yes, but he accepted the position presumably knowing the financial situation they were in, and how much they were prepared to pay at that time.

They should have negotiated a deal with a more than usually generous payout and stock options...assuming he could turn the company around. That way it is a gamble, but still attractive.

Is this common practice? Does it actually attract CEO's? Ones good enough to recover a huge company in bankruptcy? One good enough that i would imagine someone would be able to pay him an average amount up front somewhere else? I mean...you make it sound easy. I don't know if its that easy. Maybe its common....i would imagine it would depend on the size of the company though and other things.

Ultimately its all about greed and making as much money as possible. But no one is really under any obligation to take a pay cut to save this company, especially if they can go somewhere else. And when you look at the options on the table and someone is deciding between

'a normal paying CEO job'

and

'a challenge to recover a bankrupt company at a fraction of elsewhere with a promise to pay out only if you are successful'

you couldn't blame even a CEO for saying they'd rather take the other job, could you?

SO then we are stuck with where we were before. Why would anyone help bail them out.

But alternatively, if what you suggest is common practice in struggling companies and actually works...then sure. I agree they should have tried that first if they didn't

mom3girls's picture
Offline
Last seen: 10 months 3 weeks ago
Joined: 01/09/07
Posts: 1537

I would assume they looked at hiring the new guy at the rate that is comparable as an investment. I think he was a last ditch effort to try to keep them afloat.

Alissa_Sal's picture
Offline
Last seen: 2 years 5 months ago
Joined: 06/29/06
Posts: 6427

But Kim, he already took the job. It's not like they were hiring him fresh, he took the job and then gave himself a raise after the fact. So when he took the job, he agreed to the original salary they offered.

I'm not sure it's common practice, but I'm also pretty sure I didn't make that strategy up. Lol

KimPossible's picture
Offline
Last seen: 1 day 6 hours ago
Joined: 05/24/06
Posts: 3471

"Alissa_Sal" wrote:

But Kim, he already took the job. It's not like they were hiring him fresh, he took the job and then gave himself a raise after the fact. So when he took the job, he agreed to the original salary they offered.

I'm not sure it's common practice, but I'm also pretty sure I didn't make that strategy up. Lol

I agree that if he was given the job, and the raise was not agreed upon at the time of hire that giving himself one later doesn't make a lot of sense.

KimPossible's picture
Offline
Last seen: 1 day 6 hours ago
Joined: 05/24/06
Posts: 3471

Latest news says that the bakers union and hostess have been urged to mediate and try to come to an agreement. The NY TImes article below gives a really good lowdown on the two paths that the two different Unions took in this matter. It also clarifies some of the questions we had about how much pay these union workers make and how much it would be cut. The numbers are higher than was originally reported in this thread.

I still have a really hard time giving the Baker's union a free pass in this whole thing...bad advice given to them or not. I will never deny that greed and money at the top were big players in what went wrong with Hostess...but when you find yourself in the present, working for a company that screwed itself up and you have a role in the decision making or outcome, i think there are some paths that are better than others. Perhaps you feel right in demanding 'xyz' because of the injustices done to you...but what is the point of not trying to reach a compromise if in the end it means you will lose your job and every one elses along with it? No matter what 'should' have been done in the years or even months past, a hurting company can only afford to do so much...in the present

I really think when reading the article, the Teamsters approach and willingness to compromise even if its not ideal just seems like a better way to go.

FTR, if i was a Teamster, i'd be pretty PO'd about all of this and the choices of the Baker's union, and i don't think its really irrational to be so.

At Judge's Urging, Hostess and Union Agree to Mediation - NYTimes.com

Pushed by a bankruptcy judge eager to save thousands of jobs, Hostess Brands and one of its biggest unions agreed to mediation on Monday, in a last-ditch effort to avoid winding down Hostess, the bankrupt maker of Twinkies and Wonder Bread.

At the behest of the judge, Hostess Brands and the Bakery, Confectionery, Tobacco Workers and Grain Millers Union, which represents 5,600 Hostess workers, will meet with a mediator on Tuesday to try to narrow their differences toward a labor agreement.

If the mediation succeeds, it could prevent the liquidation of the company and save 18,500 jobs. Otherwise, Hostess is likely to auction off its well-known brands, leaving the fates of those workers in limbo.

In January, Hostess, an 82-year-old company, filed for Chapter 11, just three years after emerging from bankruptcy. At the time, the company said it was unable to pay its debts and needed to make deep cuts in labor costs to survive.

Hostess was able to reach a new contract with the Teamsters, its largest union. But talks between the company and the bakery workers deadlocked, and the union went on strike on Nov. 9. With production slowing and its finances dwindling, the company announced plans on Friday to liquidate.

