When news broke that Hostess Brands was going out of business, two competing reactions surfaced on Facebook:
- Another success story from organized labor: Hostess to lay off 18K workers and liquidate assets. Way to shoot yourself in the doughy foot, bakers.
- When’s the last time you actually bought a Twinkie?
While it’s easy for some to blame the unions for forcing Hostess out of business, workers have been keeping a failing company afloat with union concessions.
Hostess Brands has gotten burned in the snack market. One of the latest surveys of American snack food favorites shows V8, Doritos, Ocean Spray, Lay’s and Ritz top the list. The same survey lists 5-Hour Energy as a brand that’s moving up in popularity. The Twinkie doesn’t make the cut. Wonder Bread has lost its slice of the market too.
Hostess Brands has struggled, but you wouldn’t notice by checking the company’s top managers’ salaries. The Center for Economic & Policy Research reports the CEO gave himself a raise to $2.24 million per year. Other top executives got 35-80% raises too.
At the same time, those managers threatened to close 10-12 plants unless the workers sacrifice 8% in wages and 17% in benefits. This is the second time since 2004 that Hostess employees have been asked to sacrifice to keep the company running. This time, the workers just don’t trust the company to do the right thing.
Their skepticism is easy to understand: Hostess Brands has asked the bankruptcy court to allow it to fire 18,000+ workers while authorizing $1.75 million in incentives and bonuses to 19 managers during the liquidation.
The bankruptcy court ordered Hostess to go into private mediation with its second-largest union. But should the union workers sacrifice again? If they give up pay, benefits and pension can they be sure the company won’t close anyway?
Investors are already looking to snatch up the biggest Hostess brand names. It looks like the Twinkie will survive, but 18,000+ employees won’t be as lucky.