Economics 101: When your employer is already losing money, going on strike is not necessarily the wisest idea

Your Editor has noted, many times, that:

A union in a private sector company has a responsibility to balance its demands with the economic realities required to keep the company in business. If the union somehow forces its demands to the point at which the company cannot remain profitable and competitive, the company goes out of business and the unionized employees lose their jobs. That is the ultimate discipline of the private sector, and the unions know this, even if they don’t always manage to get the balance correct.

Well, for over 18,000 workers, there may not be much HoHo in this Christmas:

Twinkie Maker Hostess to Fire 18,000, Close After Strike

Dawn McCarty and Phil Milford, ©2012 Bloomberg News
Published 2:27 p.m., Friday, November 16, 2012

Nov. 16 (Bloomberg) — Hostess Brands Inc., the bankrupt maker of Wonder bread and Twinkies, said it will fire more than 18,000 workers and liquidate after a nationwide strike by bakery workers crippled operations.

“Companies in bankruptcy don’t have any margin for error,” Chief Executive Officer Gregory F. Rayburn said today in an interview with  on “In the Loop” on Bloomberg Television. “We just didn’t have enough workers crossing the picket line.”

The 82-year-old maker of Hostess CupCakes, Ding Dongs and Ho Hos was undone by the strike after changes in American diets led to years of declining sales while ingredient costs and labor expenses climbed. The decision to liquidate capped a weeklong standoff between the company, once the largest U.S. wholesale baker, and a union that called its proposed labor contract “horrendous.”

Rayburn said Hostess will dismiss most of its 18,500 employees and focus on selling assets. Shipments of bread, snack cakes and other products will continue until supplies run out, he said. While Hostess has fielded interest in pieces of the business, its labor contracts and pension obligations have deterred any bids for the whole company, Rayburn said.

More at the link; your Editor will eschew making comments noting that a newspaper in San Francisco stressed the word Twinkie in the headline. :)

Hostess Brands had filed for bankruptcy protection in 2004, and emerged from restructuring in 2009 after a 4½ year process. Hostess filed for Chapter 11 bankruptcy protection again in January of this year:

Wedrick Hollingsworth, business agent for Local 372-B of the bakers union, said union members took wage and benefit concessions four years ago and are unwilling to accept further wage cuts and reductions in health and pension benefits sought by the company. “It’s just too much for these employees to accept. We gave concessions four years ago.”

John Smith, a wrapper operator at the plant who has worked for Hostess for 22 years, said he’s at peace with his decision to join the strikers. “You have to take a stand for what you believe in. They gave us a take-it-or-leave-it deal. We can’t take the financial abuse.”

The obvious question is: if they can’t take the financial abuse of a contract that required concessions but kept you employed, just how well will you take the financial abuse of being out of a job?

The Teamsters union is urging the bakers union (the Bakery, Confectionery, Tobacco Workers and Grain Millers International Union) to hold a secret ballot on whether to continue striking. Citing its financial experts who had access to the company’s books, the Teamsters say that Hostess’ warning of liquidation is “not an empty threat or a negotiating tactic” but a certain outcome if workers keep striking.

Hostess, based in Irving, Texas, already has reached a contract agreement while in bankruptcy with its largest union, the International Brotherhood of Teamsters. But thousands of members in its second biggest union went on strike late last week after rejecting a contract offer that cut wages and benefits.

Instead, they have just accepted a “deal” which has cut their wages and benefits to zero. And they just cut the throats of their fellow workers who were represented by the Teamsters as well. As for the Teamsters urging the bakers’ union to poll their members about the wisdom of continuing the strike, sorry, but it’s too late now.

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