Hostess Brands

lour441

http://online.wsj.com/article/SB10001424127887324556304578122632560842670.html

This company has had issues for years. This is the second bankruptcy since 2004? so I assume they were eventually going to close up shop if they didn't fix the underlying issues. That said, I really have to wonder what was going through Bakery Union member's heads when they voted for a strike knowing full well that a strike would lead to them losing their jobs and their pensions? I guess unemployment is better then an 8% pay cut that gets scaled back over 3 years.

Azdak

I don't know all the details of exactly what the process was that led to this or the context of this specific offer. I understand that the knee-jerk reaction in this country is to always blame the workers and unions whenever something like this occurs.

Maybe at this particular junction, the bakery union members made the wrong choice. However, when you look at the larger picture, this was likely not a company that could be saved--not because of excessive labor costs or poor productivity, but because of the long-standing business incompetence of the company owners and managers. This is a classic Bain/Romney-style vulture capitalism scenario, in which private equity firms acquire businesses, and ransack the assets, or make cosmetic balance-sheet changes to flip the company and sell it off to someone else.

Here is the tipoff, from the WSJ story:

Describing Gregory Rayburn, chief executive:

The CEO, a restructuring professional

"Restructuring professional"

Not: consumer goods expert, not "manager with experience in the baked goods industry".

No--"restructuring professional". i.e. "Liquidation Expert".

Now, in this case, Rayburn appears to have taken over earlier this year, so he is not completely responsible for the mismanagement of the company. However, years ago, Hostess was acquired by Wall St investment firms who appeared either incapable or uninterested in actually running the business. Before judging the actions of the workers, I think it is necessary to look at the big picture, and consider the factors that might have eroded workers' trust.

**Workers had already accepted significant wage and benefit cuts in the past

**Workers were being asked to accept cuts, but top executives had gotten massive raises as Hostess was about to enter bankruptcy. (In all fairness, it appears that Rayburn cut executive salaries back in April after he took over).

**Investments in the company's future that had been promised as part of restructuring after the previous bankruptcy were never made.

**This (from the union president):

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.

** And, finally, this:

...according to the company’s 1113 filing with the bankruptcy court earlier this year as well as its last/best/final and non-negotiable proposal to its BCTGM-represented workers, the company was planning to close at least nine bakeries as part of its reorganization plan, although the company refused to disclose which bakeries it intended to close. This is in addition to the three bakeries that were to be closed as a result of the company’s planned sale of its Merita division.

Moreover, St. Louis Mayor Francis Slay was quoted in a November 13 KMOX-CBS St. Louis article stating, “I was told months ago they were planning on closing the site in St. Louis… And there was no indication at that time it had anything to do with the strike the workers were waging.”

Again, maybe in this particular situation, at this particular time, the union workers made a bad choice. But it could also be that, based on what they had seen taking place over the past 8 years, they felt they no longer had any faith or trust in a company management that repeatedly lied to them, and was essentially trying to use the current financial condition in this country as leverage to force workers into bearing all of the consequences of their mismanagement.

And it could also be--as referenced in the above quote--that the company is just blowing smoke and using the strike as cover, to blame workers for actions it was planning on taking all along.

It's easy and probably natural for outside observers to look at the situation and say "isn't some kind of job better than nothing?" And, again, they may be right. But the converse is to look at the situation and say "wow, if they were willing to take that action, knowing what the consequences might be--the situation must be a lot worse than we could imagine". IMO, strident union actions don't just materialize out of thin air--and they rarely have anything to do with "greed". They are almost always due to a management that is either incompetent or ideologically opposed to labor in general and so are looking to pick a fight.

Azdak

This topic seemed to drop off the radar, however it does provide some interesting insight into what appears to be some changing attitudes towards this type of story.

First of all, if you do nothing at all, read this:

http://www.dailykos.com/story/2012/11/18/1162786/-Inside-the-Hostess-Bankery

As a first-person narrative, it's the best article I have read so far about the Hostess "liquidation". Take away the "Hostess" name and this report could have been written about dozens, if not hundreds, of companies in America over the past three decades. It puts a human face on the so-called "union thugs" that conservatives so enthusiastically demonize.

But it also represents a change in the national narrative towards these types of stories. In the past, the "greedy unions" meme has gone pretty much unchallenged. For some reason, average Americans seem obsessed with denigrating their neighbors while engaging in the most obsequious behavior towards corporate executives. Corporations know this and so they have trotted out the "greedy union" description at every opportunity when it was necessary to mask their own incompetence and malfeasance.

