The Business owns the jobs, not the union, or are we living
under a different social order than we used to?
November 16, 2012
NEW YORK (CNNMoney) --
Hostess Brands -- the maker of such iconic baked goods as Twinkies, Drake's
Devil Dogs and Wonder Bread -- announced Friday that it is asking a federal
bankruptcy court for permission to close its operations, blaming a strike by
bakers protesting a new contract imposed on them.
Hostess' nearly 18,500
workers will lose their jobs as the company shuts 33 bakeries and 565
distribution centers nationwide, as well as 570 outlet stores. The Bakery,
Confectionery, Tobacco Workers and Grain Millers International Union represent
about 5,000 Hostess employees.
---
I originally picked this story up on FOX News. I read through it and saw their slant on it
rather quickly. It was easy, being
anti-union, to think that must be it; union workers bring down another company,
but something in me wanted more information.
I wanted to know if it was the union demands or bad management, or both. It was not hard to find more
information as the days went by. The
left leaning sights blamed poor management, bad bosses taking big raises and
private equity running it into the ground.
For Hostess, this is the second bankruptcy in 8 years. Iconic snack does not
always equate to iconic profits. We all
know, now, people like change. There have
been problems before. I scanned comments
left on websites talking about favoritism in upper management, undue pay raises
and jobs given to friends and families.
But eventually, I believe the truth has emerged and we have another case
of the union and its mentality leading the worker down a bad path; the union
killed the Twinkie, (though I am not sure that is a bad thing).
Unions can cause havoc on productivity and workloads. They are supposed to be protecting the worker
but in the process they coddle and soften the “work ethic” of the worker. The combining of the collective into one work
group stifles and kills the individual.
People lose the idea of being exceptional, of being better, of wanting to
work harder to get further in their lives.
We all know, behind closed doors the motto, “don’t work so fast, you make
the rest of us look bad.” The union, in trying to create jobs that do not exist, finds itself limiting the worker; telling the worker not to help their own fellow workers. Unions are job monopolies, restrictions on growth for fear not being tough, not being in control. They try so hard standing up to the company that they forget they work for the company in the end. Here are some
items that have come to the fore front on what the unions got from the company
in terms of how the work is done.
---
Union work rules
usually required cake and bread products to be delivered to a single retail
location using two separate trucks.
Drivers weren't
allowed to load their own vehicles, and the workers who loaded bread weren't
allowed to load cake.
On most delivery
routes, another "pull up" employee moved products from back rooms to
shelves.
---
Case one, Hostess could not increase productivity, two
trucks for one delivery. This might be great
for the creation of jobs, bad for the ability to meet market demands on cost
and retail value. Do you think there
were people actually proud to say, “I drive the bread truck, thanks to the
union I don’t have to deliver cakes at the same time”? Is this something that brings pride? Can you imagine telling your spouse, "sorry, I only drive to soccer practice I do not drive to baseball practice"?
Case two, driver’s not allowed to load. Said a different way, “a Hostess worker was
not allowed to help another Hostess worker or help
the company that is paying them.” Always
fight the person paying your check, when does this make sense? You could only load one type of item? How much extra cost was incurred as one
worker sat by idle watching a second worker load his own type of food? Why is the union against the employer? Why is it against common sense? Could anyone stand by and watch their
neighbor in need because you can only help the neighbor on the left, not the
one on the right side of your house?
Case three, yet another employee was needed to move products
from the back room to shelves. Why? Is the job that specialized? Is the job that difficult that one person
could not do both?
So I moved on for more information. What was the offer made to the unions, the one that drove them away, to unemployment?
---
The new contract cut
salaries across the company by 8% in the first year of the five-year agreement.
Salaries were then scheduled to bump up 3% in the next three years and 1% in
the final year.
Hostess also reduced
its pension obligations and its contribution to the employees' health care
plan. In exchange, the company offered concessions, including a 25% equity
stake for workers and the inclusion of two union representatives on an
eight-member board of directors.
---
This is just unimaginable.
Not only has the union driven a wedge between the company and the
worker, it has demanded and gotten redundant people to do jobs easily done by
less and yet the company still reached out with compromise. We have heard that word a lot lately, seems
as though it is a one way compromise.
Yes, an initial pay cut with a schedule to get 50% of that
back over the next four years.
Yes, a
reduction in pensions (no company can afford infinite liability pensions
anymore). Pension liability problems are coming to a city near you. We have built this retirement model from the 50's that makes the employer responsible for what becomes an almost unlimited liability to pay a pension. Try to figure that cost in the price next time. It is not a workable solution to retirement.
Yes, a reduction in contributions to health care (good thing they can get free health care soon).
Yet Hostess still offered the employees a 25% equity in the company and 25% of the
seats on the board. I have to ask, the
union spent so much time fighting the company, fighting against simple and
common sense work concepts that maybe they did not want to be part of a company
that had anything to do with themselves?
Something makes me wonder if the union knew it was killing the company
and wanted no stake in a failed business.
The other item that came up on left leaning sites was the
evil owners; those evil money sucking private equity firms out to drain the
money and dump the company. There is a
different view as well. Ripplewood is
one of the owners of Hostess; they are one of those “evil private equity” firms
that more often than not save bad businesses and save jobs provided it can
actually be saved.
More looking finds the searcher at the CEO of Ripplewood, Tim Collins. He is a prominent Democrat.
---
Ripplewood's foray into Hostess was
partly enabled by Collins's connections in the Democratic Party. He wanted to
explore deals with union-involved companies and sought the help of former
congressman Gephardt, who in 2005 founded the Gephardt Group, an Atlanta
consulting firm that provides "labor advisory services." In his 2004
presidential bid, Gephardt -- whose father was a Teamsters milk truck driver --
was endorsed by 21 of the largest U.S. labor unions; in 2003, Collins was one
of 19 "founding members" of Gephardt's New York State leadership
committee. (Today, Ripplewood and Hostess are listed online as major clients of
Gephardt's consulting group, which is also an equity owner of Hostess.) Back
when Hostess was coming out of the first bankruptcy, Gephardt's credibility
with both Ripplewood and the Teamsters gave them each a little more room to
break bread.
---
We have a CEO trying to get Hostess turned around, a CEO
that attempts to find union-involved companies.
This was his specialty. And even
he could not come to terms with the unions.
There is no job-axing , job-shipping, money draining private equity vampire
trying to turn around Hostess, it was the most favorable of conditions one
could find; union labor sympathizer. And
he could not save it. Even he realized
the unions needed to compromise.
In the end, this company was overrun by redundant workers
not able to help each other, not able to cross the line from bread to cake, not
able to stock a shelf or drivers not able to help load or drive the “other”
truck. We had a worker force working
against the company that paid them a wage in exchange for their labor; diluted
as it was. Sales may have been going
down and the company needed to make changes; the worker did not support them.
In the end, the company will sell the assets and someone will start over without the pension liability, with more productivity from the worker, with common sense work habits and the Twinkie will rise again.
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