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Hostess Brands is one of the most recognizable food companies in America, having manufactured Wonder Bread and Twinkies for decades. But now the company has announced they are liquidating, and company is unfairly blaming their workers, many of them members of BCTGM and the Teamsters.

The fact is that the responsibility lies with Hostess’ management and the vulture Wall Street private equity firm behind them, and yet the workers are the ones who will suffer the consequences of this shutdown.

Here are some facts about the Hostess situation:
   

   

  • For the past 8 years, Hostess has been owned by Wall Street investors: so-called “restructuring experts,” managers from other non-baking food companies, and now a "liquidation specialist."

   

  • The Wall Street investors that own Hostess have no interest in the company succeeding – very similar to the situation of Bain Capital and KB Toys in 2000.
       
  • Hostess has had six CEO’s in 8 years, none of whom had any experience in the bread or cake baking industry. This, not any action by the unionized workers, led to their failure.

   

  • Hostess workers made numerous concessions, including this year when the company stopped making contributions to their pensions. They went on strike because management offered a contract cutting wages and benefits by 27-32 percent.
       
  • Despite their troubles, Hostess’ CEO got a 300 percent raise, from $750,000 to $2,250,000. Other top executives have also gotten raises worth hundreds of thousands of dollars.

   

  • Earlier this week when workers at 20 plants went on strike, Hostess management claimed they would close plants in response. In fact, they already had plans to close at least nine plants as part of a company-wide reorganization. The Mayor of St. Louis said of the closings “I was told months ago…”

AFL-CIO President Richard Trumka made this statement in response to the latest news from Hostess:

What’s happening with Hostess Brands is a microcosm of what’s wrong with America, as Bain-style Wall Street vultures make themselves rich by making America poor. Crony capitalism and consistently poor management drove Hostess into the ground, but its workers are paying the price. These workers, who consistently make great products Americans love and have offered multiple concessions, want their company to succeed. They have bravely taken a stand against the corporate race-to-the-bottom. And now they and their communities are suffering the tragedy of a needless layoff. This is wrong. It has to stop. It’s wrecking America.
A total of 18,500 jobs could be lost in the process of this liquidation. The CEO and executives who gave themselves raises, not to mention the Wall Street investors, will emerge just fine. The workers, many of them members of BCTGM and the Teamsters, will suffer the most financially.

Even though we defeated Mitt Romney in his bid for the presidency, his style of economics that he pioneered with Bain Capital still exists, and is playing out in front of our eyes with Hostess.

by Doug Foote - Reposted from Working America's Main Street Blog

Join Working America to build strength in numbers for working families

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Comment Preferences

  •  Hostess workers have been Bained (2+ / 0-)
    Recommended by:
    Larsstephens, WakeUpNeo

    And they are paying a terrible price.

    A definition is the enclosing of a wilderness of ideas within a wall of words -- Samuel Butler

    by A Mad Mad World on Fri Nov 16, 2012 at 12:14:20 PM PST

  •  Considering how bad unemployment is (0+ / 0-)

    A better result would have been for the union members to accept the bad offer from the weak company, so workers would continue to be employed.

    Then employed workers could look for better jobs elsewhere.  Now the economy has more unemployed people, and those workers and their families will be under great stress.

    The most important way to protect the environment is not to have more than one child.

    by nextstep on Fri Nov 16, 2012 at 12:18:22 PM PST

    •  Would it have changed much of anything? (2+ / 0-)
      Recommended by:
      kurt, WakeUpNeo

      When is enough, enough?

      The consultants, and upper level management have already made decisions to close a bunch of plants. Many of the workers will have their jobs just as quickly, and those that don't still risk losing them in the near future.

      Accepting the hostage negotiations that the companies offer (and I've seen similar in the local news with American Airlines here in TX) boils down to if we don't get what we want, we'll take our ball and go home.

      By accepting outright it devalues the workers. Their wages, and their benefits are lowered, and the bar for workers nearby all those plants has just been lowered. Again.

      It is going to be tough on those workers. It would have been rough on them if they have capitulated too. If they are anything like my family, it wouldn't have helped. My healthcare bills go up, my grocery bills go up, and seemingly everything else, but the paycheck has reduced?

      In the harshest terms those workers faced death by a thousand cuts vs one clean stroke.

      It isn't pretty, it isn't nice. But we need management (in several industries) to not blame their workers, and own up to their own failings. Often those failures are because those who run the business don't know it, but they instead have some Wall St, or MBA background.

    •  actually no (1+ / 0-)
      Recommended by:
      kurt

      they were already planning to liquidate and squeeze as much as they could from employees before it finalized.

