Washington View: Demise of Hostess signals new reality
Tuesday, November 27, 2012
The end of Hostess Brands Inc. is a lesson for us all.
Hostess, maker of Twinkies, Ding Dongs and Wonder Bread, was trying to emerge from its second bankruptcy in three years when a bakery workers' strike effectively signed the company's death warrant. When the strikers refused to return to work, the company shut its doors, putting 18,500 people out of work.
The bankruptcy judge made one final attempt at mediation, but the union president didn't attend, sending another union officer in his place. When the sides couldn't agree, Hostess officials said they would proceed with plans to liquidate the company's assets.
The Teamsters union had accepted a pared-down contract for the company's delivery drivers and urged bakery workers to do the same. But Frank Hurt, the 20-year president of the Bakery, Confectionery, Tobacco Workers and Grain Millers International Union, exhorted his members to reject further concessions.
As a result, everyone lost their jobs.
Hurt has been criticized by Teamsters' members and others for pushing the strike despite the company's economic woes. Bankruptcy Judge Robert Drain said there are "serious questions as to the logic behind the decision to strike."
But Hurt refused to take the blame, instead blasting Wall Street "vulture capitalists." A statement on the union's website said: "The Wall Street investors who took over the company after the last bankruptcy attempted to resolve the mess by attacking the company's most valuable asset — its workers."
The Hostess strike reminds me of a similar standoff with the Anaconda Copper Company in Butte, Mont., 30 years ago — right down to the Twinkies.
When I was growing up in Butte, three things were certain: taxes, death and miners' strikes. You could tell when the miners' strikes were coming to an end because the Hostess delivery man started stocking the grocery stores with Twinkies and cupcakes — staples in the miners' lunch buckets.
Historically, the miners' union would strike one of the big three mining companies to win wages and benefits that would serve as the model for contract talks with the rest of the industry.
But when miners in Butte threatened to strike Anaconda again in 1983, it was the last straw. The company had reached its tipping point.
Over the decades, the once-giant Anaconda Copper Company had become weakened by fierce global competition, lower copper prices and environmental costs. In 1977, it was sold to Atlantic Richfield. The union didn't believe it when company owners said there was no money for higher wages and benefits.
Implementing a strategy that had always worked before, the miners' union called for a strike. In response, Anaconda suspended all mining and smelting operations, flooded its underground mines and demolished its smelters at Anaconda and Great Falls.
In today's tough global economy, the old rules no longer apply. The head of the bakery workers' union didn't understand that. His strategy had always worked before; surely it would work again. But he was wrong. Regardless of what caused the company's weakened financial condition, the result was the same: there was no more money.
It is a lesson for us all. Voters want to keep all the programs, entitlements and services we've grown accustomed to, but we don't want to pay higher taxes. As a result, the federal government borrows $3.87 billion each day to provide these goodies, in the process ruining America's once-great credit rating and shackling our children and grandchildren with generations of debt.
At some point, we need to understand that there isn't enough money to have everything we want. And stubbornly refusing to acknowledge this new economic reality isn't the solution.
Just ask the folks who used to work for Hostess.
Don Brunell is president of the Association of Washington Business, Washington state's chamber of commerce.