The Hostess worker jobs being lost and the demise of the iconic Twinkie are being blamed on the Bakery Union. With 15,000 Hostess workers fired immediately after Judge Drain gave approval for Hostess to begin emergency liquidation, political pundits from both the right and the left have begun slinging mud at each other. As previously reported on The Inquisitr, some of the Hostess workers, who agree with the Bakery Union’s decision to walk away from negotiations, have been blaming Bain Capital-style greedy Hostess executives for giving themselves raises while asking union employees to take stiff cuts to salaries, pensions, and health insurance. This narrative is derailed by the fact that leading members of the Democratic Party, and one of its top donors, were behind the demise of Hostess.
The accusation by the Bakery, Confectionery, Tobacco Workers and Grain Millers International Union (BCTGM) is that the Hostess executives gave themselves 300 percent raises when the company was losing money for years:
“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.”
The Bakers Union is allied with the AFL-CIO, whose leader Richard Trumka had this to say as well:
“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…[c]rony capitalism and consistently poor management drove Hostess into the ground, but its workers are paying the price.”
The other side paints a completely different story, although some of the accusations ares true. As the Bakers Union says, the Wall Street Journal reports that in July 2011, top executives received a 75 to 80 percent pay increase. What makes this executive pay raise so ridiculous is that two months prior to this Hostess posted a $341 million net loss from a recorded net revenue of about $2.5 billion.
The Teamsters Union could not stand for this outrage and the multi-million dollar CEO Brian Driscoll disappeared from the scene in March of 2012. When Greg Rayburn became Hostess’ sixth CEO in a decade he was considered a company turnaround expert. Rayburn quickly reduced those same executives’ salaries to one dollar a year, which included his own pay of $125,000. He did this to combat Hostess’ $860 million debt load and the $2 billion in unfunded pension liabilities to various unions’ workers.
This is not the first time Hostess had faced bankruptcy. Near the beginning of the year Hostess had secured bankruptcy financing of up to $75 million from a group of lenders led by Silver Point Finance. This was done in order to keep the factories running and the workers paid.
This is where the Bain capitalization of Hostess supposedly comes in. In 2010, Hostess hired Goldman Sachs and JPMorgan Chase to explore a possible sale to Hershey, Pepperidge Farm and private equity companies, including Blackstone. Hostess couldn’t find a match until Ripplewood Holdings, a private equity firm closely aligned with the Democratic Party and labor union organizations like the AFL-CIO. Ripplewood was founded by Timothy C. Collins, a major Democratic donor.
Fortunately, they did not enter Hostess with the intention of buying it, stripping it and flipping it like the infamous corporate raiders of the 80’s. At the same time, Ripplewood charged millions in consulting fees and oversaw the huge raises to the Hostess executives as part of the earlier bankruptcy proceedings. Ripplewood is expected to lose most, if not all, of the $130 million or so it invested in Hostess.
According to the New York Times, Mr. Collins sought out Richard A. Gephardt, the former House Democratic majority leader, who had become a consultant on labor issues, to help Ripplewood acquire Hostess and work with its unions. Mr. Collins had previously been a donor to Mr. Gephardt’s election campaigns. Mr. Gephardt’s son was reportedly appointed to the Hostess Board and paid $100,000 a year.
According to American Thinker, the Teamsters, notably, are not affiliated with the AFL-CIO, while the Bakers are part of the labor federation headed by Richard Trumka. It is claimed that “Trumka has a long and sordid history of selling out union workers for his personal political power and career advancement.” Clarice Feldman chronicles for readers of American Thinker Trumka’s “sell-out of the mine workers when he headed the United Mine Workers of America, allying with President Obama, who has made clear his intent to close down coal mines and destroy mining jobs, sacrificing his members’ livelihood, while his political sway earned him a promotion from his own union to head up the entire AFL-CIO and emerge as one of Obama’s key allies.”
What killed Hostess in the end is pure business math. The tastes of Americans have slowly been getting healthier, with companies like Coke only maintaining their market lead because of diet products like the Diet Coke. Other companies have responded to this change, while Hostess did not. According to Forbes, Hostess lost $341 million last year. The money the Bakery Union demanded for worker job compensation simply wasn’t available. Forbes says that “the Teamsters union, whom nobody would ever accuse of wimping out during contract talks, looked at Hostess’ books and acknowledged that the only way to keep the operation afloat would have been for workers to accept lower compensation.”
Forbes raises some serious questions about the action of the unions:
If people lose their jobs because they committed economic hara-kiri, should they still be entitled to receive taxpayer-funded unemployment?
Should the Teamsters union members, whose jobs are also being lost because of the Bakery union’s decision, be allowed to file civil suit against the Bakery union for compensatory damages for the losses they will suffer from the latter’s reckless actions?
Can the rank and file of the bakery union sue their union leaders for professional malpractice? (The malpractice is worse in the union’s case, because most doctors convicted of malpractice don’t intentionally try to harm patients, whereas the Hostess bakery union could see that their action would have a lethal effect, and they went ahead with it anyway.)
At the end of the the Twinkies saga, the final nail in the coffin was that the Bakers Union called for a strike despite Judge Drain having “serious questions as to the logic behind the decision” and walked out on negotiations. A union is supposed to represent the workers to their benefit, not get them fired. In startling contrast to statements by Richard Trumka, Samuel Gompers, the founder of the American Federation of Labor, which became the AFL-CIO, said this over a century ago: “that what workers need is a company that operates at a profit.”