Goodbye Twinkies.

[bldavis]

[Jester]

The CEO of Hostess makes 2.2 million a year (it was only 750,000 but he recently got a 300% pay increase, go figure), average Hostess worker makes 43,000 a year and wants to cut their salaries further but will be damned if he takes a cut himself.

Rats fleeting a sinking ship.

There was no chance to save the company. But apparently enough time to loot it before it went under the waves. Fair point that it's the executive, and not the workers, who get to do the looting. But it's not the difference between saving the company and not.

It is more profitable apparently for Hostess to close up shop then meet the workers demands, and many Wall Street hedge funders that have equity in Hostess have made millions in recent years through cutting workers pensions and salaires - this is fact.

Is it? How much would you have made holding Hostess stock through this whole process? I would have assumed you'd be wiped out. (And what would a hedge fund be doing buying Hostess?) Ripplewood stepped in and tried to pick it up at a bargain. They've gotten burned on this kind of thing before (Reader's Digest) and they got burned again. I have no sympathy for them, nor would I be looking for any. They're a risk business, and sometimes risks go bad. But if they hadn't stepped to buy before, those workers would have been laid off even earlier. You need both capital and labour to play the game of capitalism, and unless the workers were willing to risk *all* of their pension funds and just become the owners themselves, they're out of options. They can't coerce a capitalist to keep investing.

I wonder how much dough Hostess and their Wall Street shareholder goons are going to make giving 18k+ workers the hatchet then liquidating the companies assets. Should be some hefty little checks for the parasite class.

In liquidating a bakery company with nearly a billion in debt? This isn't Gordon Gekko, this isn't corporate raiding. They went bust. The only question remaining is who, among their creditors, loses the least. That's the story above about executive salaries - compensating themselves, because you can't legally claw back salaries, even once the place goes bankrupt. I'd like to see the pensions honoured, but I suspect there isn't even enough money to do that.

To be clear, I don't think the union is to blame here. I think any deal they might have agreed to would have been unacceptably bad. Sometimes, companies are just dead in the water. Bad decisions combined with declining demand and rising debt = going out of business.

-Jester

[NuurAbSaal]

You forgot to mention the NHL lockout. That one has me crying myself to sleep every night since October 11.

Capitalism did it!

take care
Tarabulus

[shoju]

Heh. BLDavis meet FIT.

You two... well... I might actually have to click to read things so that I can adequately enjoy the popcorn.

[Occhidiangela]

F.I.T.

Please note that the Teamsters were also in the fight, and they chose to make a deal rather than maintain the strike. The other union didn't realize when to fish, and when to cut bait ...

BUT

There is a Forbes article that describes the actual problem at Hostess. They had failed to change and innovate for about the past 20 years, regardless of changes in the market and changes in habits and consumer desires. This was not the first time Hostess was running into trouble, this was an open running sore for about a decade.

EDIT: darnit, can't find the link to that excellent analysis, and my account at the paper I subscribe to is in a password fail mode at the moment.

The Unions had Hitched Their Wagons to a Falling star, and thus fell with it.,

This isn't a case of Capitalism failing, nor of Unions failing. This was a case of failure to adapt, which as Darwin might suggest, is fatal.

[kandrathe]

There is a Forbes article that describes the actual problem at Hostess. They had failed to change and innovate for about the past 20 years, regardless of changes in the market and changes in habits and consumer desires. This was not the first time Hostess was running into trouble, this was an open running sore for about a decade.

http://www.forbes.com/sites/adamhartung/...t-failure/

This one?

[bldavis]

Heh. BLDavis meet FIT.

You two... well... I might actually have to click to read things so that I can adequately enjoy the popcorn.

heh

[Occhidiangela]

Yes, that is the one. Thanks.

[Nystul]

I would imagine the Teamsters were willing to play ball primarily in the hopes of recovering the pension funds. Younger workers with less time invested in building a pension (and also less time building up seniority based pay raises) might see a raw deal as a raw deal. You can't really look at the average situation and say people made a good vote or a bad vote, because not everyone is in the same place.

To give the extreme example, some of my coworkers at UPS will make around $10,000 dollars this year. A truck drivers nearing retirement at UPS could be making six figures. Those are people in the same union working under the exact same contract, and one is making 15 times as much as the other (also working a lot more hours, but that's part of the deal). We have contract coming up next year and I expect it will go pretty smoothly. But outsiders who look at the situation through a few articles, statements released by the company and/or union, etc. don't understand how differently individuals will be affected by the situation. If we were to strike, people who don't work in the industry would have no understanding of the dynamics behind it.

