Union Busting Kills Hostess Brands, Inc.

by John M. Curtis
(310) 204-8700

Copyright Nov. 22, 2012
All Rights Reserved.                                         

        Fulfilling his promise to shutter America’s favorite bakery, Hostess Brands, Inc. CEO Gregory F. Rayburn sent 18,500 employees heading to the help wanted lines.  Hostess Brands, now based in Irving, Texas, created America’s most famous bread and confections, including, “Wonder Bread” and the ubiquitous “Twinkies.”  Hostess distribution channels were second to none, putting products in almost every neighborhood liquor store, mom-and-pop market, national convenience and supermarkets, mass merchandisers, like Target, and big-box stores like Wall-Mart and Costco.  When the Bakery, Confectionary, Tobacco and Grain Millers Union authorized a strike Nov. 9, Rayburn moved swiftly to bankruptcy court Nov. 21, declaring the company closed forever.  With the best distribution network in the business, Rayburn blamed the bankruptcy on unions.

            When the executive suite points fingers at the union, it’s usually due to incompetent management or possible malfeasance.  Claiming the company was $860 million in the red, the New York Southern District Bankruptcy Judge Robert Drain in White Plains should ask the U.S. attorney to look into what happened to Hostess’ operating capital.  Letting one of America’s favorite brands go under compromises a national tradition.  Before Judge Drain gave Rayburn the green light to slash salaries and benefits, he should have held upper management accountable for what happened to the company’s cash.  Reports of upper management’s 2011 extravagant pay raises and bonuses raise more questions about larceny than whether or not union workers got extravagant wages and benefits.  Telling the union “take-it-or-leave-it,” the rank-and-file finally threw in the towel.

            Long-term union workers had watched their salaries eviscerated in recent years, only to see upper management give themselves obscene raises.  “They’re just taking from us,” said 46-year-old Kenneth Johnson of Missouri.  He complained his salary was cut from $45,000 five years ago to $35,000 with overtime last year.  Rejecting management’s offer, Johnson saw no reason to stay at Hostess and watch his salary continue to shrink.  “I really can’t afford to not be working, but this is not worth it.  I’d rather go to work somewhere else or draw unemployment,” said Johnson, mirroring the view of other long-term Hostess employees.  While Hostess management insists the company became unprofitable because of the union, it didn’t stop them from looting the piggy bank. Given the popularity of Hostess products and extensive distribution network, management’s explanation seems incredulous.

            With around 18,500 U.S. workers, Hostess was nearly the size of Enron when it went under Dec. 3, 2001.  Unlike Enron—the criminal energy trading company—Hostess was the real deal, creating more successful commercial bakery brands than any company in U.S. history.  Letting Hostess go under is a shameless act by upper management, more concerned about saving their hides than the plight of 18,500 hard-working U.S. citizens..  Telling the union he intends to liquidate all of Hostess Brands holdings, Rayburn placated public outrage saying “Twinkies” would eventually find themselves back on the shelf.  There’s simply no excuse for destroying an American institution, where generations of citizens since 1932 came to enjoy some of the most creative and demanded bakery confections ever produced.  While not touted in gourmet circles, Hostess products were simply superior to their competitors.

            When BCTGM union authorized the strike Nov. 9, the Teamsters, representing some 7,500 route sales representatives and truck drivers, were not notified.  Hostess management complained about 300 labor contracts, some requiring different trucks to deliver different products to the same locations.  Unable to raise prices to keep pace with rising bakery ingredient costs, upper management blamed factors beyond the company’s control.  “But the reality was that the company could not survive without those concessions,” said Hostess spokesman Lance Ignon.  Ignon mentions nothing about the whopping pay raises and bonuses given to upper management in 2011.  “They have taken and taken and taken from us,” said Debi White, a bun handler employee at the Hostess plant in Lenexa, Kansas.  White, like other long-term employees, couldn’t accept any more pay-and-benefit cuts.

            When U.S. Labor Secretary Hilda L. Solis got word of the Hostess bankruptcy filing, she should have called for an urgent moratorium pending a Labor Dept. investigation.  When 18,500 employees stand to lose their jobs, the Labor Dept. must act quickly to get all the relevant facts.  While Hostess upper management pled destitution to bankruptcy court Judge Drain, Solis should have asked for more facts before tossing 18,500 workers out of work.  No Western democracy, other than the U.S., treats its workers so cavalierly.  Before running to bankruptcy court, Hostess CEO Rayburn should have appealed to the government to save one of America’s truly cherished institutions.  Teamsters General-Secretary-Treasurer Ken Hall called the Hostess bankruptcy “a sad day for thousands of families affected by the closing of this company.”  Hall forgot about the millions of U.S. and foreign customers who loved Hostess goods.

 John M. Curtis writes politically neutral commentary analyzing spin in national and global news.  He's editor of OnlineColumnist.com.and author of Dodging the Bullet and Operation Charisma.

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