Hostess: Another perspective

There are two sides to every story, and usually neither side represents the truth. But there are some components to the Hostess vs. Unions story that, if true, hardly supports the “it’s all the unions’ fault” narrative I’ve been hearing. Here’s one view of the other side (Knoxville News). One key section:

During the first bankruptcy, the bakers’ union agreed to some $20 million in wage and pension concessions, and the company “promised to focus on brand building, modernizing its plants and trucks, investing in new technology that other baking companies were employing and, importantly, developing new products to increase revenue in the face of a national trend away from sweet goods and bleached flour breads.”

However, when the company emerged from that Chapter 11, plant machinery was not replaced, new technology was ignored and new product development never occurred. And at the same time, company executives were getting raises of as much as 300 percent.

I’m not sure why the executives should be getting raises, period. Surviving bankruptcy (while piling up more debt) is not nearly so laudable as turning the company around, which they obviously didn’t do.  On the other hand, $20 million is not necessarily as big a number as it sounds. It comes to about $4000 for each of the BCTGM’s 5000 represented employees. I’m not sure how much they make on average, but that’s not necessarily a huge cut, and most of that was probably pension cuts. The fact that ongoing savings would only be $2 million a year ($400 per union member) indicates this reduction wasn’t going to save the company.

On the other hand, BCTGM is not the only union Hostess had to deal with. In their 2004 bankruptcy the company extracted $110 million in concessions from unions, so BCTGM’s $20 million was a small fraction. There are other unions out there that should be just as much under the microscope, if not more so.

So I don’t know what to make of this, frankly. It’s not so cut and dried. Certainly the union’s stance seems consistant. If they really do feel the company is mis-managed then it seems logical for them to let the current management fail and see who buys them out. It’s a gamble, but I’ve certainly seen companies where just about anyone else would be an improvement. And I’ve read enough about their management problems to feel the union’s claims are not without merit. Here’s the union’s side of the story, as filed in court this week.

As I said before, there’s their side, the company’s side, and somewhere else there is probably the truth. This piece at takes a wide-angle view of all components and, while inconclusive, sheds light on more aspects than we’ve likely heard. The bottom line is that it’s complicated. No on likes to hear that when a cultural icon goes under, but that’s the truth. No one likes to hear that when jobs are lost. But it sounds like there is plenty of blame to go around. No one factor brought Hostess down.

So while we’re at it, if we want to know who is responsible for killing our Twinkies, perhaps we should go look in the mirror. How many did you buy in the last year? I know I didn’t buy any, which is why I don’t feel qualified to get too sentimental. Nostalgia only gets you so far, and it’s not something Hostess could take to the bank.


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