    •  Out of the ashes (0+ / 0-)

      of this Hostess "Wall Strteet Deconstruction" could  possibily arise a new worker founded Baking company that over the long haul could salvage many thousands of jobs. If there emerges a group of bakers who are able to produce twinkies, cup cakes, pies and other sweets that are normally identified with the Hostess brand; and these Bakers get funded to start a new company providing these products, this may turn out to be the solution to the current situation.

      The Union should be able to help underwrite such a venture, and help make sure that the new company does not violate or infringe upon any existing Hostess copyrights. Furthermore, Union involvement in the new venture  would provide an instant initial market for the new line of baking products produced by the new company.

      Lastly, if a new national Bakery project does arise from the sacking of Hostess employees, the new company should not attempt to provide a replacement for the Wonder Bread products. Let Wonder Bread go the way of the wagon trains in America.  

  •  Well at least they didn't offshore (1+ / 0-)
    Recommended by:
    WakeUpNeo

    The company production to China. Here buy this twinkie with added lead.

    Personally I've never liked hostess products, they taste horrid, the texture is off and the frosting always tasted crappy
     I feel bad for the workers but I'm not seeing this as a loss of quality products.

  •  Hostess' incompetent & crooked management (4+ / 0-)
    Recommended by:
    Bluerall, kurt, WakeUpNeo, LostBuckeye

    If you can't make money selling junk food to the American people, you have no business calling yourself a businessperson.

    But of course this is as much about union-busting and blame-shifting as it is about the bottom line. Hostess' management couldn't or wouldn't innovate and develop new, healthier products that appealed to the changing marketplace, so when they realized they were going under they manipulated their numbers to the executives' best advantage, and blamed the unions for the collapse.

    Unions are simply what happens when an employee says "Huh, the boss isn't listening to me. Maybe the boss will listen to ALL of us." You know what creates and feeds unions? Bad management. If management were good and competent, unions would rarely be needed. But bad management drives workers to unite, and then you have a union.

    American workers haven't had a pay increase for a given job, adjusted for inflation, for over 30 years. During that time productivity has soared eight times over, and ALL that extra wealth created has gone into the pockets of the upper 1%. They use a bit of that money to produce propaganda to convince workers that unions are the problem.

    Hostess was mismanaged to death, and it's this kind of mismanagement that makes unions all the more necessary.

  •  Trumka (3+ / 0-)
    Recommended by:
    kurt, WakeUpNeo, LostBuckeye

    Trumka is correct Wall Street and the financial services industry are systematically destroying the nation's industrial and commercial in pursuit of ROI.

  •  I disagree (0+ / 0-)

    First off, I feel terrible for the people who will lose their job because of what is happening with Hostess.

    That said, I do think the situation at Hostess highlights a real problem in America, but your analysis is simply inflamatory and incorrect. The situation at Hostess exemplifies why I will never be a member of a union and consequently never work for a company that primarily employs union workers.

    When was the last time you heard of a major problem like this that didn't involve a union? I can't recall one. Look at American Airlines or General Motors or Chrysler. Look at any number of companies that have been forced to continually deal with unions by our corrupt federal government.

    The fact is that Unions "fight for the employee's rights" by forcing companies to grossly overpay people in both salaries and benefits. Unions are the perfect example of why socialist concepts simply don't work. Employer-employee relationships should be symbiotic, but unions make them parasitic. The union wants to take more value out of the company that they are contributing and eventually the company dies.

    You mentioned that the CEO got a 300% raise, a sum of $1,500,000. While I agree that giving anyone a raise while a company is supposedly in trouble is distastful, did you bother to do any math on that? That $1,500,000 devides up between the 18,500 jobs that you mentioned could be lost for a whopping $81.08 per employee per year. Did you bother to look at the raises union undoubtedly required for each employee that year regardless of whether it was meritted? I bet it was more than $0.04 per hour per employee which is what $81.08 divides down to if you assume a 40 hour work week and 52 weeks per year.

    The truth is that biggest enemy of a hard working union member is the union that is supposed to be protecting him from the "big bad corporation". The problem the employees face isn't the fact that they might lose their jobs; its the fact that they have gotten so used to wages and benefits that are far beyond what any company is willing to pay for the work they are trained to do. The laid off employees will end up staying on unemployment because it pays more even though they would rather be working.

    I understand that it's easy to look at a situation like this and have sympathy for the people who will lose their jobs. I have that same sympathy. The difference is that you want to blame the people who are named in the bancruptcy case while the reality is that if the unions hadn't been so greedy, the company would still be profitable.

