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Friday, November 16, 2012

Union Greed Kills 18,500 Jobs

Unless you've been living in a cave it isn't news that the Hostess Brands, Inc. has announced it is closing up shop and will be seeking to liquidate assets, including all properties and equipment.  After eighty two years, no more Twinkies, for the time being.  It's likely another company will acquire the brand and begin producing snack cakes again at some point.

What caused the collapse of Hostess?  Union refusal to negotiate concessions.  The Bakery, Confectionery, Tobacco Workers and Grain Millers International Union refused to agree to wage reductions that would have kept the doors open. 

Hostess had filed for bankruptcy earlier this year and the filing included a plan to stay in business.  If the union agreed.  The plan included an 8 percent cut to employee pay, a reduction in health benefits and a freeze to pension plan payments for over two years.  If the concessions were agreed to, union workers would get a 25 percent equity in the company, two seats on the board and a note worth $100 million.  Also there would be a 3 percent pay increase in the next three years and a 1 percent raise in the final year.

The union said no and now at least 18,500 people will be unemployed; probably more when you get down to the local level of contracted delivery people.  And then there's the economic impact of not having the incomes of 18,500+ people spent in their communities.

In the bad economy we have the union chose to be greedy and gambled with their jobs.  Now they can reflect on that decision while standing in the unemployment line.

Which will be the next large company to close up shop due to union greed?



2 comments:

  1. I have been reading bits and pieces of this story throughout the day. It is a shame that these people are losing their jobs at all, but especially so since it is right before Christmas.

    Part of what I have read suggests the union members are blaming Hostess' mismanagement for the collapse of the company. While this may be true, to a certain degree, it looks like it would be smarter to make concessions and work through their issues, rather than lose their jobs. I guess they don't like to eat like I do.

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    1. I've read about the hedge funds that were involved in this and it appears to me they were trying to save the company but received no cooperation from the union. The company was already paying far and above the average market pay for bakery workers and even after an 8% cut that still would have been the case. This is just another example of people's greed doing them in. I for one am glad to see a company not giving in to the demands of a union.

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