Associated Press
For conservatives, the demise of Hostess Brands, perhaps best known for making Twinkies, is a story about union workers going on strike and forcing a business to close its doors forever.
For those concerned with the facts, a very different picture emerges. Forbes' Helaine Olen had a good piece on this the other day.
Hostess has been sold at least three times since the 1980s, racking up debt and shedding profitable assets along the way with each successive merger. The company filed for bankruptcy in 2004, and again in 2011. Little thought was given to the line of products, which, frankly, began to seem a bit dated in the age of the gourmet cupcake. (100 calorie Twinkie Bites? When was the last time you entered Magnolia Bakery and asked about the calorie count?)
As if all this were not enough, Hostess Brands' management gave themselves several raises, all the while complaining that the workers who actually produced the products that made the firm what money it did earn were grossly overpaid relative to the company's increasingly dismal financial position.
By all accounts, Hostess just wasn't a well-run company. After its executives made a series of poor decisions, then rewarded themselves with generous raises, Hostess demanded that its workforce accept far less pay and fewer retirement benefits. Not surprisingly, the workers weren't fond of the idea -- why should they alone feel brunt of the executives' mismanagement? -- and Hostess collapsed.
But to hold the union responsible for this series of events is absurd.
Matt Yglesias flagged this story from July about Brian Driscoll, the Hostess CEO who led the company into bankruptcy in the first place.
Even as it played the numbers game, Hostess had to face chaos in the corner office at the worst possible time. Driscoll, the CEO, departed suddenly and without explanation in March. It may have been that the Teamsters no longer felt it could trust him. In early February, Hostess had asked the bankruptcy judge to approve a sweet new employment deal for Driscoll. Its terms guaranteed him a base annual salary of $1.5 million, plus cash incentives and "long-term incentive" compensation of up to $2 million. If Hostess liquidated or Driscoll were fired without cause, he'd still get severance pay of $1.95 million as long as he honored a noncompete agreement.
To blame the union, which had already accepted compensation concessions, is to overlook what actually happened.
Update: James Suroweicki has more on this, including noting the steps that led to the strike: Hostess planned to use the bankruptcy process to undercut workers' compensation even more. The piece added, "[W]hile the strike may well have sent Hostess over the edge, the hard truth is that it probably should have gone out of business a long time ago. The company has been steadily losing money, and market share, for years. And its core problem has not been excessively high compensation costs or pension contributions. Its core problem has been that the market for its products changed, but it did not."
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Not to mention health care professionals who said don't those products they're bad for you.
The problem here isn't the Union, it was the wrong greedy owners not helping to build and advance this company. Corporate raiders if you will. Was this one of bains moves?
Pitty the Lawyers:
We may still want to shoot all the Lawyers, but before we do, try something to fix the management problem. When a corporation goes bankrupt, the bankrupted companies' protected assets of the should go to the employees of the corporation, after that the existing management must be removed, if the management has taken excessive compensation loan it back to the employee owned corporation for zero interest.
It isn't that allowing a corporations asset to be stolen isn't a good incentive to run a business, but making it legal to do so puts money on the table for any takers. This is the same reason that banks don't put money on wooden pallets in front of the bank overnight to make loans; it makes it harder to collect the interest. By awarding the employees ownership, they can continue to produce with the notion that they alone can make the company profitable.
If we get the majority of corporation's equity to be owned by its employees, we should have less need to feed quite so many no producers, and perhaps can find a way for the few lawyers that remain to be well paid.
If the employee run company cannot make it, there will plenty of investors who will promise to do a better job.
Hostess is far from the first company even in recent times to enrich its incompetent (or even crooked) executives and damn the employees and of course the customers. Now we see the union's stand may be paying off, as the courts have gotten involved and another entity wants to purchase the mismanaged company. Just before the housing crisis hit, we observed the overlords of Freddie Mac and Fannie Mae giving themselves HUGE bonuses and also lying about the financial condition of their mega-lenders. They should be in prison for such criminal behavior but not a single one of them has even been charged or even grilled and publicly shamed before a Congressional committee. Naturally, the Hostess execs must have figured this was the way to behave .. as executive salaries especially for failing companies have been skyrocketing ever since the days of the Clinton Administration.
RM's blog entry lacks logic. The preceding issues aside, a company can restructure from bankruptcy...unless of course the union is not cooperative. What the union cannot say is that they contributed to the success of Hostess. When a company does well, the unions will praise themselves, but when it goes under, it's everyone's fault but their own.
Criticizing the CEO's salary is ludicrous. Hoffa, head of one of the larger unions representing Hostess workers, makes nearly a half-million in direct and indirect wages and creates no product. When unions lost over 100k people 18 months ago, he gave himself a raise.
Once upon a time unions may have been a therapy for workers woes, an antibiotic against an industrial infection, but now their side-effects overwhelm their benefits. Union addiction is nothing more than occupational hypochondria. You've convinced yourself that things are so bad that you need the union pill.
Can anyone tell me why are executives getting raises when employees need health care and other benefits? shouldn't this money go toward the company so it can stay open? employees are what keeps a company running, wish they would settle it and keep the company open, they need the jobs.
Some keep asking why do Republicans hate Unions. The answer is easy: Republicans hate unions because unions keep all of the power and the money from shifting 100 percent over to the one percent who own the company. Republcians believe the CEOs who created the company, they should all the pie and the rest of the "little" people who make the company possible, such as the workers should be happy working their lives away with a minimum income so the big wheels can live their life to the full and with no consequences, such as their paying their fair share of taxes. Now that companies are people my friends, they can get away with anything which hurts workers who depend on unions to help them. Unions help people and Republicans hate that American ideal of helping others so to make their lives betters. Why? because you are suppose to be able to pull youself up by your own bootstraps.
