Will the Ding Dongs Ring Out the End of Hostess As Unions Fail to Negotiate

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The U.S. company Hostess, which makes Wonder bread, Twinkies, Ding Dongs, cup cakes and other goodies, are going to run for cover of Chapter 11 bankruptcy for the second time because they can’t reach an agreement with the implacable unions on pension, health benefits, and rule changes that originally led to their insufficient liquidity.

It owes its largest creditor, Bakery & Confectionery Union & Industry International Pension Fund, $944.2 million. Hostess owes another $50 million to vendors.

Hostess was unable to reach an agreement with its unions regarding pensions, health and welfare benefits and work rule changes that ultimately led to insufficient liquidity, it said in court papers.

Despite selling $2.5 billion in goodies, they lost $340 million. Rising costs of sugar and flour are partly to blame as are the government quotas which raise the price of sugar for a small number of farmers.

The Twinkies and Wonder Bread baker listed assets of between $500 million and $1 billion and debts of more than $1 billion.

The biggest problem is the 80% unionized workers and their 372 separate union labor contracts.

The reason there are so many contracts is because Hostess pays about $100 million a year into so-called multi-employer pension plans that cover workers at a wide array of companies, which unnecessary, negotiated rules brought about. Hostess, whose pension plan is underfunded by about $2 billion, wants to rescind its obligations to that plan and start paying into a plan that only covers its own workers. 

What was the competence level of the administrators who negotiated this absurd agreement???

These contracts only allow certain trucks to deliver their bread and cake products, a very unproductive and oppressive rule and one example of why there are so many unions and other companies involved with this one company. Every union handles a different aspect of the process.

There are 40 pension plans and managing it all is an expensive ordeal. The company wants to change this to reduce benefit costs.

Lots of luck needed, they are dealing with The Teamsters.

It’s a simple problem, because of the rising price of ingredients and the high labor costs, they take in less than they pay out. If the unions can’t see this and are unwilling to deal with it appropriately, can we expect this from every union as our country sinks further into bankruptcy?

The unions and management cannot reach a deal. Management might have mismanaged, I don’t know, but the unions seem willing to negotiate themselves right out of a job and retirees right out of pensions rather than make it work. Meanwhile, other companies will pick up the most interesting treats, 19,000 people at Hostess will be on the unemployment line, and another U.S. company with historical significance will cease to exist. Read here: WSJ

 

 

 

 

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