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.

More articles by:

David Macaray is a playwright and author. His newest book is How To Win Friends and Avoid Sacred Cows.  He can be reached at dmacaray@gmail.com

Weekend Edition
March 16, 2018
Friday - Sunday
Michael Uhl
The Tip of the Iceberg: My Lai Fifty Years On
Bruce E. Levine
School Shootings: Who to Listen to Instead of Mainstream Shrinks
Mel Goodman
Caveat Emptor: MSNBC and CNN Use CIA Apologists for False Commentary
Paul Street
The Obama Presidency Gets Some Early High Historiography
Kathy Deacon
Me, My Parents and Red Scares Long Gone
Jeffrey St. Clair
Roaming Charges: Rexless Abandon
Andrew Levine
Good Enemies Are Hard To Find: Therefore Worry
Jim Kavanagh
What to Expect From a Trump / Kim Summit
Ron Jacobs
Trump and His Tariffs
Joshua Frank
Drenched in Crude: It’s an Oil Free For All, But That’s Not a New Thing
Gary Leupp
What If There Was No Collusion?
Matthew Stevenson
Why Vietnam Still Matters: Bernard Fall Dies on the Street Without Joy
Robert Fantina
Bad to Worse: Tillerson, Pompeo and Haspel
Brian Cloughley
Be Prepared, Iran, Because They Want to Destroy You
Richard Moser
What is Organizing?
Scott McLarty
Working Americans Need Independent Politics
Rohullah Naderi
American Gun Violence From an Afghan Perspective
Sharmini Peries - Michael Hudson
Why Trump’s Tariff Travesty Will Not Re-Industrialize the US
Ted Rall
Democrats Should Run on Impeachment
Robert Fisk
Will We Ever See Al Jazeera’s Investigation Into the Israel Lobby?
Kristine Mattis
Superunknown: Scientific Integrity Within the Academic and Media Industrial Complexes
John W. Whitehead
Say No to “Hardening” the Schools with Zero Tolerance Policies and Gun-Toting Cops
Edward Hunt
UN: US Attack On Syrian Civilians Violated International Law
Barbara Nimri Aziz
Iraq Outside History
Wilfred Burchett
Vietnam Will Win: The Long Hard Road
Victor Grossman
Germany: New Faces, Old Policies
Medea Benjamin - Nicolas J. S. Davies
The Iraq Death Toll 15 Years After the US Invasion
Binoy Kampmark
Amazon’s Initiative: Digital Assistants, Home Surveillance and Data
Chuck Collins
Business Leaders Agree: Inequality Hurts The Bottom Line
Jill Richardson
What We Talk About When We Talk About “Free Trade”
Eric Lerner – Jay Arena
A Spark to a Wider Fire: Movement Against Immigrant Detention in New Jersey
Negin Owliaei
Teachers Deserve a Raise: Here’s How to Fund It
Kollibri terre Sonnenblume
What to Do at the End of the World? Interview with Climate Crisis Activist, Kevin Hester
Kevin Proescholdt
Secretary of Interior Ryan Zinke Attacks America’s Wilderness
Franklin Lamb
Syrian War Crimes Tribunals Around the Corner
Beth Porter
Clean Energy is Calling. Will Your Phone Company Answer?
George Ochenski
Zinke on the Hot Seat Again and Again
Lance Olsen
Somebody’s Going to Extremes
Robert Koehler
Breaking the Ice
Pepe Escobar
The Myth of a Neo-Imperial China
Graham Peebles
Time for Political Change and Unity in Ethiopia
Terry Simons
10 American Myths “Refutiated”*
Thomas Knapp
Some Questions from the Edge of Immortality
Louis Proyect
The 2018 Socially Relevant Film Festival
David Yearsley
Keaton’s “The General” and the Pernicious Myths of the Heroic South