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Unions: Hostess CEO Received 300% Raise Before Bankruptcy

Labor blasts 'myth' that a union strike killed Twinkies

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by Mary Noble

Senior Editor t

Image: Facebook

Union leader Richard Trumka has resurrected the Bain attack line to explain the death of the Twinkie.

Twinkie-manufacturer Hostess blamed a union strike for the company's closure. But AFL-CIO President Trumka says that's nonsense, and that "crony capitalism and consistently poor management drove Hostess into the ground."

"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," Trumka said in a statement reported by Politico.

Trumka painted Twinkie's employees as the victims of the company - especially since the company's closure will mean 18,550 job losses. Hostess has called itself the victim of overly-demanding workers, who made the company unprofitable. The company previously filed for bankruptcy in 2009 and again in January 2012.

The Sacramento Bee quotes the Bakery, Confectionery, Tobacco Workers and Grain Millers International Union on alleged pay raises for Hostess execs during earlier bankruptcy filings, including a supposedly tripled salary for former CEO Brian Driscoll: "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."

Via Politico and the Sacramento Bee.
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What caused Hostess to go out of business - unions, or bad management?

Comments (view in Forum)

  • u
    RobertJHarsh
    !
    I think you just described GM and Chrysler but they got a bailout. Wait...I like Zingers...I demand Obama bail out this failing company so I can continue to get my Zinger fix.
  • Fishbone345
    !
    @Denizen_Kate That wouldn't work, because the "Evil Unions" would likely dial up something evil to take down Hostess still.
    It's just so ridiculous when people attribute bad business decisions to the "Evil Unions".
    Its seriously no wonder that the budget is such an issue if these same people have any say in it.
  • View all 26 replies >
  • MongoAPillager
    !
    i'm just wondering if that is a real funeral or a tv funeral,i know if one of my kin had been replaced by a twinke in their funeral picture i would be pizzed,(Unless it was Uncle Ralph)
  • View all 10 replies >
  • DARSB
    !
    "The bankruptcy petition filed in January was the second for Hostess. It listed assets of $982 million and liabilities of $1.43 billion. The first bankruptcy reorganization filing was in 2004."

    It seems like a reach to blame the current labor situation for a failure that seems to have been in the works at least since January, if not even longer.

    Read more here: http://www.kansascity.com/2012/11/15/3919585/...
  • Fishbone345
    !
    Poor management, and decreasing demand? Heresy!!!
    It was the Unions DARSB. Don't you know CEO's no longer need to claim responsibility for poor business decisions anymore? Blame it on anything by thyself. Its the American way.
  • Neo_NtheMatrix
    !
    I love when people who have never run a business pontificate on how easy it is to run one and how labor is basically a neutral cost. I'd love for some of these union loving leftists to open up a business and pay their workers $30 an hour + top notch benefits, medical, and a pension, then see how long they last. Since it's a piece of cake, I want to see a union boss do it. I want to see it done. Show the world up. Labor is a neutral cost that can't sink a business. I want to see a liberal prove it.
  • DARSB
    !
    @Neo_NtheMatrix Puzzling challenge, Neo. Are you arguing that only management can scuttle an 80 year old business?
  • Rocker
    !
    I don't suppose it would sway any opinions if it was known that 2 engineering consultant firms was hired at 2 different times that made suggestions to improve operational efficiency and the management blew them off both times.
  • MRMacrum
    !
    @Rocker - No. It won't matter to the "Unions is evil, them losers should be taken out and shot" crowd. To the anti union folks management is never to blame. Ever.
  • View all 9 replies >
  • u
    Rogue
    !
    Hard to believe Jeff, when during their last bankruptcy they cut wages. In the meantime, between 2004 and now they've paid their CEO $125 Million per year with additional perks of $2 million; and paid management $125,000 PER MONTH, while cutting workers pay again! Can't blame the worker's strike on this one.
  • Jeff_Woehrle
    !
    @classychazy Follow closely: The company asked the unions for concessions and to end their strike to keep the company going. Some unions agreed, but one refused. As the company could not operate with the workers on strike (and at inflated wages), it is now closed for good.