    •  You Dont Know The Situation (0+ / 0-)

      Not everything is as black and white as you state. I dont know the exact situation but given this looks like it is followingthe template for many of Romneys' Bain Deals found at David Stockman's article found at this link:
      http://www.thedailybeast.com/...

      What can be useful for these companies without Wall Street bleeding them dry is for the owners and the unions sharing in the ownership with the workers accepting the wages necessary but with ownership and a stay in management.

      Instead we have 1% controlling much of the equiyty in this country through their payoffs in the form of lobbying and campaign finance to our representatives.

      So for you to say with sympathy for the worker, its the unions or workers fault is just ignorant of what is happening in America and elsewhere in developed countries.

      Treat people with dignity and you live in a much more civil and just country. Not recognizing this means we are doomed

      •  You're absolutely right.. (0+ / 0-)

        I don't know the situation. What I do know that I never once stated it ever being the workers fault. I will give them the benefit of the doubt that they are all hard working individuals that just want to make a living. I did say that the union is at fault, and by that I mean the union leaders that threaten to shut the company’s production down via strikes every time they don't get their way.

        You’re also right that the situation at Hostess is without a doubt not as black and white as I portray it to be. Just as it’s not as black and white as the original poster portrayed it to be. Was there probably some unethical actions taken by the Wall Street vultures that took over Hostess? Sure, but that is something you can’t judge unless you have all of the information in your hands. To throw a fit just because you see a headline about people being laid off is ridiculous because you’re not privy to most of the pertinent information. It’s no different that the right wing condemning President Obama over the tragedy in Libya.

        You mention the “Bain Deals” that were so wonderfully publicized during the election cycle. Did Mitt Romney make great deals of money by choosing to fire many American workers? He most certainly did. Is that something that you and I would do? Probably not, but there again we will most likely never be in that situation so we will never know what our actions would be. Did Romney hoard the money he made and keep it all for himself never to be seen again? No, he re-invested it into companies that were also in danger of bankruptcy and with some of those he was able to save many American jobs, and guess what, he made money there too. That is what an investor does, they invest. Part of being a good investor is to know a good investment from a bad one. If you have a bad one you drop it and walk away, if you have a good one you keep it and watch it mature until it’s the right time to cash out. That’s the point!

        In regards to the unions sharing ownership of the company, they have that ability. Anyone can purchase a share of ownership in any publicly traded company. As for privately owned companies, that would be a matter of negotiation amongst the private owner(s) and the head(s) of the union.  The problem is that I don’t think the unions want ownership of the company because that would mean taking the bad with the good, where right now they get to just take the good while the owners take the majority of the risk. Americans need to keep in mind that there is absolutely no “right” to have a job. Jobs are property owned by companies and those companies should have the sole authority (barring unjust discrimination) in choosing who and how much will be paid for those jobs.

        You mention the "1% controlling much of the equity in this country through their payoffs in the form of lobbying and campaign finance". You think the unions contribute any less than any other large corporation? And again, I'm not referring to the individual members, I'm talking about the mandatory dues each member is forced to pay to the union which ends up in the pockets of their preferred politician. Look at Wisconsin. How much money did the teachers union pay for adds demonizing Governor Walker? It’s a gross double standard to condemn corporations for lobbying and political contributions while ignoring the fact that unions are doing the exact same things.

        The ironic thing is that you think that I’m ignorant because of my belief while I believe you just aren’t willing to see the big picture. I will agree that treating people with dignity and respect is a standard to live by and I do believe that if everyone felt that way we would live in a more civil and just country. You and I just apparently disagree on the definitions of dignity and respect.

        •  Suggest you do some Research (1+ / 0-)
          Recommended by:
          LostBuckeye

          I suggest you do some research which may clarify what unions give to our legislators compared to corporates. I beliegve it may be as much as 10 to 1 for corporates compared to unions. Citicorp spent over 300 million in ten years in order to repeal Glass/Steagal then Robert Ruboin as Sec of Treasury repealed the remaining provisions and went on to make 150 million in a few years at Citicorp. And this is just one of many examples. I am not an apologist for unions but the destruction of the middle class began when they could no longer bargain effectively because of the corporates owning congress and corrupt unions.

          Please read David Stockman's article to get an idea about Romney's Bain deals which are pervasive throughout the vulture capital financial sector:

          http://www.thedailybeast.com/...