My impression is that Hostess was a sinking ship and it was just a matter of when. They had filed for bankruptcy some years back and workers had to make concessions back then. Apparently that wasn't enough to solve the company's problems. I would buy Twinkies or donuts or Wonder bread when they were on a good sale, but there are plenty of good alternatives at the grocery store. For the suggested retail price of Hostess stuff you could often get superior product fresh from the bakery.

[kandrathe]

I would imagine the Teamsters were willing to play ball primarily in the hopes of recovering the pension funds. Younger workers with less time invested in building a pension (and also less time building up seniority based pay raises) might see a raw deal as a raw deal. You can't really look at the average situation and say people made a good vote or a bad vote, because not everyone is in the same place.

To give the extreme example, some of my coworkers at UPS will make around $10,000 dollars this year. A truck drivers nearing retirement at UPS could be making six figures. Those are people in the same union working under the exact same contract, and one is making 15 times as much as the other (also working a lot more hours, but that's part of the deal). We have contract coming up next year and I expect it will go pretty smoothly. But outsiders who look at the situation through a few articles, statements released by the company and/or union, etc. don't understand how differently individuals will be affected by the situation. If we were to strike, people who don't work in the industry would have no understanding of the dynamics behind it.

My impression is that Hostess was a sinking ship and it was just a matter of when. They had filed for bankruptcy some years back and workers had to make concessions back then. Apparently that wasn't enough to solve the company's problems. I would buy Twinkies or donuts or Wonder bread when they were on a good sale, but there are plenty of good alternatives at the grocery store. For the suggested retail price of Hostess stuff you could often get superior product fresh from the bakery.

I recently attended a seminar on labor being given by one of the local top union's leadership. They viewed the growing global economy as the major reason unions in the US are having a hard slog. Just after WWII, the US was pretty much the major unbroken industrial economy, and so management and labor became rich, and complacent. They were not forward thinking to the 1980's when everyone would have recovered from the war. Couple with that the explosion of productivity enhancements due to technology (computers, software, and robotics are just the obvious). The US had the luxury of giving labor whatever they wanted, and writing into law bunches of regulations. But, Hostess is an extreme example of a product that no longer has a market. Like film, VHS tapes, record players, or CRT's.

The unions are trying to be realistic in working with companies to create workable labor partnerships. No companies, means no jobs, no dues, and no unions.

[Occhidiangela]

My impression is that Hostess was a sinking ship and it was just a matter of when.

Apparently so, for the last ten or fifteen years.

kandrathe: that situation was pretty obvious back during Clinton's administration, but was masked by the tech bubble.

*pause for a moment, Stan Rogers, Barrett's Privateers*

I first go to know the Teamsters back then due to where I worked. It was interesting to see how that organization was of two minds: one, the old "management is the enemy and all else is rubbish" and the other "we need to keep this company alive to keep our union strong."

The iron law of wages cares not for borders.

Nystul: the NFLPA and UPS seem to have some interesting similarities in income disparity.

[Nystul]

I first go to know the Teamsters back then due to where I worked. It was interesting to see how that organization was of two minds: one, the old "management is the enemy and all else is rubbish" and the other "we need to keep this company alive to keep our union strong."

The iron law of wages cares not for borders.

Nystul: the NFLPA and UPS seem to have some interesting similarities in income disparity.

You are right about Teamsters leadership. There is a lot of politics to it and there is a lot of hardline rhetoric. A lot of times what the national leadership really wants is to increase membership. Having companies struggle does not help to increase membership. So the rhetoric is one thing and the real contracts are another.

Wage pressures are different in different lines of work. We talk about the global market, and it affects everyone. But it's not the same for everyone. An auto manufacturing plant in Ohio could be shut down and moved out of the country where people are willing to work for peanuts. On the other hand, a UPS hub in Ohio cannot be moved very far at all. If Hostess could move their bakeries to another country, they would still need drivers in the U.S. Local services are always going to be required.

Union or not union is not always the real issue. Starting wage at UPS has been $8.50 for a very long time now. If you start at UPS or non-union FedEx, early on at least it is basically the same. A little premium over flipping burgers etc. because the work is a lot more physically demanding and most people quit. Unions cannot ignore or change the realities of the market. They can limit the exploitation or unfair treatment of workers to some extent. And they can waste union dues to pay the union leadership and fund political agendas.