Why Hostess' Demise Really Wasn't the Union's Fault
Wonder Bread: Once an icon, now a "tired also-ran."
When news broke Friday that Hostess is now effectively out of business, the prevailing narrative, amplified by the right-wing media, was that it was the intransigence of Bakery, Confectionery, Tobacco Workers and Grain Millers International Union, whose members went on strike to protest cuts in pay and benefit cuts, that killed the Irving-based purveyor of Twinkies and other snack cakes.
Over the weekend, a counter-narrative unfolded that portrays Hostess as a poorly managed company that has failed to adapt to the market and shows a union taking a final stand against the American factory worker's demotion from the middle class.
In the Daily Kos, a Hostess employee who has worked at several Wonder Bread plants explains his union's seemingly inexplicable brinksmanship.
He traces his own distrust of Hostess management to his early days on the job, in 1999. Attached to his first paycheck was a memo telling workers that Wonder Bread was having a bumper year. They were later informed that the letter had been a mistake and that sales were miserable, but that was only after the CEO and board had sold their stock.
In 2005, the union accepted a pay cut that reduced the writer's salary by 30 percent. $48,000, last year I made $34,000. My pay changed dramatically but at least I was still contributing to my self-funded pension. Six years later, in July 2011, the company informed workers "that the $3+ per hour that we as a Union contribute to the pension was going to be 'borrowed' by the company until they could be profitable again. Then they would pay it all back."
They never got the money back. Instead, Hostess filed for bankruptcy and demanded more concessions that would have cut pay by more than a quarter over five years, doubled employee contributions to insurance plans, eliminated pensions, and ceded claims to the pension contributions the company had promised to repay.
"It will be hard to replace the job I had, but it will be easy to replace the job they were trying to give me," he writes. "That $3+ per hour they steal totaled $50 million last year that they never paid us. They sold $2.5 BILLION in product last year. If they can't make this profitable without stealing my money then good riddance."
New Yorker economics writer James Surowiecki puts things in a broader context. Greedy union workers didn't bring on their own demise. Instead, unions are concentrated in once thriving industries that are fast becoming obsolete. If it was the Hostess workers' strike that killed the company, the company was already on its deathbed for unrelated reasons.
(T)he hard truth is that it probably should have gone out of business a long time ago. The company has been steadily losing money, and market share, for years. And its core problem has not been excessively high compensation costs or pension contributions. Its core problem has been that the market for its products changed, but it did not. Twinkies and Ding Dongs obviously aren't anyone's idea of the perfect twenty-first-century snack food. More important, the theoretical flagship of Hostess's product line, Wonder Bread, has gone from being a key part of the archetypical American diet to a tired also-ran.
Get the This Week's Top Stories Newsletter
Every week we collect the latest news, music and arts stories — along with film and food reviews and the best things to do this week — so that you’ll never miss Observer's biggest stories.
- Ray Hunt's Fighting Against Porn. His Dad Fought Against Monogamy, Kennedy and Catholics.
Sat., Feb. 13, 2:00pm
Sat., Feb. 13, 7:00pm
Sat., Feb. 13, 7:00pm
Sat., Feb. 13, 9:00pm
- Ross Perot’s Former Campaign Manager’s Advice to Presidential Candidate Bloomberg
- Texas Horse Racing Is Fighting for Survival