LA Times – Poor management, not union intransigence, killed Hostess

27 Nov

Go read the whole article at the LA Times.                  

This is the Mitt Romney/ job creator business model. Very popular for a while now with the hedge fund/vulture capitalist/–small business?? –crowd that the republicans would like to help more by slashing their taxes to nothing.

Buy a company. Sometimes it will be a company like Hostess, that’s doing fine.

Immediately start cutting costs. Which mostly translates into cutting labor cost. Start to destroy the union.(These people look at Chinese labor costs and salivate.. They want that here)

Spend no money on upkeep and infrastructure. That takes cash from the investors that should rightly end up in their pockets.

Start loading the company up with debt. Bankruptcy laws, when played the right way, can be very lucrative.

Get your large bonuses early. That way the money will be in the Caymans,… safe and sound,… when the shit hits the fan later.

Run the company into bankruptcy. Blame the workers. Get concessions. Repeat as often as necessary. With as many companies as possible.

Tell people that you,… as a “job creator”,… are what makes this country great. You need to be nurtured and protected.

Poor management, not union intransigence, killed Hostess

By Michael HiltzikNovember 25, 2012

Hostess management’s efforts to blame union intransigence for the company’s collapse persisted right through to the Thanksgiving eve press release announcing Hostess’ liquidation, when it cited a nationwide strike by bakery workers that “crippled its operations.”

That overlooks the years of union givebacks and management bad faith. Example: Just before declaring bankruptcy for the second time in eight years Jan. 11, Hostess trebled the compensation of then-Chief Executive Brian Driscoll and raised other executives’ pay up to twofold.At the same time, the company was demanding lower wages from workers and stiffing employee pension funds of $8 million a month in payment obligations.   ——————–

———— Hostess first entered bankruptcy in 2004, when it was known as Interstate Bakeries. During its five years in Chapter 11, the firm obtained concessions from its unions worth $110 million a year. The unions accepted layoffs that brought the workforce down to about 19,000 from more than 30,000. There were cuts in wages, pension and health benefits. The Teamsters committed to negotiations over changes in antiquated work rules. The givebacks helped reduce Hostess’ labor costs to the point where they were roughly equal to or even lower than some of its major competitors’.

But the firm emerged from bankruptcy with more debt than when it went in — in with $575 million, out with $774 million, all secured by company assets. That’s pretty much the opposite of what’s supposed to happen in bankruptcy. By the end, there was barely a spare distributor cap in the motor pool that wasn’t mortgaged to the private equity firms and hedge funds holding the notes (and also appointing management).      ——————————————

———————– In any event, the $989 million in pension liabilities Hostess ended up owing various union funds, according to its bankruptcy filing, didn’t accumulate in secret, like termite damage. It accrued because Hostess and its sister bakeries judged their retirement obligations to be relatively unimportant in the grand scheme of things. Now that the bill has come due, Hostess blames the workers for demanding what they were promised.

The record shows that Hostess’ unions were willing to talk with management at virtually every stage to keep the firm alive. There are plenty of companies and industries in which such talks have been fruitful, including the auto industry. But they can succeed only when everyone is confident that the guys at the other side of the table are committed to the same goals.

In this case, the unions finally realized that the Hostess strategic plan started and ended with extracting yet another round of cutbacks from employees. To argue that capitulating might at least save thousands of jobs is to accept the corrosive mind-set that manufacturing workers should be glad they’ve got any job at all and take what they’re offered.

The union members could see that their supposed management “partners” hoped to rescue their own investments by placing workers on a glide path to life on a minimum-wage existence, without pensions and without healthcare, after they had given and given again. You want to claim that they should have accepted the latest management demands as better than nothing instead of voting it down, OK. But you should ask yourself two questions: Where do you think this trend would have ended, and how much would you take?

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Posted by on November 27, 2012 in Economy, Politics


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