Economics 101: Hostess arises from the ashes, and goes non-union

At THE FIRST STREET JOURNAL, we paid some attention to the demise of Hostess Brands. Now comes this, from Sister Toldjah:

New maker of Twinkies: Non-union workers will be used to restart plants

Posted by: ST on April 24, 2013 at 7:03 pm

Let the OUTRAGE!!!!!!! begin:

The company that bought the Twinkie, HoHo and Ding Dong brands out of bankruptcy is gearing up to reopen plants and hire workers, but it won’t be using union labor.

Hostess Brands LLC—Metropoulos & Co. and Apollo Global Management LLC’s APO -2.11% new incarnation of the baking company that liquidated in Chapter 11—is reopening four bakeries in the next eight to 10 weeks, aiming to get Twinkie-deprived consumers the classic snack cake by mid-July.

Chief Executive C. Dean Metropoulos said the company will pump $60 million in capital investments into the plants between now and September and aims to hire at least 1,500 workers. But they won’t be represented by unions, including the one whose nationwide strike sparked the 86-year-old company’s decision to shut down in November.

“We do not expect to be involved in the union going forward,” Mr. Metropoulos said in an interview Wednesday.

More at Sis’ original.

We have 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.

Local 372-B of the Bakery, Confectionery, Tobacco Workers and Grain Millers International Union forgot that simple economic fact, and forced Hostess Brands Inc. into bankruptcy, and shut down the company. In striking for more, they wound up with nothing. A foolish choice, but it was their choice. Unfortunately, they took the jobs of the Teamsters Union local which had agreed to help Hostess stay in business along with their own.

Now, the new investors are planning to restart the business, but to do so with non-union labor. The former employees can always apply for the new jobs, but if the new investors are smart — and they didn’t get to be rich by being stupid — they will cross-check each application with the names of the previous employees, and every match will get tossed in the garbage can; why bring back the malcontents who shut down Hostess in the first place?

Of course, once Hostess is back up and running, current law absolutely allows the employees to either join an existing union or organize one of their own, and it’s very probable that Local 372-B of the Bakery, Confectionery, Tobacco Workers and Grain Millers International Union will try to get that done. But the new employees will also be very aware that it was Local 372-B’s actions which got the last unionized workforce unemployed, and might be just a little bit leery of going down that path.

By being stupid, one local hurt unionized employees everywhere. One wonders if any lessons were learned.

7 Comments

  1. One solution, given that Twinkies last forever, would be to produce far higher quantities of the product than needed, and then if there’s serious movement towards unionization, close the plant for six months.

    Obviously, this perverse method of business is not optimal, but perhaps it’s better than unionization, which says a lot for the stifled potential of America these days.

    The first amendment should protect workers’ right to assemble in any peaceful way they want, but it has always been clear to me that a strike that shuts down a factory is not lawful. Interference with someone’s business is immoral, too. I’ve never understood why this kind of shakedown racket is seen as a good thing. Be an awesome employee, and quit if you’re not treated as well as you’d be at the plant down the street. Over time, that kind of effort would work a lot better than what’s happened at Hostess.

    The problem with that, for the unions, is that many of their people are not even close to great. They want to be treated like they are great, but without the dedication. Hence all those GM cars with bottles left in the frame to rattle around, until the UAW got what they wanted. This particular incentive system has actually pulled inferior workers to the point where the smart shopper will avoid union labels.

  2. Dustin wrote:

    The first amendment should protect workers’ right to assemble in any peaceful way they want, but it has always been clear to me that a strike that shuts down a factory is not lawful.

    I think that depends on what you mean by “a strile that shuts down a factory.” If you are referring to picketing which blocks entry to a factory, you might have a case, but the strike that shut down Hostess wasn’t of that nature. Rather, the Bakers’ union said that they would strike, and not work, under the conditions imposed by management, and I believe that they have a perfect right to decline to work for a particular person or company; anything else would be slavery. I would suggest that striking your employer into bankruptcy ought to make you ineligible for unemployment compensation.

    They miscalculated: they thought that Hostess Brands would capitulate, and that they’d keep their jobs. If they had taken seriously the threats that failure to go along with what management said would be necessary to keep the company open, I’d guess that, like the Teamsters, they’d have gone along with it, albeit grudgingly. That wasn’t what they chose to do, they wound up gambling, and they lost.

