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 Betty Liu 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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12 Comments

  1. Foxfier and I don’t need to go to the urban dictionary to know what a twink is. I know I have been a twink many times over the past 17 years, and I have no doubt Foxfier has been a twink many times over the past 10. Gamers twink all the time; it’s how to get things done faster, stronger, better, more powerfully.

    I’m a twink and proud of it (where, on Mortal Realms, I once took a Level 1 character to the max (level 95) in just under 14 hours while it took normal people 100 to 300 hours to do the same).

  2. Foxfier and I don’t need to go to the urban dictionary to know what a twink is. I know I have been a twink many times over the past 17 years, and I have no doubt Foxfier has been a twink many times over the past 10.

    I have no idea about Foxfier, but that explains so much about you…

    Bwahahahahahhhahahahah.

  3. OTOH, it’s sad to see people lose their jobs especially in this struggling economy where finding new employment is unlikely. And, for one union’s intransigence to put tens of thousands of other union members out in the cold is hardly a satisfactory expression of the brotherhood of labor.

    OTOH, Hostess products are increasingly being rejected in the modern market and the future seems to indicate a continuation of the long slow decline that brought the company to it’s second bankruptcy. Perhaps this is the inevitable result of the company’s failure to change with the times and develop new products the public is willing to purchase.

    I haven’t bought a package of Twinkies since the middle 70s when I shared one with my dog. He spit his out. I went ahead and ate mine, but it bothered me, and it was the last one I ever ate.

  4. This is similar to the strike on Caterpillar in York, PA about 10 years ago. Caterpillar want to restructure the contract for pay comnesurate with work type. the union wanted the same salary for floor sweepers and skilled machinists. This wnt on for about 15 months, then they settled. But Caterpillar told them they risk losing the plant to the Carolinas. Three months after the strike ended, the trucks backed up to the doors, it was off to the carolinas. There went a few hundred good paying jobs. Seeing this over and over, you would think people and the unions would learn. Nope, same tactics, same results.

  5. The Bangor Daily News reports that union leaders are proud of their accomplishment: they sure showed management what would happen if union demands weren’t met. However, the union’s leaders don’t seem to have much to say at all to the workers they’ve unemployed. Yep, the leaders made their point all right, but who exactly has done the most damage to the employees and to their families: corporate management or union leaders?

    Maine’s striking Hostess workers say company’s collapse a strong message of union resolve

    Labor leaders in Maine say the resilience of the Hostess workers on the picket line at the company’s Biddeford plant, which is in the process of being shut down after the company on Friday said it would liquidate the business, gives them inspiration in the face of what they believe have been ongoing efforts — by politicians, including Gov. Paul LePage, and corporate investors — to reduce union influence.

    Bakers’ union officials and their supporters say also that the demise of Hostess Brands Inc., which failed to convince striking workers to return to their jobs, is a warning sign for corporate investors seeking to squeeze more profits out of the working class.

    “Unions have been losing power for years,” said Ken Rumney, a striking worker outside of the Hostess plant in Biddeford on Friday. “This is an exceptional case. If Hostess had been allowed to get away with what they’d been trying to do, other corporations would have lined up to try the same tactics. Hopefully, this will be an example to other companies not to [try to] break their unions.”

    “I think we’re the first ones who have stood up and said, ‘We’re not going to let you get away with it,’” said Sue Tapley, the strike captain on hand Friday morning at the Biddeford plant, which employed nearly 600 people. “You can fight them. You can shut them down.”

    [Comment edited to add hyperlink; no changes made to text. --Editor]

  6. “I think we’re the first ones who have stood up and said, ‘We’re not going to let you get away with it,’” said Sue Tapley, the strike captain on hand Friday morning at the Biddeford plant, which employed nearly 600 people. “You can fight them. You can shut them down.”

    So Sue Tapley, where are you going to work on Monday. Or, are you going to the Unemployment office and freeload off the people who work. You probably voted for BO.

  7. York, maybe Sue can get a job with either the Commerce or Labor Department of our federal government where she can apply her insights to the management of the major private enterprises in our nation’s economy. Her peculiar inclinations just might fit right in with Barack Obama’s plans for transforming America into a second-rate debtor nation.

  8. One wonders just how much of an “inspiration” the Hostess workers have given to other workers. As for the now former Hostess employees, just how much of that “inspiration” is going to be on the Thanksgiving table, or under the Christmas tree?

  9. I’m trying to figure out just what rocket scientist thought that the best way to drum up support for unions was to have a strike and block traffic at Los Angeles International Airport on the busiest travel day of the year.

  10. Editor says:
    November 21, 2012 at 22:07

    I’m trying to figure out just what rocket scientist thought that the best way to drum up support for unions was to have a strike and block traffic at Los Angeles International Airport on the busiest travel day of the year.

    So this action will want people to like Unions??? HA! The Union Boss always comes out ahead in his little dictator ship.

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