Local View: Demise of Hostess fault of management, not union



Business writers and right-wing columnists have been piling on unionized workers at Hostess for striking and thus “causing” the company to close its Twinkie bakeries. In their haste to heap blame and vitriol on workers and unions they have, not surprisingly, neglected to examine the entire story. Those facts, conveniently omitted, would have led readers to a much different conclusion: Gross management incompetence and greed caused Hostess to fail.

The current bankruptcy is the second in eight years for Hostess. The 2004 bankruptcy, which lasted for five years, was used to leverage lower wages and to cut corporate contributions to the pension plan by $96 million a year. The workforce was cut from 30,000 to 19,000.

The court documents from that earlier bankruptcy laid out the Hostess plan to turn the company around. Those measures included closing outmoded plants; improving efficiency and technology in the remaining plants; merging distribution warehouses for efficiency; and installing new software to track inventory. It was also indicated that the company would restore the advertising budget and establish a research and development program for new products.

Ironically, the company failed to shed burdensome debt during the earlier bankruptcy. Hostess, then Interstate Bakeries, entered bankruptcy with $575 million in debt and exited court supervision with $774 million in debt. Why would a company even enter bankruptcy if not to obtain relief from heavy debt? Because bankruptcy has become an all-too-common “business strategy” providing corporations with a court-ordered device to slash wages and benefits.

Further evidence that the prior bankruptcy was designed purely for the purpose of rolling back compensation of hourly workers is the fact that none of the so-called “turnaround” measures cited in the 2004 filings had been implemented when the 2012 bankruptcy was filed. Plants were still outdated and Hostess was well behind its competitors with respect to introducing new products and conducting meaningful R & D.

CEO compensation tripled

And to add insult to injury, the executives at Hostess tripled the compensation of CEO Brian Driscoll, and gave substantial raises to other executives just before the 2012 bankruptcy was filed.

In the latest round of concessionary bargaining, Hostess was demanding yet more reductions and radical changes in the multi-plant pension plan. It was no secret at Hostess that pension liabilities were piling up but instead of executing the turnaround plan, gaining efficiencies and introducing new products the company elected, once again, to do the bankruptcy gambit and try to offload pension promises made to their employees.

The Bakery, Confectionary and Tobacco Workers Union showed an extraordinary amount of patience and forbearance. The union was willing to talk to Hostess at every step of this unsavory process in an effort to keep the company alive. Union members were left with little choice when it became clear that management was not interested in anything except more wholesale cutbacks under the protection of bankruptcy. They voted to strike.

This is a case where management was protecting their own investments and bonuses without doing any of the hard and innovative work necessary to make a company successful. Instead, they fell back to the oft-repeated formula — force workers to work for minimum wage or blame them for their failures.

Denny Scott of Brush Prairie is retired from the United Brotherhood of Carpenters. He conducted economic research for the manufacturing sector of the union for 22 years.