In this the age of the internet, Twitter, and other social media, however, it has become more and more difficult to control the narrative. Within hours of the announcement that the equity companies that own the Hostess brands would be shutting them down, stories describing the real facts behind the decline of the company and the so-called "labor dispute" appeared all over the internet.

And, as it turns out, the story followed some familiar themes that were prominent in the recent Presidential election. One thing we learned during the 2012 campaign were details about the practices of venture (vulture) capitalist and private equity firms such as Bain Capital. We learned how they purchased companies, not to operate them efficiently and turn a profit, but to loot them---leveraging them with large amounts of debt, paying off the executives with large salary increases and bonuses, charging them huge "management and consulting" fees, and then using the added debt and expenses as "proof" of economic crisis to be used to squeeze concessions out of fearful workers and loot the pension plans--which paid for the whole thing And all along, execs with no experience running the businesses were put into place, thus ensuring that these companies could not recover and become competitive. And, finally, when there is nothing left, like the scene in Goodfellas after Paulie becomes a "partner" in Sonny's restaurant, you pull off the moral equivalent of an insurance fire by liquidating the company and selling off the pieces.

Thanks to the campaign, the story at Hostess is now familiar to a lot of Americans. The "blame it on the unions" story doesn't have the legs it used to. This may be the only positive contribution Mitt Romney has ever made to American society.

redhousecat

TBH, I haven't really kept up with the story, but, I want to ask, in case someone knows. Was the pay, benefits, work environment at Hostess so bad that workers were willing to lose jobs over it?

The way I look at it, if Hostess didn't employ Americans, they would be employing some other country's citizens at .30/hr. I don't know what a fair wage is considered anymore, but I do know minimum wage won't cut it. Were the unions asking for an unrealistic number or was the company THAT broke (or both).

I can't imagine risking my job over a few cents. I don't blame Hostess for closing shop either.

Azdak

TBH, I haven't really kept up with the story, but, I want to ask, in case someone knows. Was the pay, benefits, work environment at Hostess so bad that workers were willing to lose jobs over it?

The way I look at it, if Hostess didn't employ Americans, they would be employing some other country's citizens at .30/hr. I don't know what a fair wage is considered anymore, but I do know minimum wage won't cut it. Were the unions asking for an unrealistic number or was the company THAT broke (or both).

I can't imagine risking my job over a few cents. I don't blame Hostess for closing shop either.

You should read the story in the link -- then come back and talk about who is being "unreasonable" I also described in my second comment how these companies operate and how the economic conditions that company owners use to justify cutting workers salaries and benefits are often artificially contriived--they are the results of money having been looted from the company in the form of "management fees" and "consulting fees" paid back to the equity firm that owns the companies assets.

I don't have time to go into more detail or cite a lot of references, so anyone is free to ignore my interpretation of events. However, the information is readily available--both about Hostess and the way these types of companies operate. There is no reason to be uninformed if one actually wants to know the details. (And one can certainly read the same articles, etc, and come to different conclusions than mine--but IMO those conclusions should at least be based on facts and not just random speculation).

redhousecat

TBH, I haven't really kept up with the story, but, I want to ask, in case someone knows. Was the pay, benefits, work environment at Hostess so bad that workers were willing to lose jobs over it?

The way I look at it, if Hostess didn't employ Americans, they would be employing some other country's citizens at .30/hr. I don't know what a fair wage is considered anymore, but I do know minimum wage won't cut it. Were the unions asking for an unrealistic number or was the company THAT broke (or both).

I can't imagine risking my job over a few cents. I don't blame Hostess for closing shop either.

You should read the story in the link -- then come back and talk about who is being "unreasonable" I also described in my second comment how these companies operate and how the economic conditions that company owners use to justify cutting workers salaries and benefits are often artificially contriived--they are the results of money having been looted from the company in the form of "management fees" and "consulting fees" paid back to the equity firm that owns the companies assets.

I don't have time to go into more detail or cite a lot of references, so anyone is free to ignore my interpretation of events. However, the information is readily available--both about Hostess and the way these types of companies operate. There is no reason to be uninformed if one actually wants to know the details. (And one can certainly read the same articles, etc, and come to different conclusions than mine--but IMO those conclusions should at least be based on facts and not just random speculation).

