FacebookTwitterGoogle+RedditEmail

Labor Union Unfairly Blamed for the Hostess Meltdown

by DAVID MACARAY

“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.

David Macaray is a playwright and author. His newest book is “Nightshift: 270 Factory Stories.” He can be reached at dmacaray@gmail.com

Weekend Edition
February 5-7, 2016
Jeffrey St. Clair
When Chivalry Fails: St. Bernard and the Machine
Leonard Peltier
My 40 Years in Prison
John Pilger
Freeing Julian Assange: the Final Chapter
Garry Leech
Terrifying Ted and His Ultra-Conservative Vision for America
Andrew Levine
Smash Clintonism: Why Democrats, Not Republicans, are the Problem
William Blum
Is Bernie Sanders a “Socialist”?
Daniel Raventós - Julie Wark
We Can’t Afford These Billionaires
Enrique C. Ochoa
Super Bowl 50: American Inequality on Display
Jonathan Cook
The Liberal Hounding of Julian Assange: From Alex Gibney to The Guardian
George Wuerthner
How the Bundy Gang Won
Mike Whitney
Peace Talks “Paused” After Putin’s Triumph in Aleppo 
Ted Rall
Hillary Clinton: the Good, the Bad and the Ugly
Gary Leupp
Is a “Socialist” Really Unelectable? The Potential Significance of the Sanders Campaign
Vijay Prashad
The Fault Line of Race in America
Eoin Higgins
Please Clap: the Jeb Bush Campaign Pre-Mortem
Joseph Mangano – Janette D. Sherman
The Invisible Epidemic: Radiation and Rising Rates of Thyroid Cancer
Andre Vltchek
Europe is Built on Corpses and Plunder
Jack Smith
Obama Readies to Fight in Libya, Again
Robert Fantina
As Goes Iowa, So Goes the Nation?
John Grant
Israel Moves to Check Its Artists
Dean Baker
Market Turmoil, the Fed and the Presidential Election
John Wight
Who Was Cecil Rhodes?
David Macaray
Will There Ever Be Anyone Better Than Bernie Sanders?
Christopher Brauchli
Suffer Little Children: From Brazil to Flint
JP Sottile
Did Fox News Help the GOP Establishment Get Its Groove Back?
Binoy Kampmark
Legalizing Cruelties: the Australian High Court and Indefinite Offshore Detention
John Feffer
Wrestling With Iran
Rob Prince – Ibrahim Kazerooni
Syria Again
Louisa Willcox
Park Service Finally Stands Up for Grizzlies and Us
Farzana Versey
Of Beyoncé, Trudeau and Culture Predators
Pete Dolack
Fanaticism and Fantasy Drive Purported TPP ‘Benefits’
Murray Dobbin
Canada and the TPP
Steve Horn
Army of Lobbyists Push LNG Exports, Methane Hydrates, Coal in Senate Energy Bill
Colin Todhunter
“Lies, Lies and More Lies” – GMOs, Poisoned Agriculture and Toxic Rants
Franklin Lamb
ISIS Erasing Our Cultural Heritage in Syria
David Mihalyfy
#realacademicbios Deserve Real Reform
Graham Peebles
Unjust and Dysfunctional: Asylum in the UK
Yves Engler
On Unions and Class Struggle
Alfredo Lopez
The ‘Bern’ and the Internet
Missy Comley Beattie
Super Propaganda
Ed Rampell
Great Caesar’s Ghost!: A Specter Haunts Hollywood in the Coen’s Anti-Anti-Commie Goofball Comedy
Cesar Chelala
The Public Health Impact of Domestic Violence
Ron Jacobs
Cold Weather Comforts of a Certain Sort
Charles Komanoff
On the Passing of the Jefferson Airplane
Charles R. Larson
Can One Survive the Holocaust?
FacebookTwitterGoogle+RedditEmail