Judge Robert D. Drain of the Federal Bankruptcy Court for the Southern District of New York pushed hard for the two sides to try one last round of talks. The judge expressed worry that neither side had exhausted all efforts to avoid liquidation. He especially urged the bakery union to seek mediation, suggesting that it might face significant legal claims if Hostess is forced to liquidate.

?I?m giving the union, as well as the debtor and their lenders, a chance to work out their issues in private,? Judge Drain said. ?If they don?t take it, it?s not that the issues won?t be worked out. They will, but it will be done in public and in an expensive way.?

The unions have been at the center of the struggle for Hostess?s survival.

When Hostess filed for bankruptcy, the company insisted that its labor costs and union rules were unsustainable, and it moved to renegotiate the contracts. One work rule required that two separate trucks be used to ship bread and cake products to a single retailer. The company also indicated that it faced $52 million in workers? compensation claims.

The two main unions, the bakery workers and Teamsters, countered that years of mismanagement were to blame. The private equity backers had loaded the company with debt, the unions said, making it difficult to modernize Hostess?s bakeries or product offerings. The bakery workers? president, Frank Hurt, called the private equity owners ?vulture capitalists.?

The two unions took different approaches to the labor negotiations.

The Teamsters hired a financial consultant, Harry J. Wilson, who had worked on the General Motors restructuring. He laid out just how much the union could get and still allow for a recovery of the company.

?We?re pragmatic when it comes to this situation,? said Ken Hall, the Teamsters? secretary-treasurer. ?We know that it?s a tough situation. We knew that because of mismanagement, the company was in a real hole.?

After eight months, the Teamsters eventually reached an agreement with the company. The union agreed to a contract that cut pay by 8 percent immediately ? with that cut shrinking to 5 percent next year. The Teamster workers, most of whom drive trucks for Hostess, average about $20 an hour; the bakery union workers, $16 an hour.

The Teamsters contract reduced the company?s health contributions by 17 percent and suspended its pension contributions until 2015. The company had originally insisted on freezing the pension plan permanently and ceasing all contributions.

The Teamsters insisted on numerous concessions from management. The company eventually agreed to give Hostess?s unions two seats on its board, a 25 percent share of company stock and a $100 million claim in bankruptcy. Last March, the Teamsters helped push out Hostess?s former chief executive after the board proposed tripling his salary even as he was demanding steep concessions from the workers.

In September, the Teamsters members voted narrowly to approve the deal, 53 percent to 47 percent.

The bakery workers union took a far more adversarial stance.

After Hostess?s unions had agreed to more than $100 million in annual cost concessions during Hostess?s previous bankruptcy, the bakery union thought it made little sense to agree to further cuts. It feared a deal would pull down wages and benefits throughout the industry, without saving Hostess.

?Our consultant said the debt load on the company was too heavy, and that we would be back in bankruptcy and facing liquidation in 12 to 16 months from now, even if we took more concessions,? David B. Durkee, the union?s secretary-treasurer, said.

The bakery union often derided Hostess?s management, saying it was composed of Wall Street investors and ?third-tier managers? from nonbaking companies. It said the investors were trying to ?resolve the mess by attacking the company?s most valuable asset ? its workers.?

Both sides refused to budge, and the bakery union went on strike at 24 of the company?s 33 bakeries.

With the threat of liquidation looming, the Teamsters, in an unusual move, called on the bakery workers to hold a vote to determine whether the rank-and-file workers wanted to end their strike and accept Hostess?s offer ? or face layoffs. Last Thursday, Mr. Hall of the Teamsters told the bakery workers that Teamsters members could not believe liquidation and layoffs were what the bakery workers ?ultimately wanted to accomplish when they went out on strike.?

But the bakery union declined to hold such a vote. The next day, the company announced plans to liquidate and sell off its assets.

?There was this whole theory that the company was bluffing about liquidation and there was some white knight that was going to come and buy the company? Mr. Hall said.

Now, Hostess and the bakery union will meet at the offices of the company?s lawyers. Representatives for the Teamsters and the company?s bankruptcy lenders were also invited to attend. If the two sides cannot agree, Hostess?s lawyers are expected to appear in court on Wednesday morning to seek approval of their liquidation plan.

Potential suitors are already lining up.

Some of Hostess?s rivals may pursue deals for the company?s most popular brands, especially Twinkies. One possible buyer, Flowers Foods, disclosed on Monday that recent revisions to its bank lending agreements would allow the bakery company to borrow up to $700 million. That additional cash may help finance a deal, analysts said. A spokesman for Flowers did not return a call for comment.

