How Union Leaders Are Screwing Us Out of Twinkies (and Jobs)

Matt Crowder offers his opinions about how greed has ruined America’s favorite snack.

This morning as I was getting started with my Physical Therapy I received some troubling and sad news: Hostess is going out of business. The famous maker of snack cakes like the Twinkie and Ho-Hos is going to be shutting their doors. How could this be? Well after reading the article on ABCnews.com it all became clear.

As a little background on me, I’m not what you would call in shape, unless you are considering round a shape. I love my snack cakes from companies like Hostess and Little Debbie. I know I should eat better, but I’ll admit it: they taste good so I like them. Also, I am a Capitalist that understands what it means to be successful in business and the basis for making a profit. Revenue – Expenses = Profit.  It’s a basic principle.  Without profit a company can’t stay open. This is what happened at Hostess.

In recent years, Hostess has had to file bankruptcy twice in efforts to reorganize in order to stay afloat.  Last month they made the tough decision to put forth a new contract that included a 7% pay cut and other cuts in benefits. When a business has increases—for instance in transportation costs and materials due to higher fuel prices—they have to make cuts somewhere. The easiest way to do so is by cutting labor costs. Keep in mind that Hostess didn’t just lay off people which would have been just as effective as cutting everyone’s pay. They chose to do what they could to keep all of their employees.

Unfortunately, Hostess’ efforts were thwarted because they were working with a union. I have nothing wrong with people who work in a union. But in this case, it’s the union leadership that screwed their members yet again. Hostess put out that if there were not enough employees that returned to work by 5 p.m. yesterday they would have no choice but to go out of business. Unfortunately, the union leadership and their members chose to call what they thought was a bluff on the part of Hostess. Only it wasn’t a bluff. Hostess announced this morning that it will be asking the Bankruptcy court to allow them to sell all of their assets including the rights to the beloved Twinkies and Ho-Hos. Now instead of over 18,000 people taking a 7% pay cut, they will be taking a 100% pay cut and they have only themselves and their leadership to blame.

During the last election there was a lot of discussion on outsourcing jobs to other countries. While it would be nice if we could keep these jobs in America, it’s not financially feasible to do so and stay in business in many cases, especially when the unions are involved. Take a look, for instance, at the price of our cars that are made domestically as compared to cars make in Asia. They have similar material costs and the cars are largely the same, but the labor costs are much lower in other countries because they do not have union labor costs to deal with.

I have a great appreciation for why unions were implemented in the early 20th century. They made great strides in ensuring worker safety and FAIR wages. This is where the unions of today have lost track. No longer are they concerned about fair wages, but instead they (the union leadership) are only interested in lining their own pockets at the expense of it’s members.  Not all unions are bad, but there are many instances where instead of facilitating, they only hinder.  Does anyone else remember hearing about what happened after Hurricane Sandy? Electrical workers from the south came up to help get the power back on ended up not being able to help due to confusion over a union contract that was presented to them. By the time they got it sorted out they were told they were no longer needed. How is this a good thing? They should have just been allowed to come and help. No contracts should have ever been sent in the first place. It’s a time of disaster when it should be all hands on deck, not sign here and then you can help.

In the end, I will miss my Twinkies even if that means that I have one less tasty treat to snack on. But each time I see one on an old movie or tv show and think back to the good old days when we had our treats it will remind me yet again why I will never, ever be a part of a union. I’d rather work for less than not have a job at all.

 

 

 

http://www.waff.com/story/19981857/some-nonunion-ala-crews-turned-away-from-sandy-recovery

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About Matthew Crowder

Matt Crowder is a 33 year old divorced dad of a 7 year old daughter. Originally from Holland, Michigan, he is currently living in Northern New York where he has served in the U.S. Army for 10 years. He has deployed to both Iraq and Afghanistan, and is currently a Sergeant First Class tracking the strength management of over 20,000 Soldiers.

Comments

  1. Not to worry, the existing Twinkies already manufactured should last through the apocalypse.

    • Matt Crowder says:

      That is a great point Justin. Let the Twinkie hoarding begin!!

      • k….I’ve seen snak food hoarding prior to major New England blizzards. They are volatile, violent and viscous. I can’t imagine the carnage going on right now at the Shop-N-Save. Can’t well just get a long?

        And it takes THIS for the 47%ers to understand the consequence of American Labor Unions. Fools!

    • Relax dude, your beloved Zoo Zoo and Wham Whams ain’t going nowhere. Bankruptcy proceedings begin tomorrow. Hostess can say that the retire-ees and those receiving medical benifits are killing the company; the judge should agree, and business as usual.

