But it bothers me even more the way they will lose them -- that the bakers union representing only 5,600 of those employees had the power to cause another 12,900 employees to lose their jobs as well. {The union's leadership evidently didn't want to create a precedent for other companies who might seek similar wage and benefit reductions and productivity improvements.}
And let's ask ourselves this question. Of the 5,600 Hostess employees who are bakers union members, if given an individual choice, would 100% of them have voted to forfeit their jobs? Of course not.
Let's do the simple math. Assuming that at least 50% of the 5,600 bakers union members would have elected to keep working given an individual choice, this means that 2,800 or fewer Hostess employees have been able to put Hostess out of business and have caused 15,700 other Hostess employees to lose their jobs.
So whatever happened to guaranteeing individuals the right to exercise free choice in America? Well, unions happened, for one thing. But it's a much bigger deal than Hostess.
You see, in today's new world of global competition, unions have increasingly become an anti-competitive albatross around the necks of many employers and employees as well. They have become harmful to the future competitiveness of American businesses and America as a whole. Therefore, they are proving harmful as well to the best interests of the very people they purport to represent --- American employees.
Court Allows Liquidation of Hostess tells the story of the demise of Hostess and its 18,500 jobs:
The doors shut on a Hostess Bakery outlet store in Victorville, Calif., last week.
A federal bankruptcy judge on Wednesday approved plans for Hostess Brands to wind down its operations, but there is little doubt that its best-known brand, Twinkies, will live on.
The company, whose corporate ancestors go back 82 years, said it would put Twinkies on the auction block, along with its other famous brands, including Ho Hos, Sno Balls, Ring Dings and Wonder Bread.
In granting the motion by Hostess, Judge Robert D. Drain of the United States Bankruptcy Court for the Southern District of New York said it was important to have a quick and orderly shutdown of the company to prevent the deterioration of its factories and assets.
The company’s chief executive, Gregory F. Rayburn, testified in court that he needed to lay off 15,000 of his 18,500 employees on Wednesday afternoon so that they could begin applying for unemployment benefits as soon as possible. He said such speed was necessary for maximizing the remaining value of the company.
“From this point forward, I need two things to happen,” Mr. Rayburn told the judge. “I need to maximize the value of the estate, and I need to do the best thing for the employees.” . . .
Investment concerns like Sun Capital Partners and C. Dean Metropoulos & Company, the owner of Pabst Blue Ribbon beer, have already said that they are interested in buying some or all of Hostess’s remains. Sun Capital has said that it would like to buy all of Hostess, not just its brands, hoping to preserve the company and improve its often-tense relations with its unions.
(Liquidator) Mr. Scherer said that he expected asset sales to reap “significant values,” perhaps more than $1 billion. Hostess had revenue of $2.5 billion in fiscal 2012, and a net loss of $1.1 billion....
“These products will surely live on in one form or the other — because these brands are about as indestructible as Hostess’s baked goods are,” said Jeffrey A. Sonnenfeld, senior associate dean for executive programs at the Yale School of Management.
Hostess was unable to resuscitate itself during this bankruptcy, its second in less than a decade. When it filed for bankruptcy last January, it had nearly $1 billion in debt as well as labor costs and work rules that it insisted were unsustainable.
According to Mr. Rayburn, what sent the company into bankruptcy was both the refusal of one of its largest unions, the Bakery, Confectionery, Tobacco Workers and Grain Millers International Union, to accept far-reaching concessions and a strike that the union began on Nov. 9, crippling two-thirds of the company’s 33 bakeries.
The bakery workers union, with 5,600 workers at Hostess, repeatedly said that it saw no reason to grant a new round of givebacks — after having granted major concessions in the previous bankruptcy of Hostess — because it was convinced that Hostess was heading toward liquidation, with or without concessions. . . .
After filing for bankruptcy protection in January, Hostess demanded lower-cost contracts from the Teamsters, whose workers at Hostess average about $20 an hour, and the bakery workers, who average about $16. To help the company survive, the Teamsters, with 6,700 members at Hostess, most of them drivers, reluctantly agreed to a contract with numerous concessions. They include new work rules, an immediate 8 percent pay cut, a 17 percent reduction in Hostess’s contribution toward health coverage and a suspension of its pension payments until 2015. In return, the company agreed to give its unions two of the nine seats on its board and a 25 percent stake in the company.
But the bakery workers’ union resisted a similar deal, convinced it would drive down wages in the industry while in no way guaranteeing Hostess’s survival. That union went on strike rather than accept that offer, hoping the company would bend.
A week after the strike began, Mr. Rayburn said he would liquidate the company. . . .
Hostess Brands has corporate roots going back to 1930, but the company has had that name only since 2009, when Ripplewood Holdings, the private equity firm that took control of Interstate Bakeries, renamed it. Ripplewood, which has close ties to Richard A. Gephardt, a former Democratic House majority leader and longtime ally of labor unions, is rarely viewed as a predatory private equity company — it originally bought Hostess as part of an effort to save distressed unionized companies."
SUMMING UP
In short, the bakers union leadership chose to eliminate its members 5,600 jobs at Hostess rather than agreeing to an 8% pay cut from the then $16 average hourly rate, higher employee health care contributions and an ownership stake in the company.
It's an excellent bet that the bakers union took this position to avoid facing similar concessions from other industry employers. They obviously didn't do it with the best interests of their 5,600 members and other Hostess employees in mind.
Thus, in all likelihood almost all of the 18,500 Hostess employees will lose their jobs, and the company will cease operations and sell off its various assets in pieces to the highest bidders. And the investors in Hostess will have lost their money, too.
In my opinion, there is something very wrong with our nation's labor laws. In the old days, unions fought for a bigger slice of an ever growing pie. Today they often seem to be doing their best to eliminate the pie.
And as a result, many innocent Hostess employees will be left out in the cold who would have preferred to work for $15 to $18 per hour and owning a piece of the pie instead of eliminating the pie and applying for unemployment compensation this holiday season.
The American taxpayers would have preferred that the thousands of Hostess employees who will be filing for unemployment compensation benefits keep working as well, but who cares about the taxpayers?
Certainly not the bakers union leadership. Or lots of other union chieftains either.
Thanks. Bob.
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