Good Bye Hostess

Posted By on November 22, 2012

There are indications that union bosses are very perplexed at union workers over this decision….

Hostess will start selling off the rights to Twinkies, Ding Dongs and other baked brands after a federal bankruptcy judge on Wednesday approved its plan for an “orderly wind-down.”

On Wednesday, the day before Thanksgiving, Hostess Chief Executive Gregory Rayburn testified that layoffs of 15,000 employees would begin immediately, with head counts shrinking 94% within 16 weeks. Some 3,200 workers would remain to see the shuttering through.

The company said its “inflated cost structure” – which it attributed primarily to its collective bargaining agreements with unions – put it at a “profound competitive disadvantage.”

Hostess also said it will close 33 bakeries, 565 distribution centers, 5,500 delivery routes and 570 bakery outlet stores.

So….Did union workers simply get their ‘Just Desserts’ for backing Hostess into a corner with too many unreasonable demands? Consider the evidence.

Union workers have now lost the cause as 18,500 jobs are gone forever.

The national labor bosses stood firm. Labor leaders are proud they stood up to those nasty ‘suits’ [see Entourage for definition] who refused to run a money-losing business simply to continue paying salaries and benefits.

Hostess posted a $341 million loss in 2011 on revenues of about $2.5 billion. Contributing to those 2011 losses:

  • $52 million in Workers’ Comp Claims
  • Dealing with 372 Distinct Collective-Bargaining Contracts
  • Administration of 80 Separate Health and Benefits Plans
  • Funding and Tending to 40 Discrete Pension Plans
  • $31 million in year-over-year increases in wages and health care benefits for 2012 v. 2011

Uncounted in the above numbers were the outrageous union-imposed rules that made for a too-high-to-bear cost of sales:

  • No truck could carry both bread and snacks even when going to the same location
  • Drivers were not permitted to load their own trucks
  • Workers who loaded bread were not allowed to also load snacks
  • Bringing products from back rooms to shelves required another set of union employees
  • Multi-Employer pension obligations made Hostess liable for other, previously bankrupted, retirement plan contributions from employees that never worked for Hostess at all.

The company thought the only defense against unreasanable union demands was the willingness to walk away and close shop.

Courtesy of Dr. Paul Price

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