      As for me, I’ve roofed union and non-union, and I can’t understand why anyone would work non-union should he have the choice—medical, pension, superior equipment, classroom trained co-workers, set work hours, scheduled breaks, yuh know, America?

  2. Jonathan G says:

    This argument fails. If you want to make the case that the union caused the failure of Hostess, you have to show how it was not the result of other factors, and make a case that Hostess would have thrived in the future, but for the actions of the union.

    The two bankruptcies in recent years, prima facie, say otherwise.

    • Matt Crowder says:

      Thank you Jonathan for you comment. I respect you opinion and agree that it is not entirely on the unions but the company as a whole. The CEO of Hostess himself said as much that there was blame to go around on everyone’s part. They were obviously in financial trouble based on the two bankruptcies. There is no doubt about that. But when trying to cut costs across the board they were hampered in their efforts when it came to lowering labor costs by the union leadership. It is the union bosses are the ones blaming the company and taking none of the responsibility on their shoulders while the CEO is wanting to share the blame. This was not an effort for the Hostess Board to try and make more money, they weren’t making any in the first place which caused the bankruptcies. The main point I am trying to make is that had they returned to work they would still have jobs, they chose not too.

      • Nick, mostly says:

        I wouldn’t say those costs were cut “across the board.” The executives certainly enriched themselves nicely while preparing for the latest bankruptcy filing. I’ve heard counter-arguments that say even if you took all the pay raises you gave to the executives and distributed them to the employees, it wouldn’t have amounted to much. The problem is this counter-point misses the mark by a mile. It’s not the saved expenses of executive compensation that’s important – it’s the sense that management and the rank and file are sharing in the cuts. When management enriches itself while asking others making far less to cinch their belts a little more, it erodes trust between the two. This wasn’t a case of greed run amok as much as another example of management and the workforce being at odds that is endemic to big business.

        While there are tens of thousands of employees who are suddenly without a job, I can’t help but feel it’s probably for the best that Hostess failed. Was anyone really looking forward to a round three?

        • Tom Gualtieri says:

          While union greed (indeed HUMAN greed) cannot be denied, Nick makes a good point in that executive sacrifices must match the sacrifices of the labor force. It is hardly the Union’s job to bear the responsibility of a poorly managed company which would rather cut the salaries and benefits of its laborers than ask executives to share the burden of cost.

      • Thanks for the reply, Matt. I understand what you’re saying, but I stand by my assessment. This article was literally the second thing I read about the Hostess situation, the first being a page I follow on Facebook posting nostalgic, old pictures of Hostess products from years past. I have developed a natural suspicion for blame-the-unions arguments over the years because I’ve found them too pat, too easy, and apparently motivated more by ideology than facts. So I had to apply some critical thinking and found that your argument lacks evidence that other factors are not primarily to blame.

        The third thing that I read about the failure of Hostess was a CNN article which confirmed my suspicions in spades: The bakers at Hostess had already absorbed massive wage and benefit concessions through the previous two bankruptcies. They quoted a member of the bakers’ union who said that he used to make $48,000 in 2006, had his pay cut to $36,000 before this strike, and if the wage cuts and increased out-of-pocket payments for health insurance had gone through, he’d be down to $24,000 in take-home pay– a 50% wage cut in 6 years. He said that the job wasn’t worth saving at that cost. He’ll bring in more money from unemployment compensation while he looks for a new job. Furthermore, this decision was taken by a vote of the bakers’ union members, not a decision solely by the leadership. It seems that this was a rational decision made by the rank-and-file employees who knew the score.

        Other commenters here have pointed out some damning facts that I’ve also found by reading further:

        * Hostess was the victim of a Bain-style management consultants who saddled the company with major debt, meanwhile extracting large consulting fees.
        * The management disclosed in its financial filings that soft demand had lowered its sales outlook due to Americans’ healthier eating habits. However, they completely failed to even attempt to adapt to this new market reality.
        * The management received large pay increases in recent years, at the same time they were asking workers to sacrifice.

        Blaming the union in this case is like blaming the skier for the avalanche: They may have triggered it, but they didn’t build up the unstable snow-pack on the mountainside.

    • crystalwolfakacaligrl says:

      Hostess is going the way of Bain-type buyouts, but their choosing to blame the Unions…that should tell you something “right” there.
      Nobody buys that crap they call food.
      The executives and the buyers will walk away with tons of $$ while so many people lose jobs.Unless we demand Unions, you can kiss your manufacturing jobs goodbye.