Industry analysts say Grupo Bimbo, the world?s largest bread-baking company, is also in the mix. Bimbo, which already owns parts of Entenmann?s, Thomas? English muffins and Sara Lee bakery, made ? and then withdrew ? a $540 million bid for Hostess during its previous bankruptcy. The company might just buy pieces, because it could face antitrust issues.

Financial investors like Sun Capital Partners and Metropoulos & Company have also said that they are interested in pursuing a deal for Hostess. Sun?s co-chief executive, Marc Leder, told Fortune, ?I think that we could offer a slightly better, more labor-friendly deal than what was on the table last week.?

wlillie's picture
Offline
Last seen: 3 years 6 months ago
Joined: 09/17/07
Posts: 1796
Offline
Last seen: 8 hours 16 min ago
Joined: 03/08/03
Posts: 3348

By the way, Pinterest is running wild with Hostess copycat recipes....

GloriaInTX's picture
Offline
Last seen: 1 day 3 hours ago
Joined: 07/29/08
Posts: 4228

When you read these details it is no wonder that Hostess went under. I wonder how many more union shops will follow before they wise up? And they really want to blame it on the pay one CEO got?

Compare the union attempts at Wal-Mart to what happened at now bankrupt Hostess Brands, maker of Twinkies, Ding Dongs, Dolly Madison cakes and Wonder Bread. The 82-year old business will now be liquidated after a national strike by the Bakery, Confectionery, Tobacco Workers and Grain Millers Union, the company’s second -largest union that started on Nov. 9. This is the second bankruptcy in a decade for Hostess, as sales plummeted from $3.1 billion in 2006 to just $2.45 billion in 2011, a 20% drop, according to PrivCo, a financial research company. Hostess’s balance sheet was underwater, carrying debt of over $1.43 billion, $2 billion in unfunded pension liabilities and just $40.4 million in cash. Net losses nearly tripled from 2006 to 2010, from $128 million to $341 million, PrivCo says.

But while Hostess hammered out an eleventh-hour agreement in bankruptcy court with its largest union, the Teamsters, to cut workers' pay and benefits, the bakery union balked and went on strike.

The details are ugly when you see what was going on behind the scenes at Hostess. It reportedly was dealing with 372 separate collective-bargaining contracts, 80 separate health and benefits plans, and 40 different pension plans.

Union rules said no Hostess delivery trucks could have both bread and snacks on board, despite the fact the goods were going to the same stores. Drivers were not allowed to load the snacks onto their trucks, certain workers could only load snacks not bread, and vice versa. PrivCo notes that potential suitors for Hostess may include the owner of the Sara Lee, Entenmann's and Arnold brands, and Flowers Foods, which owns Tastykakes, Nature's Own, Dandee, and Sunbeam brands. C. Dean Metropoulos, a private equity firm, has been hovering too -- it owns brands like Pabst Blue Ribbon beer, Chef Boyardee and Bumblebee Tuna. PrivCo estimates Hostess' brands “could fetch about $1 billion in an asset sale based on comparable private M&A deal multiples on the PrivCo data platform.” The unfunded $2 billion pension liability “will be picked up by the government controlled Pension Benefit Guarantee Corp. (PBGC), as well as other corporations participating in its multi-employer pension plan,” PrivCo notes.

PrivCo CEO Sam Hamadeh said in a statement: "As Americans both cut back spending on baked goods as well as move toward healthier eating options, Hostess Brands failed to innovate and offer fresher, healthier baked goods, resulting in 9 straight years of revenue declines. With just $40 million in cash remaining, over $1.4 billion in total liabilities, its high fixed cost and distribution structure – which Hostess was unable to reduce due to strict legacy union contracts - and another $2 billion in unfunded pension obligations, Hostess was doomed without significant concessions from its unions.”

Read more: Wal-Mart and Hostess: Two Union Stories | Fox Business

Offline
Last seen: 2 months 1 week ago
Joined: 08/17/04
Posts: 2256

Unions can be tough to deal with I'll give them that but to really assess what was happening on the union side you would have to go back and see what other union negotiations went down and what contracts were signed. Many times employees give up something in order to get something and the company gives somewhere else (may be the case with the trucks delivering only 1 type of food...to ensure workers have jobs and not eliminating). That may have been in their contract for ages and they may have given up things like floating personal days or something.

GloriaInTX's picture
Offline
Last seen: 1 day 3 hours ago
Joined: 07/29/08
Posts: 4228

This article says the raises they were complaining about were rescinded anyway. The more I read the more sure that I am that the union is completely to blame for this.

