Wednesday, November 14, 2012

Unions Bite Hand that Feeds Cream Filling

In January, I wrote about the struggles that Hostess was enduring regarding their pending bankruptcy.

In the reorganization and restructuring the bankruptcy brought, the company introduced new union contracts designed to keep the company from cutting jobs and production in an effort to repay debts and, once again, make a profit.

Hostess owed a ridiculous amount to pension funds. Their overhead was bogged down by unrealistic labor benefits demanded by the unions. These were aggravated by rising costs and federal regulatory fees on sugar. To add more to the pain of the sugar taxes and costs, fuel prices have increased, adding to the overhead costs in bringing products to market, as well as costs of production in paying for the electricity and natural gas necessary to produce their baked goods.

Hostess's answer was to cut the company's contributions to many benefits, including pension funds and health benefits. They also sought to reduce the number of allowable hours in an effort to reduce the labor costs associated with paying overtime wages.

The deal also called for an average 8% wage cut. The union inaccurately told workers the cut was closer to 32%.  

The various unions didn't like the deal. They threatened to strike.

Hostess told the unions that the company would not stop them from striking. However, the company warned that if production fails to meet levels necessary to cover operating costs of any plant, they would be forced to close the respective plant. That would mean those striking workers would no longer have a position of employment to be striking with.

The union went on strike.

The unions also refused to tell the striking union members about what Hostess has informed them. So the wonderful union lied to its members and hid the truth from them.

Given the current state of the economy and the number of jobs being cut from various companies across the country, this may not have been the brightest move the unions made. In fact, this may have been as dumb of a move as backing Obama for president.

The warning wasn't enough. Union workers claimed that their unemployment and union benefits were better than the conditions of the new contract. So, they increased their strikes.

The result was that Hostess went back to bankruptcy court and told they were no longer seeking Chapter 11 restructuring bankruptcy. The company is now closing all of its facilities and selling off the remaining stock.

The union bit the hand that feeds them, cream filling in this case. Now they won't be fed by that hand. At last estimate, as many as 18,500 jobs with Hostess no longer exist. Now those union members have no pension fund. They have no medical benefits. They have no overtime. They have no regular wages. They will not be paying any union dues. They have no jobs at all. And, they are no longer on strike, since they are just unemployed people picketing.

Atlas needed a Twinkie -- shrug.