  3. “Now, the new investors are planning to restart the business, but to do so with non-union labor. The former employees can always apply for the new jobs, but if the new investors are smart — and they didn’t get to be rich by being stupid — they will cross-check each application with the names of the previous employees, and every match will get tossed in the garbage can; why bring back the malcontents who shut down Hostess in the first place?”

    I think I’ve told this story before. My kid sister, before she went into medicine, was hired out of engineering school by an extremely well known and large foods company sharing an abbreviated name with an equally recognizable American automotive company. Among their most instantly recognizable products were things like cake mixes and breakfast cereals.

    In an effort to improve with new methods of manufacturing and management they built a new test plant with the idea of introducing worker participatory management, quality circles, and flexible job assignments. The idea was that by empowering employees and introducing new methods everyone would gain.

    At first the union seemed to agree to it. The staffing of the facility was to be voluntary and not based on seniority.

    However as things began to get underway, it was discovered that many of the company’s most troublesome or indifferent employees with seniority, suddenly became interested in moving to the new plant. They didn’t want to be “empowered”. They didn’t want to cooperate. They didn’t want responsibility. They did want to move to the new building and to take their old attitudes with them – to sit on stools as brainless machine tenders for eight hours a day, to earn really good money while doing so, and to lay off the responsibility for all else onto someone else who was tasked with the duty of making them happy.

    So sorry to all you ambitious younger workers who saw this as an opportunity to leverage your factory jobs into something more intrinsically ego and intellectually satisfying and respectable – something you could be proud of doing. So the new bottle was filled with bitter old vinegar.

  4. I worked for a large aerospace company in the 1990′s (Okay, it was McDonnell Douglas) and the hourly assembly workers were all union. Most of them were deecent enough, but the ones who actually represented the union were, to a man and woman, lazy ingrates whose sole talent was knowing how little work they could do without getting fired (they were all protected by seniority, meaning they had to really screw up at their jobs to get fired). Most of those losers would have been overpaid at minimum wage. They contributed next to nothing of value to the company.

  5. Makes perfect sense: the workers knew that if the lazy scum could protect their own jobs, they’d make it easy to protect the jobs of the men who actually worked.

  6. Makes perfect sense: the workers knew that if the lazy scum could protect their own jobs, they’d make it easy to protect the jobs of the men who actually worked.

    But that’s the thing. Job protection was based on seniority and nothing else. Now, I suppose you had to meet some minimal level of competence in the early years of your career to build that much desired seniority, but once you had it, it was like a teacher or professor with tenure. They were next to impossible to fire short of gross incompetence/negligence or actual malice.

    Unfortunately, when it came to layoffs, seniority was the only factor to decide who got the axe. I knew guys who were extremely skilled and hard working, but they got layed off anyway. Their job skills and work ethic meant exactly nothing. But the aforementioned lazy bums and union staff were essentially immune. In aerospace, precision matters, but I knew one inspector, who was also the local union official, who I would not have trusted to inspect something built with Tinker Toys. Also, I suspect he did a lot of mind altering drugs in his spare time, since he was a big fan of Timothy Leary.

    I’m not totally anti-union. Some of the smaller professional unions actually do a good job for both their members and the company, too. But too many unions, especially the big industrial unions, mostly exist so they can protect the stupid and the lazy in their ranks while doing next to nothing to protect the guys with superior skills and superior work ethics.

  7. I admire your honesty Eric, however regardless of what the intent of unions were “in the old days”, today they exist not to protect superior skills, the little guy or any other high-fallutin’ notions. They exist to protect and perpetuate the Union itself. They are like any other beurocracy…self propetuating. They take money from those they perport to defend, spend it on those they deem worthy ( the bosses and their concubines) and the rest “goes away” before it ever hits those so-called pension funds. They are corrupt, impersonal and have cheated the very people they were supposed to serve. They have created their own CEO’s and big-wigs, their own money pools, have sold out to mobsters and gangs, rigged bids, made nepotism an art form and raised corruption to a new high (or low? ). Sorry, I hate liars and whatever unions were or were supposed to be they no longer are…therefore they have become liars.

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