The unions will say management had given itself millions in pay raises while demanding worker cuts. (True, but the raises were barely a rounding error at a company that had lost almost half a billion bucks in two years; and Rayburn rescinded the raises anyway, making the brass work for a dollar a year apiece.)

The unions will blame the company for taking on almost $900 million in debt. (Yet that debt cost Hostess all of $45 million in interest last year, when its total losses swelled up to $340 million).

And here’s what you won't hear the unions ever talk about:

--Hostess paid out almost $100 million in health benefits for retirees last year, but over half of it covered workers who never had worked at Hostess. The Teamsters’ onerous and antiquated “multi-employer pension plan” foists the pension obligations of a bankrupt company on to the balance sheets of surviving rivals—ensuring a steady death spiral in any declining industry. A similar “MEPP” almost killed YRC, one of the largest trucking companies.

--Union rules forced Hostess to run separate truck fleets for delivering bread vs. sweets. A sweets driver, serving a 7-11 store, was forbidden from restocking shelves with breads already delivered and waiting in the back—he had to call for a bread driver to swing by and handle.

--The union restrictions on the 5,500 distribution routes at Hostess made it unprofitable to serve tiny outlets, yet Hostess was barred from using smaller, sleeker—and non-union—distributors.

--Workers were asked to take an 8% pay cut and pay 17% of their health-care costs instead of zero. Welcome to the club, guys. For this, they would have received 25% ownership of Hostess plus $100 million of Hostess debt to be paid back to the unions.

Read more: Death of Twinkies: A Union Contract Hit | Fox Business

Offline
Last seen: 4 hours 2 min ago
Joined: 04/12/03
Posts: 1763

"GloriaInTX" wrote:

This article says the raises they were complaining about were rescinded anyway. The more I read the more sure that I am that the union is completely to blame for this.

--Union rules forced Hostess to run separate truck fleets for delivering bread vs. sweets. A sweets driver, serving a 7-11 store, was forbidden from restocking shelves with breads already delivered and waiting in the back—he had to call for a bread driver to swing by and handle.

I would like to know more about this. Isn't the bread part of Wonder and the baked goods Hostess, Dolley Madison, and Drakes? It doesn't sound like it's "union rules" per se as much as it is they are different brands under the parent company of Hostess. I wouldn't expect someone driving a Drakes delivery truck to be allowed to also stock the Hostess display. Just like I wouldn't expect to see a Walmart cashier ringing me up at Sam's Club.

GloriaInTX's picture
Offline
Last seen: 1 day 3 hours ago
Joined: 07/29/08
Posts: 4228

"ethanwinfield" wrote:

I would like to know more about this. Isn't the bread part of Wonder and the baked goods Hostess, Dolley Madison, and Drakes? It doesn't sound like it's "union rules" per se as much as it is they are different brands under the parent company of Hostess. I wouldn't expect someone driving a Drakes delivery truck to be allowed to also stock the Hostess display. Just like I wouldn't expect to see a Walmart cashier ringing me up at Sam's Club.

Multiple sources say it was union rules that caused the problem. I'm pretty sure that Walmart and Sam's Club merchandise are sometimes shipped on the same truck, especially since I have seen trucks with both logos on the same truck.

Under the latest turnaround plan, the sticking point was Hostess's distribution operations, source of the Hostess horror stories filling the media. Union-imposed work rules stopped drivers from helping to load their trucks. A separate worker, arriving at the store in a separate vehicle, had to be employed to shift goods from a storage area to a retailer's shelf. Wonder Bread and Twinkies couldn't ride on the same truck.

Hostess has spent eight of the past 11 years in bankruptcy. As the company explained to its latest judge, the Hostess brands "have not been able to profit from many of their existing delivery stops and have been unable to enter potentially profitable markets, such as dollar stores, vending services and movie theaters."

If Hostess were able to rationalize or outsource delivery to serve these customers, ready to go are "new products based on its best-selling cake items that have a longer shelf-life and can withstand freezing en route to customers over longer transportation hauls."

Under pressure on Monday from Judge Robert Drain to back down from their strike aimed at forcing the company to liquidate, the bakers themselves pointed to "what everyone in the baking industry knew: Hostess's production costs were neither excessive nor out of line with the market but its distribution costs were—to the tune of between $80 million and $130 million annually."

One could always ask about the wisdom of a labor-law structure that causes companies like Hostess to drag on for decades without adapting to their marketplaces. One might question whether the bakers are acting in true and brotherly solidarity. But given the circumstances that actually exist, the bakers might well prefer to hold back further concessions, let the company liquidate, and try their luck with a new owner or owners who might materialize for its bakery operations.

Holman Jenkins: Twinkies: A Defense - WSJ.com