The author obviously missed the point on the story believing that he was actually reporting a much bigger picture of the problem. Sounds like a lot of the readers bought it too. Poor performance, execs paying themselves disproportionate to results... these are all just simple brain off gripes driven by emotion. What he claims to be the conservatives misunderstanding of the issue, is actually the authors in the unethical and non-productive results of collective ideology. Wise up.
TO THOSE OUT THERE IN FACEBOOK LAND who want to blame the "union thugs" for the demise of the Twinkie...please read this piece with input from Forbes Magazine...
Its the same concept as giving tax cuts to the wealthy , blowing a hole in the budget , then blaming it on food stamps and cutting them to fix the hole ....it is the wall st modle for job and government destruction
We need a MAKE AMERICAN COMPANIES EFFICIENT loan program , and drive the inept psychotic anti worker wall st losers out of america
I'm more interested in the Walmart fiasco. I think we're about to see a Reagan-esque move on this presidents part with the firing of all the Air Traffic Controllers. Ya know, where you had Walt the janitor landing your plane. We're about to see the same with Walmart. We saw it with the teacher's unions up in WI. We're gonna see it again.
That's fine, that's great. But I would rather have a Republican in office than a DINO. At least then in 4 or 8 more years we could get a real Democrat, instead of 12 or 16. But it is what it is, I s'pose.
Someone who said that he would "stand there and face down big companies with the unions behind him". Yah, sure Obama. You sure showed Scott Walker. Noble work you're doing.
Oh, and about this... When's the last time you ate a Twinkie? That's the reason the company collapsed. Sure, the executives are to blame, but in today's capitalistic society of pit bull eating chihuahua what did you expect?
This isn't a dog eat dog world. That implies that both dogs are of equal size. This isn't a even a fair fight for the American worker anymore and the president does not have your backs America.
The Story is the Perfect example of how managment destroyed the company...
Ownership changed every four years, Admin paid themselves outrageous salary with gigantic expense accounts including Jets, Party's, Entertaining Hundreds of Guests, Clothing Accounts, Dining Accounts, Security Guards, Special Schools for their Children...
The workers did not even get a cost of living raise for three years. The company raised the cost of health care to the point that workers had to drop the coverage. When a medical emergency did come up, they used up all their funds, losing their home, cars...
WAIT A SECOND... I'm not talking about Hostess... This is the United States Government!
Corn affordability isn't what it was, thanks to ethanol. Gasoline isn't what it was for the same reason, but that's another story. Still, Twinkies did not go under because of cost of ingredients or cost of labor. Marketing and management were responsible. This blog was eye opening. Thanks, Rachel.
I have no doubt about the article's truthfulness behind the demise of Hostess. However, I do not think it pointed out that the Union and the Company, in my understanding, had agreed on a contract. It was a splinter group of the union that was perhaps (note I said perhaps) the last straw. If this is the case, the entire Union cannot be criticized. In addition, the facts set out are very complicated. Many union members will associate the loss of their jobs with the splinter group. There could be some violence within the union.
I have seen so many large local companies go out of business because the workers are unionized and from the Greed of those workers. Bethlehem Steel, Firestone, Stanely G Flagg, and Gudebrod. That's just a few in this area. The demands the workers usually get from labor negociations are just too much for the company to stay in business and make a profit.
However you feel about them, Twinkies are irreplaceable.
You can try to bake some cream-filled sponge cakes at home, but there's just nothing like the real thing.
On the occasion of the 80th anniversary of Twinkies, David Leavitt, Vice President of Snack Marketing for Hostess attempted to describe their special magic:
Deconstructing the Twinkie is like trying to deconstruct the universe. Some people look at the sky and think it’s beautiful; others try to count the stars.
http://gigabiting.com/the-80-year-old-twinkie/
"Unions obtain their benefits from corporate boardrooms. After upper management takes a healthy cut up front, it then cares little for the long term. Give the unions whatever they want. There’ll never be money to pay down the road anyway. It is illusory. On closer inspection, hasn’t management conveyed just expectations?"
Read more at
http://lifeamongtheordinary.blogspot.com/2012/01/he-gave-expectations.html
I'm not convinced that it was "the product"'s fault either... already there are several groups lining up to take over production. Long live Twinkies!! (Don't you love that bit in "Wall-e" about the 700-year old Twinkie...)
COMMON CHRISTEN CITIZEN
As a common christen citizen I know even God
believes in world changes, you can see this all around with everything in
nature. If they (The Republican Party) continual with contempt of (We the
People) the majority of the nation political wish and the wasteful sidetracking
to stop President Obama from for filling these wishes of the people. We must
first call on the law of the land to JUSTIFY the removable of the Republican
Party or vanishing of the party from history and replacing them with the
Independents. IF THEY DONOT UNDERSTAND then we will do it the Republican way,
drag them out of offices (We the People), Republican please leaves your person
convention at home; your owners who pay you leave them out of the nation’s
politic. We do not want or need a Communist control or one party rule country
in theses UNITE STATE of AMERICA. Where is your loyalty mister Republican to
our nation or too another hidden nation.
something greate can become of this if a group of invester would buy out Hostess an move production, manufactoring with new factorys all around the country. This will save a Icon and open a new market to the world, think about it.