    Fault = unions. There's your clue.

    :-)
  • Jeff_Woehrle
    !
    @Rogue The strike was the defining event. Had the unions all agreed to concessions and ended their strike, the company would still be squeezing out Twinkies. The unions refused. The company is now closed.
  • View all 15 replies >
  • kstigar
    !
    Bad management.

    Look at recent history. The union made major concessions for the previous contract in order to keep the company alive. Following that the company voted its owner large dividends and increased the pay of the CEO by 300%.

    The union took a strong stand and kept it. They knew the company was going to die and they chose the time and place for the end to come. Rather than wait for it to happen to the employees instead they turned it around and made it happen to the company.
  • Jeff_Woehrle
    !
    The 'bad management' was agreeing to unsustainable union contracts in the first place.

    Unions had a chance to give this company another shot. They chose to eliminate their own jobs and let the company close. Much like Government Motors, this company was saddled with expensive union contracts that had no foothold in reality. Unlike Government Motors, Obumble didn't step in to bail out the unions this time.
  • kstigar
    !
    @Jeff_Woehrle - why did the company agree to these unsustainable contracts? Perhaps they should have said "No" to the union.
  • CanisCanemEdit
    !
    @Jeff_Woehrle -

    Wall Street Journal Jan 11, 2012

    "In a court document explaining how the company got into this mess, Hostess largely pins the blame on its labor costs, as well as increased competition, poor financial performance and excessive levels of debt. Hostess also says the company didn’t do enough to fix itself during a lengthy prior stint in bankruptcy protection less than a decade ago."

    ”The company obtained only modest concessions relating to health and welfare, as well as inflexible requirements under their collective bargaining agreements relating to work rules,” Hostess says in its court filing, which says the company and its employees have 372 separate labor agreements."

    "Hostess said it posted a net loss of $341 million in the fiscal year ended May 28, 2011, and a loss of $138 million the prior year."

    "The company indicated it will seek to modify or throw out its labor contracts, and its pension plans for workers. Hostess said its annual cash contribution to employee pension plans is about $103 million."

    http://blogs.wsj.com/deals/2012/01/11/its-off...

    How in the hell is any company supposed to operate when the Unions saddle them with 372 SEPARATE LABOR AGREEMENTS?

    For all the class warfare folks out there complaining about how the Hostess CEO's salary went up to 2.5 million...

    If you stole EVERY penny that CEO made, divided it by 18,000 employees, it would give them a pay increase of $138.88 per year. If you stole EVERY penny the top 10 executives earned while employed at Hostess, the amount divided out to those 18,000 employees would be less than $250.00 per year.

    The tax the rich crowd and the it's not fair because the owners, CEOs and executives make more than their fair share crowd appear incapable of basic math.

    Not only are there no winners (except government) in a redistribution scheme, this system makes financial losers out of nearly everyone.

    For the diehard union supporters out there... If you want to make $XXX.XX per hour, produce a genuine benefit to your company that is in excess of of what your wages and benefits cost that company.

    Otherwise you are costing your company money, and no business owner or investor is looking to lose their investment just so you feel good because you've earned a fair or 'living' wage.

    This really isn't rocket surgery.
  • Jeff_Woehrle
    !
    @CanisCanemEdit Spot on.

    This largely explains why unions are on a steep decline in America, and nearly every product that can be made elsewhere now is. Unions believe that employees should be richly compensated in good times and bad...no matter what.

    And the undeniable truth is that Hostess would still be pushing out Twinkies if not for the union's own vote to kill their own jobs. They had the choice and they made it.

    Cry me a river.
  • Jeff_Woehrle
    !
    @kstigar Excellent point. THAT is bad management. They should have fired everyone and started anew a long time ago. Alas, nobody wants to be the CEO who presides over massive labor unrest and cost to the company. They just agree to more and more extortion and kick the can further down the road for someone else to deal with.

    And that same mentality is alive and well in Washington today. Massive spending, no appetite for cuts and a debt that will come due for our childrens' children.