          It may illuminate your thinking on the subject

    •  So how much is "overpaying"? (2+ / 0-)
      Recommended by:
      NancyK, LostBuckeye

      There is no bottom to what people will pay for something. While I won't defend every action of a union, they are one of the few avenues that give individuals bargaining power in the face of large entities. You don't hear of many instances of "problems" from non-union companies because those people have zero say in what happens. I'm all for symbiotic relations within businesses but in most cases companies (speaking from the manufacturing side) don't want that. Long term viability is not a major factor in decision making. Workers are talked about as is they are cattle.  A single worker has no say in the general direction of a large company. Why is it wrong for workers to organize for a voice? They have no say in management pay or company direction without it. Unions in other countries do just fine when they have seats on the board and are involved in decision making.  And since when does a person's compensation result from some distribution over all of those who are below them? That's ludicrous.

      •  Well.. (0+ / 0-)

        You’re right, there are very “few avenues that give individuals bargaining power in the face of large entities.” However I believe that unions are a poor one because they have neither the employee nor the entities best interest at heart. If you go on the assumption that the “large entity” is a publicly traded one, which most are, then each employee can purchase a say in the dealings of that company. That is, in my opinion, the most effective avenue for an employee to represent his or her self. In fact, I would encourage anyone that works for a large company to buy a few shares of stock from their company for that exact reason. If the employees want to organize for a voice they should pool their money together and buy a large chunk of shares from their employer and organize that way. When they do that, they are ensured that the only people involved in the negotiations have the profitability of the company at heart. They are less likely to vote themselves a raise if it means their investment in the company is going to tank. They aren’t going to mind giving up their pension if it means the value of their investment in the company is going up. That is how employees should organize and be heard. Not through a political union with a political agenda. They aren’t going to let an employee milk the clock or do substandard work if it means they will personally lose money.

        I completely disagree that with the statement that “long term viability is not a major factor in decision making” when it is applied to management. Quite the contrary, the management of a company wants nothing more than the long term viability of a company because that means they have secured their future income, and consequently the future income of every other employee.

        Large companies do have a tendency to talk about employees as if they are “cattle”. First off, that is there right just as it is your right to leave the company and go work somewhere else. That said, the good companies look at said “cattle” and analyze their attributes to ensure they are paying their good “cattle” enough that they won’t be lured away by another company offering “greener grass”. The company will pay and should only pay as much as they feel an employee is worth. Unions however don’t take the same care in deciding who gets a raise and who doesn’t. This is because a union’s primary goal is to increase its profitability which means keeping its “customers” (the union members) happy. The number one way for a union to do that is to bully a company into paying its “cattle” whatever the union decides is proper, even if it does happen to be more than some of the employees are worth to the company. They, in some cases, prevent employers from firing workers that are not profitable which not only hurts the company’s bottom line but the morale of the other employees.

        The way it should work is this: The employee, if they feel they are not being paid what they are worth, has the right to ask for a raise. The company can either approve or deny the requested raise. At that point the employee has a couple options. First, the employee should make an honest self-evaluation and determine if the company is truly underpaying him/her or if the employee was just overestimating his/her worth. If they find that the company is truly underpaying them then the next step is simple but not always easy. The employee should go look for a better company that will pay them what they are worth. This search could take some time but if the employee is worth it, a job will become available. If the employee finds that they overestimated their value as an employee, he or she has to decide if they are willing to do whatever it takes to increase their value as an employee.

        And my intention was not to imply that any employee’s compensation should be derived in any manner other than how I’ve described above. The point I was trying to make was that while 1.5 million dollars is a lot of money to people like us, it is a relatively small amount in the budget of a company like Hostess when compared to their entire payroll cost.

    •  I know of a few (0+ / 0-)

      Once successful companies that struggled and possibly died?

      I've seen it several times. In retail it has been companies like Sears, JC Penny's.

      Worked at a factory or two as well. The first didn't die, but closed down one of their product lines. The other sold itself off. Both were VERY well known. Both were poised to make a lot of money if they looked beyond the next quarter. But that didn't look good on a short term balance sheet.

      And even in a small town office.

      What they all had in common was bad decision making, bad planning, and salaries for the top of the scale were oversized. And they blamed their workers. Their non-union workers.

      Most of the workers I knew were more than willing to put in the hours, and sweat to make their work profitable. They were willing to be creative, innovative, and flexible.

      Until they cut my pay and gave the CEO another raise. Until they cut Joe, Fred, and Tommy and had me do their work. Until they refused to listen to the lowly line workers on how the miracle plan wouldn't work (and then blamed us for it, even when we gave workable alternatives!)

      We've been fighting class warfare for a while, and without realizing it. It has just be an insurgency.

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