I know the gist of it. I am lazy and just like reading other's opinions. I am indifferent either way.

lour441

TBH, I haven't really kept up with the story, but, I want to ask, in case someone knows. Was the pay, benefits, work environment at Hostess so bad that workers were willing to lose jobs over it?

The way I look at it, if Hostess didn't employ Americans, they would be employing some other country's citizens at .30/hr. I don't know what a fair wage is considered anymore, but I do know minimum wage won't cut it. Were the unions asking for an unrealistic number or was the company THAT broke (or both).

I can't imagine risking my job over a few cents. I don't blame Hostess for closing shop either.

You should read the story in the link -- then come back and talk about who is being "unreasonable" I also described in my second comment how these companies operate and how the economic conditions that company owners use to justify cutting workers salaries and benefits are often artificially contriived--they are the results of money having been looted from the company in the form of "management fees" and "consulting fees" paid back to the equity firm that owns the companies assets.

I don't have time to go into more detail or cite a lot of references, so anyone is free to ignore my interpretation of events. However, the information is readily available--both about Hostess and the way these types of companies operate. There is no reason to be uninformed if one actually wants to know the details. (And one can certainly read the same articles, etc, and come to different conclusions than mine--but IMO those conclusions should at least be based on facts and not just random speculation).

That link is pretty good. Thank you.

I think it gives a pretty decent viewpoint of the way things have been at Hostest for the past 10 years since the company went in to bankruptcy. I have no doubt the current management has no other goal then to milk whatever it can out of the company and then sell off the IP to the highest bidder. That said, the company got into this mess pre-2002. I would be curious to know why since all the claims of mismanagement are from 2002 on. I looked a little bit but the Steelers game is on and I am distracted Maybe later.

This little tidbit bothered me from that article....

The reason these jobs provided me with a middle class opportunity is because people like my father in law and his father fought for my Union rights. I received that pay and those benefits because previous Union members fought for them. I won't sell them, or my coworkers, out.

So the pay and benefits were received because they got the job and got into the system. Once they are in the system all they have to do is show up, do their job, and collect whatever is in the union contract. Whatever happened to earning pay and benefits through merit? I guess it's not possible in an unskilled labor position. If that's the case then one has to wonder why the unskilled labor position is making as much as it is in the first place? Oh ya.. because the union fought for it. Maybe the mismanagement before 2002 included signing bad labor contracts?

I believe you will see a lot more of this. It might be spun as greedy labor unions or crappy management. In the end, maybe it is just that management realizes they don't have to pay 48k per year with benefits and pensions for jobs that require unskilled labor.

This is the point where everyone that disagrees with me calls me an arrogant *kitten*. Cheers!

redhousecat

Thanks, Lour441 for offering your candid point of view. I love learning what other people really think. American capitalism makes real capitalism look like an ugly monster.

Both teams cut their noses off to spite their face. I think unions are a hindrance. I also think if corporations would just get over the instant dollar, they will find profits to be more abundant, and for a longer period, if they just keep things fair and keep their business in the US.

Azdak

I am posting the link to a follow up story from the author I linked to earlier. He provides more insight (in this case, opinion, but I think "informed" opinion-you can judge his credibility for yourself) into the Hostess situation, especially the real "business plan" behind followed by the "owners".

http://www.dailykos.com/story/2012/11/24/1164134/-The-Successful-Hostess-Business-Plan-Included-Bankruptcy

I know this topic started as a general conversation about unions--and that is still an appropriate discussion to have--however, I think it is important to realize that the Hostess bankruptcy and liquidation has little to do with the union workers per se. From what I have read in this and other stories, the jobs were pretty much doomed whether the union workers accepted the offer or not. I think the workers realized that, which is why they took such a hard line.

I think this article is important because it gives a good analysis of how these takeovers work. These types of actions--perfectly legal BTW-- play an increasingly larger role in our economy and it is one of the reasons why -- despite all the sturm and drang from our politicians --the economy has been so slow to recover. Nobel Prize winning economist Joseph Stiglitz refers to this as "rent seeking"-- the use of financial manipulations to grab a larger share of the economic pie without enlarging the pie itself. It's an important part of the massive transfer of wealth from the middle and working classes to the top 1% that has been taking place since 1980.

I don't know that there is a specific answer--other than taxing the crap out of the profits of these ventures and using that money to strengthen the safety net. I just think that when you read these stories about "union conflicts", it's important to look behind the curtain and see who is playing the Great Wizard of Oz -- and why. .