Nuclear war, twinkies and unions

Greg R. Lawson Nov 16, 2012

Nuclear Armageddon? No problem. Twinkies, as the old joke used to go, could survive it (along with cockroaches). Sadly, it appears these seemingly robust treats that appeal to the sweet tooth in us all look to be nearing their final days. Fans better stock up now because all those pink Sno-Balls and Ding Dongs may also be joining Twinkies in the ash heap of history now that the company that makes them, Hostess Brands, is looking to shut down.

So what happened? Clearly, it wasn’t a nuclear war. Rather, it was something far more pedestrian, but apparently for Hostess, just as destructive: union demands and strikes.

Hostess had already filed for Chapter 11 bankruptcy due largely to the legacy costs of pensions as well as medical benefits and difficult work requirements. Yet, what put it over the top was a strike.

A statement from the current Hostess CEO, Gregory F. Rayburn, who had been brought in to reorganize after the company filed for bankruptcy, makes it clear that the company is making immediate plans to layoff 18,500 workers and lays blame squarely at the foot of the of striking union workers,

“We deeply regret the necessity of today’s decision, but we do not have the financial resources to weather an extended nationwide strike,” said Gregory F. Rayburn, chief executive officer.

“Hostess Brands will move promptly to lay off most of its 18,500-member workforce and focus on selling its assets to the highest bidders.”

Hostess had warned striking employees that if workers did not return to manufacturing plants by 5PM on November 15, it would move forward with shutting down. While the company had reached an agreement with its largest union earlier, the second-biggest union went on strike last week after rejecting an offer from Hostess that cut salaries and benefits.

It also bears pointing out that in October, a bankruptcy judge had given Hostess the ability to impose changes to its collective bargaining agreements including the cuts in salary.

Even then, Rayburn made clear that a strike would be the death knell for the company stating,

“If our unionized employees decide to strike, it would force a shutdown of the company… A significant work stoppage would almost certainly drive away customers and cause our lenders to withdraw their financial support. The fate of the company sits in our employees hands.”

The Bakery, Confectionery, Tobacco Workers & Grain Millers International Union turned it down, prompting the strike.

Apparently, many people did attempt to cross the picket line and go back to work, but there were not enough for the company to recommence operations.

While there are plenty of recriminations flying back and forth between union representatives and management, the bottom line appears clear. Rather than protecting workers, the purpose for which unions are supposed to exist, it looks as if they are responsible for potentially throwing thousands of people out of work. This is especially tragic and traumatic for those people who did vote for compromise to save the business and their jobs.

Certainly, no one likes to deal with salary or benefit cuts. These are painful decisions, but far less painful than the decision to close plants and cut thousands of jobs. Yet many,now former unionized employees who chose stridency over compromise are going to have to ask what they would have been willing to accept to keep their jobs.

This is unlikely to be the last time that this happens. The reality is that the new, global economy represents an extremely complex and competitive environment.