Labor Union Unfairly Blamed for the Hostess Meltdown


“Ignored or left to languish, even the strongest brands can decline or die.”—Charles Sullivan, Hostess CEO, 2000 (Source:  Mid-American Journal of Business, Spring, 2000)

“If you over-lever a business, and you don’t invest back into the business for a period of years, you’re going to wind up in bankruptcy.”—Greg Rayburn, Hostess CEO, 2012 (Source:  CNBC Squawk Box, November 15, 2012)

Unless a last-minute investor comes to the rescue (and there are rumors that Dean Metropoulos & Co., owners of Pabst Blue Ribbon beer, is considering acquiring the company), Hostess Brands, Inc., founded in 1930, will permanently shut its doors, put 18,500 people out of work, and begin liquidating its assets.

Despite the fact that it’s had two bankruptcies since 2004, that its management has proven woefully inadequate (it’s had six CEOs since 2002), and that its Wall Street masters ( a private equity firm and two hedge funds) burdened Hostess with $800 million of debt, the blame for this mess is being laid on the BCTGM (Bakery, Confectionery Tobacco and Grain Millars International Union), the union representing Hostess employees.

Let’s look at the facts.

The company was never seriously interested in solidifying and entrenching its position in the marketplace. Rather, caught up in the go-go exuberance of the “bigger is better” philosophy of the post-Reagan era, Hostess went on a wildly ambitious buying spree in the 1990s, one that more than doubled the company’s total number of production facilities and employees.

Then, in the early 2000s, despite warnings from market analysts, Hostess began buying back huge amounts of its own stock. Because the timing was bad, the move resulted in enormous debt and what was described as “balance sheet degradation.” One could make the case that Hostess was not only a poorly run company, but one that was crying out for a cohesive market strategy. You don’t go through six CEOs if you have a clear plan.

But they blame the union for their problems.

During the 2000s, over-burdened with debt and absent any clear idea of what to do or where to go next, Hostess abruptly shut down 21 production facilities and cut its total workforce from 35,000 to approximately 18,000. First they buy big, then they sell big. To any outside observer, Hostess Brands, Inc., during the early 2000s, would appear to be a company in distress.

Yet, during this dreadful period—a period during which Hostess continued losing market share, continued watching its technology grow obsolete, continued accruing debt, and continued struggling to find a codified plan of action—it never stopped generously rewarding its top executives. Annual salaries were doubled and even tripled. Hostess was pretending it was still a healthy, successful company.

But they blame the union for their problems.

In the wake of Hostess’ 2004 bankruptcy, the BCTGM willingly gave back $110 million in concessions. This was done in return for the company’s promise that it would invest in new machinery and new technology, and thereby insure its future in the marketplace. For the union, these give-backs were a prudent, self-preservation move, ones the rank-and-file and leadership felt was necessary.

But despite that promise, Hostess never followed through on those long-term investments. Indeed, the “long-term” no longer seemed to interest them. Instead, company executives and the private equity firm and two hedge funds that ran the company sought to line their own pockets. They raked it in. Meanwhile, the revolving door of CEOs continued.

Then, most recently, after the chickens had come home to roost, Hostess, now in full-blown panic mode, approached the BCTGM and demanded debilitating pay and benefit cuts. Even in the wake of the union’s $110 million in concessions that followed the first bankruptcy, Hostess demanded staggering give-backs. They insisted on cuts of between 27-32 percent. And that was just for starters.

Alas, the union saw the writing on the wall. This was a company that was going out of business. This was a company that was going out of business and was looking to “harvest” as much as it could on the way out. Hostess could spin it any way they liked, but this is what was happening.

And it was at this point that the workers said enough is enough. They realized that the company they’d worked for all these years had been run into the ground. While the decision gave them no solace, they recognized what needed to be done, and by a vote of 92-percent, the union rejected the massive cuts and opted to go on strike, even knowing that a strike almost assuredly put them in jeopardy.