  3. wellokaythen says:

    How can other people screw me out of a Twinkie, unless I think I’m entitled to a Twinkie? This makes it sound like the union was holding the snack food hostage. What’s the alternative, holding workers hostage so that other people can get their snacks?

    At any moment, Hostess could have declared bankruptcy, sold itself, or decided to end production, no matter what the union did or didn’t do. The company always had the final say over whether it stayed in business or not.

    I recommend some healthy skepticism whenever you hear the explanation that management gives for why a company goes bankrupt. It’s easy to blame the union, and it may be a valid explanation. Do we really know where all the money went? Was it really all a question of transportation costs and labor costs? Unions can be horribly corrupt, no question about it, but are companies always truthful when they report earnings and costs?

    In any event, the blame may be even more widely shared than the union leadership. It depends on the union, but the leaders could have been responding to what the membership voted. It could be that most of the people in the union voted to reject the contract, and the leaders were just reflecting what their constituents told them.

  4. An excellent article on how Hostess’ failure is not the Union’s fault: http://recessappointment.com/2012/11/16/hostess-a-lesson-in-blaming-unions-for-your-failures/

    • Thanks for posting that. Given the sums of money at stake in the ensuing liquidation, we can be almost guaranteed that the jobs under a new contract would be shortlived. At least now the union has a shot at getting some of what it’s owed, to the detriment of the profits of the hedge funds that own the company’s debt.

  5. Unions are very rarely the source of problems, but they are almost always the scapegoats. The simple fact of the matter is that unions are the only thing that help to prevent brutal and inhumane treatment of employees. Unions work to help the people who would otherwise be victimized by those at the top. We ALL make less money because unions are less powerful. It is no coincidence that the fall in union power coincides EXACTLY with the decoupling of increasing productivity and increasing pay for workers. Wages have not gone up in decades and it is because of the crushing of labor unions by the capital class.

    For example, I’m not unionized, and I’m now losing my already meager health insurance at my day job. I have a chronic illness, so I will now have to pay thousands of dollars a year more just to make sure I don’t, you know, die. It isn’t that my employer couldn’t afford to pay for my insurance, they wanted to squeeze out MORE profit and, well, if I am now unable to survive it’s tough for me. Great system.

    • crystalwolfakacaligrl says:

      “Wages have not gone up in decades and it is because of the crushing of labor unions by the capital class.”
      Exactly!
      I hope Obamacare will help you with your illness, getting treatment and coping.

  6. Tomio Black says:

    This is a really great anti-union screed! Congrats! There is not one bit of evidence given to support any statement made. What we have is the argument, “I like Twinkies. I know capitalism. Therefore, the unions are to blame.”

    Here’s some facts to figure into your rant:
    1) Hostess Brands, Inc. is a privately-held company. They could probably raise a few million overnight with an IPO. Of course, then they would not get to run the company so badly.
    2) The portrayal of Hostess as a benevolent entity valiantly struggling to keep jobs for good workers simply doesn’t sit with the history of the company. Here is a timeline of how Hostess got in trouble (http://www.bizjournals.com/kansascity/news/2012/01/11/timeline-hostess-brands-bankruptcies.html). Notable culprits: Lower sales (due partly to low-carb diet crazes), and an SEC inquest into worker comp practices that resulted in a $40 pre-tax charge against earnings.
    3) Hostess laid off people and closed plants in 2003, 2004, and 2005. In 2007, they threatened liquidation if labor contracts weren’t renegotiated – which they were. More lay-offs in 2009.
    4) Hostess recorded revenue of $2.5 billion in 2011 – down from $3.5 billion a decade earlier. That’s REVENUE, not profit – so please explain how the union bosses are to blame for that. Go ahead. I’ll wait.
    5) Interstate Bakeries Company started down the road to ruin when it financed the purchase of Hostess and Wonder brands from Ralston Purina. By 1995, they had gone $212.2 million into debt based on stock buy-back alone. The following year, it bought back another $255 million of stock from Purina. This, as I’m sure everyone can see, is the fault of the union bosses.
    6) IBC’s new systems led to a 100% increase in stale returns
    7) According to one sales manager (a non-union job) IBC “…had no regard for customer service or cooperation. It was all a perfect formula of how to piss away a nationally recognized franchise.”
    source: http://www.bizjournals.com/kansascity/stories/2004/10/04/story1.html?page=all
    and: http://www.bizjournals.com/kansascity/news/2012/01/11/timeline-hostess-brands-bankruptcies.html?page=3

    Here’s a lesson in business, because apparently you DON’T understand capitalism: Unions are not SUPPOSED to tell management how to run the company – including how to turn a profit. That is the job of management. It’s what they get paid to do. The job of a union is to make sure their workers get a fair wage for the work they do. The unions made concessions less than a decade ago, so you can’t blame them. It isn’t their fault fiscal mismanagement was rampant in management.

