Friday, November 16, 2012

Bakers' Union Plays Chicken With Hostess, Costs 18,500 Employees Their Jobs; Anchorage Sunrise Bakery To Lay Off 90 Workers

Note: Post updated November 17th to include the impact on Fairbanks and rural areas.

A union decided to play chicken with a major corporation, and it backfired catastrophically, costing 18,000 employees their jobs. And the effects have spread to Anchorage, Alaska, where 90 employees of Sunrise Bakery will be furloughed. The effects are being felt in Fairbanks as well, as Fairbanks Distributors offers Hostess products to local stores, but owner Wayne Carter was out of town Friday when Hostess announced it was halting operations. In addition, Alaska Commercial Company, which operates 27 grocery stores in rural Alaska, was told by its Anchorage distributor on Friday that the company would be making its final Hostess deliveries that day.

Hostess Brands, Inc. sought to renegotiate their contracts with the two bargaining units, the International Brotherhood of Teamsters, and the Bakery, Confectionery, Tobacco Workers and Grain Millers International Union, which would have cut wages and benefits. While Hostess did reach agreement with the Teamsters, the Bakers, which represented 30 percent of the workers, rejected a contract offer in September, and members began industrial action a week ago. Although many workers were willing to cross picket lines and return to work, Hostess decided there were not enough workers to keep their plants going, and so after the workers failed to respond to a deadline to return to work by by 5 p.m. on Thursday November 15th, the company announced that it had filed a motion with the U.S. Bankruptcy Court to shutter its business. If the motion is granted, their facilities could begin closing as early as Tuesday November 20th. The Teamsters and Bakers are the two largest of the 12 bargaining units representing Hostess workers.

In a statement posted on their website, Hostess revealed that in September, the Bakers rejected a last, best and final offer from Hostess Brands designed to lower costs so that the Company could attract new financing and emerge from Chapter 11. Hostess Brands then received Court authority on October 3rd to unilaterally impose changes to the Bakers' collective bargaining agreements. The offer to the Bakers included wage, benefit and work rule concessions but also gave Hostess Brands’ 12 unions a 25 percent ownership stake in the company, representation on its Board of Directors and $100 million in reorganized Hostess Brands’ debt.

This decision means the closure of 33 bakeries, 565 distribution centers, approximately 5,500 delivery routes and 570 bakery outlet stores in the United States, costing approximately 18,500 employees their jobs. And one of those outlets is the Sunrise Bakery in Anchorage; while the bakery is expected to remain open until Friday November 23rd, most of the 90 employees have already been furloughed.

Hostess had been operating under financial pressure for an extended period of time; in January 2012, they filed for Chapter 11 bankruptcy protection. The major problems were legacy pension and medical benefit obligations and restrictive work rules. That marked the second significant court restructuring for Hostess during the past several years. In addition, shifts in public eating habits undermined Hostess as Americans became more brainwashed by nutrition propaganda and started choosing "healthier" snacks. You can read the bankruptcy documents HERE.

Hostess CEO Gregory Rayburn said "We deeply regret the necessity of today’s decision, but we do not have the financial resources to weather an extended nationwide strike”. But that didn't play well with the Bakers, who said “Despite Greg Rayburn’s insulting and disingenuous statements of the last several months, the truth is that Hostess workers and the union have absolutely no responsibility for the failure of this company. That responsibility rests squarely on the shoulders of the company’s decision makers.” But the Bakers do not explain why the Teamsters found a similar offer to their members acceptable, and already some workers are blaming the union for its intransigence. Meanwhile, the AFL-CIO's radical president Richard Trumka blamed Bain Capital and, by extension, Mitt Romney, saying “What’s happening with Hostess Brands is a microcosm of what’s wrong with America, as Bain-style Wall Street vultures make themselves rich by making America poor. Crony capitalism and consistently poor management drove Hostess into the ground, but its workers are paying the price.”

Except for one problem -- a pay cut is still better than a JOB CUT. The Bakers encouraged their members to play chicken with Hostess, and Hostess shut down the coop. Perhaps organized labor has forgotten that private corporations cannot afford to operate at a deficit and, unlike government, lack the power of taxation. So all the workers are now out on the street -- including the MAJORITY who wanted to continue working.

Anchorage Reaction: Mixed reaction posted on the Anchorage Daily News website. Many comments reveal that the executives may have overcompensated themselves:

sayno2grouches November 16th 2:13 P.M:
BCTGM members are well aware that as the company was preparing to file for bankruptcy earlier this year, the then CEO of Hostess was awarded a 300 percent raise (from approximately $750,000 to $2,550,000) and at least nine other top executives of the company received massive pay raises. One such executive received a pay increase from $500,000 to $900,000 and another received one taking his salary from $375,000 to $656,256 [No link was supplied to support these allegations.].

KaiserSosay November 16th 1:36 P.M:
Ahem, those if you again blaming this on the worki man need to read the article in this very publication. Workers wages over the past 40 years have been in a fall in the last thirty it started to tilt further. This past 10 years has been a nose dive. This article is no revelation, wokes have sen there benfits cut, pensions dumped and wages wither cut or frozen. Yet CEO to include the CEO of Hostess compensation go up 200%. Oh yeah by the way production has gone up to, so much for being rewarded for hardwork. How about we blame the way a buisness toady is squeezed for every penny so sharholders can make a few pennies more or the CEO can redecorate hs offoice for millions.

I saw the news coverage a guy holding a sign making $29,000! In 2012 that is a disgrace. I do not blame the worker for saying I can not take another hit, I have no golden parachute, I have not a pension but a 401K (worthless), I dont have lobbyiest or lawyers I've got kids to feed.

Chrysippus November 16th 1:19 P.M:
What the Commies and Bolsheviks ignore, while screaming loudly about executive compensation, is that liquidating a company is a last resort, used only when no other viable operating plan exists. The reason for this is that a companies worth is a function of its cash flow and earnings. In fact its a multiple of the earnings. Profitable, operating companies are worth a lot more than companies in liquidation and restoring companies to profitability is always the first choice of venture capitalists if its feasible.

When there are no earnings, the company is not worth anything except for what you can get when you turn the lights out, sell the equipment, the brand, and real estate, etc.

While the exec compensation may look high, as a total for a company with 18,000 employees, its a drop in the bucket of total wages.. Cutting it to 1/3 won't make any difference. The Teamsters understood this. The other union did not so everyone now loses.

IMHO, the executives weren't paid enough to deal with morons running the the Bakery, Confectionery, Tobacco Workers and Grain Millers International Union (BCTGM). Its a John Galt moment.

It would sure be nice if these lefties would learn to spell.


  1. Just FYI ;) "Perhaps organized labor has forgotten than private corporations cannot afford to operate at a deficit and, unlike government, lack the power of taxation." May want to change than to that. You can delete this after the fix.

  2. Good catch, Anonymous.

    Anchorage Activist, Love the excellent 360-degree reporting, as usual. Since you have not been able to find substantiation of the high pay for executives, I'm going to presume the commenters are "making stuff up" as they often do.

  3. Anonymous -- Thanks for the catch, AND for reading this blog in the first place. Have made the change.

  4. AKan -- Actually, the compensation of the executives is not particularly relevant to the situation. The Bakers union had a chance to accept the offer, they failed to do so, and cost EVERYONE their jobs. The Bakers failed to explain why the offer acceptable to the Teamsters was NOT acceptable to them. The Teamsters understood that preserving existing employment, even at a lesser salary, was better than having NO employment.





    Chrysippus November 16th 1:19 P.M....YOU ARE A HORSES ASS.GO BACK TO EATING MONKEY SNOOT.