Hostess is a cautionary tale. It’s a company that was not only systematically picked clean by Wall Street vultures, it’s one whose executives lavishly compensated themselves during its death throes. For Hostess, it’s been one reckless, greedy move after another—one management fiasco after another—and yet they’ve been unwilling to blame themselves.

They blame the union for this whole mess.

David Macaray, an LA playwright and author (“It’s Never Been Easy:  Essays on Modern Labor,” 2nd Edition), was a former labor union rep.

November 26, 2015
Ashley Nicole McCray – Lawrence Ware
Decolonizing the History of Thanksgiving
Joseph Grosso
The Enduring Tragedy: Guatemala’s Bloody Farce
Roxanne Dunbar-Ortiz
Imperial Myths: the Enduring Lie of the US’s Origin
Ralph Nader
The Joys of Solitude: a Thanksgiving!

Joseph G. Ramsey
Something to be Thankful For: Struggles, Seeds…and Surprises
Dan Glazebrook
Turkey Shoot: the Rage of the Impotent in Syria
Andrew Stewart
The Odious President Wilson
Colin Todhunter
Corporate Parasites And Economic Plunder: We Need A Genuine Green Revolution
Rajesh Makwana
Ten Billion Reasons to Demand System Change
Joyce Nelson
Turkey Moved the Border!
Richard Baum
Hillary Clinton’s Meager Proposal to Help Holders of Student Debt
Sam Husseini
A Thanksgiving Day Prayer
November 25, 2015
Jeff Taylor
Bob Dylan and Christian Zionism
Dana E. Abizaid
Provoking Russia
Oliver Tickell
Syria’s Cauldron of Fire: a Downed Russian Jet and the Battle of Two Pipelines
Patrick Cockburn
Trigger Happy: Will Turkey’s Downing of Russian Jet Backfire on NATO?
Robert Fisk
The Soothsayers of Eternal War
Russell Mokhiber
The Coming Boycott of Nike
Ted Rall
Like Father Like Son: George W. Bush Was Bad, His Father May Have Been Worse
Matt Peppe
Bad Policy, Bad Ethics: U.S. Military Bases Abroad
Martha Rosenberg
Pfizer Too Big (and Slippery) to Fail
Yorgos Mitralias
Bernie Sanders, Mr. Voutsis and the Truth Commission on Greek Public Debt
Jorge Vilches
Too Big for Fed: Have Central Banks Lost Control?
Sam Husseini
Why Trump is Wrong About Waterboarding — It’s Probably Not What You Think
Binoy Kampmark
The Perils of Certainty: Obama and the Assad Regime
Roger Annis
State of Emergency in Crimea
Soud Sharabani
ISIS in Lebanon: An Interview with Andre Vltchek
Thomas Knapp
NATO: This Deal is a Turkey
November 24, 2015
Dave Lindorff
An Invisible US Hand Leading to War? Turkey’s Downing of a Russian Jet was an Act of Madness
Mike Whitney
Turkey Downs Russian Fighter to Draw NATO and US Deeper into Syrian Quagmire
Walter Clemens
Who Created This Monster?
Patrick Graham
Bombing ISIS Will Not Work
Lida Maxwell
Who Gets to Demand Safety?
Eric Draitser
Refugees as Weapons in a Propaganda War
David Rosen
Trump’s Enemies List: a Trial Balloon for More Repression?
Eric Mann
Playing Politics While the Planet Sizzles
Chris Gilbert
“Why Socialism?” Revisited: Reflections Inspired by Einstein’s Article
Charles Davis
NSA Spies on Venezuela’s Oil Company
Michael Barker
Democracy vs. Political Policing
Barry Lando
Shocked by Trump? Churchill Wanted to “Collar Them All”
Cal Winslow
When Workers Fight: the National Union of Healthcare Workers Wins Battle with Kaiser
Norman Pollack
Where Does It End?: Left Political Correctness
David Macaray
Companies Continue to Profit by Playing Dumb
Binoy Kampmark
Animals in Conflict: Diesel, Dobrynya and Sentimental Security
Dave Welsh
Defiant Haiti: “We Won’t Let You Steal These Elections!”