    By the way, I knew NOTHING about Hostess before I read this drivel. But I managed to use an internet search engine and read such union-friendly sources as the Wall Street Journal to get an understanding as to what went wrong with Hostess. It’s just so much more RELIABLE than just going with an ideological hatred for unions.

    • Very well researched. You missed the part where the CEO’s salary was tripled, yes, tripled from $750,000 to $2,250,000 LAST YEAR. I’m certain you would have found it if you knew to look for it. 9 other executives got huge raises last year. Right before they filed bankruptcy.

      Yeah, it was the union. Notsomuch. It was greed.

  7. wellokaythen says:

    If you think Twinkies are disgusting now, wait until they get produced in places with weak worker safety regulations. Anybody read _The Jungle_?

    I’m willing to believe the argument that unions used to be necessary, good things and now have outlived their usefulness, if someone can point to the specific turning point where it all went wrong. Was it the creation of the minimum wage, maximum working hours, workers’ safety regulations, the right to unionize, the demand for health care insurance, the right to collective bargaining, the creation of government agencies to try to prevent you from getting killed on the job, or…..?

    When did unions start to ruin everything? Was during that magical time when companies treated their workers well just out the goodness of their sweet little hearts and the executives put the interest of their workers first? Back before the unicorns went extinct.

    • OMG! I LOVED that Jungle Book! Yer right! The 18,500 workers need to see the movie now….cuz they’ll have to:

      Look for the bare necessities
      The simple bare necessities
      Forget about your worries and your strife
      I mean the bare necessities
      Old Mother Nature’s recipes
      That brings the bare necessities of life

      Yeah….Unions! LOL…..greedy greedy fools!

  8. QuantumInc says:

    Obviously Unions have a purpose. To claim that purpose has diminished in the new economic order is silly. They allow the workers to negotiate with the large corporations that employ them in a unified manner, which of course brings a superior bargaining position to the table. If you want to live in a world where everybody gets fair wages this seems to be a necessary thing.

    The article mentions overseas labor costs, but fails to mention that plain and simple, people in those countries have a lower material quality of life. Sure maybe they have superior immaterial goods, the joys of spirituality, family, optimism, etc. However that doesn’t change the fact that a smaller number of them have the modern conveniences we take for granted. They are quite simply, really, really poor when compared to even minimum-wage workers in fully developed economies. $3 per hour is way better than trying to grow your own food, even if you’re an experienced farmer. Of course in many of those countries, you can exchange $3 into the local currency and get a bigger basket of goods than just spending it back in the US, so there’s that too.

    Of course if the workers get “greedy” and decide they want wages and benefits and a lifestyle more similar to the Americans who use the things they produce, they will attempt to Unionize. The corporation will usually either try to quash such Unions as best they can, or just pick a village a hundred miles away where everyone is closer to starvation and therefore more grateful for the $3 an hour.

    I just have to love how there’s a half dozen comments tearing apart the original article rather effectively. Schadenfreude I suppose.

  9. Brennan Peters says:

    The Union agreed to over $100 million in concessions in 2004… and then execs tripled their own pay and failed to invest that money in the company or marketing strategies. Unions didn’t sink Hostess. Bad business practices did.

  10. I remember watching this same scenario unfold at a wood-products company in the 1980s. A family member worked at Nikolai Door and the company told the union and it’s members that they couldn’t stay afloat at current wages. The Union went on strike. The company asked them to take a pay cut, and when the members refused, the company shut down (or moved overseas – I don’t remember which).

    Dumb.

    In the meantime, I work in the Emergency Medical Services industry. Most people would be shocked to hear how little paramedics and EMTs make. In the past 20 years, there has been some help from unionization, but not enough.

    Like you said, not all unions are bad.

  11. You should have heard Mayor Blumee howl from his office when he heard about this. He was only days away from outlawing the the darn things, or slapping a 55% Health Tax on any inventory of retail-ready Twinkies.

    In the East Village, I heard howls too. “NO MORE TWINKIES????”

    Hey! If Twinkies are outlawed, only ________________ will have Twinkies!

  12. Another perspective on the topic

    http://www.youtube.com/watch?v=UGIk30pyHUs

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