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Unions shot themselves in the foot with their strike against Hostess. They had a decent gig, were getting paid extremely well for what amounted to manual labor (the machines did most of the work) but they decided that, economic conditions be damned, they weren't going to acquiesce.
(Again, this company had been mismanaged for a long time. Not saying the workers were 100% to blame.)
But it strikes me as funny that these same workers assumed that whomever took over Hostess brands would honor their old agreement. From the WSJ:
The union that brought the 85-year-old baker of Twinkies and Wonder Bread to its knees is holding out hope that a buyer will salvage chunks of the company and send the union's members back to work, even as Hostess Brands Inc. gears up for a fire sale.
Hostess, the company behind treats snacked on for generations, is poised on Monday to present to a federal bankruptcy judge a plan to shut down 36 plants and sell off the company's business. The liquidation was sparked by a nationwide strike orchestrated by the snack maker's second-largest union, the Bakery, Confectionery, Tobacco Workers ...
Now a judge has ordered the company and its union into mediation. But it's too little, too late. There are better options on the table and the brands are gone. Kaput. Poof.
For now. Because the American snack company (and I shudder to say that, since it's hardly a mark of quality) may no longer be American-made, going the way of Miller Beer. From Yahoo:
The brands “most likely will be purchased by a competitor that will bolt the additional sales to a more efficient delivery system,” David Pauker, a food industry restructuring specialist, tells Reuters. “The company itself won't survive.”
Bimbo has already sniffed around the bankruptcy proceedings that have haunted Hostess for a decade, in a bid to further expand its North American portfolio and pad its $4 billion net worth. Bimbo reportedly put in a low-ball bid of $580 million a few years ago, Forbes reports, and may be rewarded for that move since the Hostess kit-and-kaboodle may fetch more like $135 million today.
But the big question is whether the same problems that haunted Hostess – high sugar prices tied to US trade tariffs, changing consumer tastes, and union pushback against labor concessions – will squeeze whatever profit is left in the brands.
Especially if a Mexican buyer is involved, production may go the way of the Brach’s and Fannie May candy concerns: south of the border. With US sugar tariffs set artificially high to protect Floridasugar-growing concerns, a non-unionized shop with access to lower-priced sugar in Mexico could be the Twinkie lifeline, economists suggest.
On the other hand, if Hostess’ problem is its legacy delivery system, which is what University of Maryland economist Peter Morici suspects, Bimbo may be able to squeeze profits out of the supply chain while still making Twinkies in the US, albeit probably not in union shops.
While Twinkie may not be dead (God help us all), the union workforce that produced the diabetic treat certainly is. And it seems that may be a good thing, because the rules were absurd. From the WSJ:
The snack giant endured $52 million in workers' comp claims in 2011, according to its bankruptcy filing this January. Hostess's 372 collective-bargaining agreements required the company to maintain 80 different health and benefit plans, 40 pension plans and mandated a $31 million increase in wages and health care and other benefits for 2012.
Union work rules usually required cake and bread products to be delivered to a single retail location using two separate trucks. Drivers weren't allowed to load their own vehicles, and the workers who loaded bread weren't allowed to load cake. On most delivery routes, another "pull up" employee moved products from back rooms to shelves.
This year management negotiated concessions from some of the unions, including the Teamsters, but the bakers rejected a last and best offer in September. Then the courts gave Hostess unilateral authority to modify collective-bargaining contracts, prompting the strike. So now it will liquidate, instead of attempting to emerge from Chapter 11 intact.
I only post this information because there's a push to blame the management. Who, I have said, was awful. But this class warfare bullish has gone entirely too far. Even if these numbers are true (there's no source), the shop rules completely restricted the company from making even simple changes that would allow the brands to survive.