    On a small scale like Hostess, it plays out quickly. On the grand scale of the federal government, it takes lifetimes. But that clock is ticking just as well.
  • View all 8 replies >
  • FFX_VA
    !
    A tragedy of errors by all involved. Read the details. Management made mistakes, venture capital investment pressures, poor advice to employees from union leaders, and the economy. They all are culpable in killing the Twinkie and putting over 18,500 people out if work.
  • FFX_VA
    !
    @Cheenoguy I know, it's a hard sell to some of these zealots. I'm beginning to think it's more fun being an instigator!
  • marine1
    !
    Here is an opportunity for the union to prove its point. Union should buy it. Retain all current union employees. Give them the raise and bennies they want and show the world how right they are.
  • FFX_VA
    !
    The union negotiated a 25% stake in the company, they could now easily buy up the assets for penny's on the dollar. Problem is, they don't have the skills to run a business that large, it's not what they do.
  • mimi57
    !
    Trumka is the reason those people are out of jobs, all he's doing is passing the buck...
    that's what all Big Labor Union thugs do, lie, steal money and blame others! Someone
    else will buy them out, minus the "strong arming" of the unions...Pass the Twinkies!!!
  • marine1
    !
    IF the goverment employees didn't have the vote,obama and the states would be cutting their salaries and bennies right and left. no pun intended.
  • u
    Penn1699
    !
    I have an idea. When the big wigs in government get the same bene s as citizens and drop their back door insider info deals then corp America should too. Otherwise, same animal different side of the coin .
  • Ashstop
    !
    Don't know the history but if they are shutting down I don't think it is because of corporate greed, I can understand strikes if a company is making profits and upper management is well paid but they want to takeaway from the workers( Lockheed ) but Hostess must have been losing money and simply couldn't afford to spend more for labor than they received from their products.
    I don't think the union spokesman is representing the membership a lot of times
  • u
    Cheenoguy
    !
    So you admit that you don't know what's going on but it has to be because of the union? The executive raises leading up to bankruptcy played no part just greedy laborers?
  • Ashstop
    !
    @Cheenoguy no, my remark about unions was in general, I've belong to a union for over 32 years, I was on strike this year for over 10 weeks, since we went back to work, the union has been nonexsistant,we can even get a scab list! They got what they wanted, control of the 401 plan, now it cost too much to go to arbitration, business reps are too busy to leave their office etc..
    I said hostess didn't look like corporate greed because they went out of bussness , the company i work for on the other hand posted record profits
  • martydotcom
    !
    This is it !!!!!
    A world without Twinkies.
    Obama re-elected
    War in the Holyland
    This is the Introduction to The Apocalypse..
    THE RAPTURE is upon us
  • u
    Yank
    !
    That article also says the CEO never received the 300% raise. It was brought before the bankruptcy judge, but he quit before it was approved and it was then withdrawn.
  • jessejaymes
    !
    While the right wing indulges in their favorite pastime of blasting Unions those of us with a lick of common sense will take note of the 24 million dollars in additional debt that Hostess took on last year while still in Bankruptcy. 24 million that did not go to workers, facilities or any place discernible. Looks like a Bain capital take down from here. The power cats pocketed the money.
  • o
    NO-BAMA
    !
    Chalk up another victory to the liberal backed unions.
    If its not Barry and his policies, its his union pals,(thugs) that destroying America's economy from within.
    Looks like more government "dependency" is on its way. Lets see if the unemployment numbers go down again this month.
  • o
    Zoe2012
    !
    Unions, everything they touch turns to trash! Oh well, it won't matter soon, there will not be any companies for them to abuse.
  • u
    Kellso
    !
    Unions were good when the manufacturers had 'sweat shops' and mistreated workers. Unions only bleed the pockets of the comapnies now to fill the UNIONS pocket and they dont care what happens to the workers that they are supposed to protect.
  • martydotcom
    !
    The motors appears to be working out... The Twinkie supply is a critical industry in the states with lrgal marajauna
    Stoners, kids being denied Twinkie is Unamerican
  • o
    Zoe2012
    !
    The Hostess workers won't be buying Obamamotor vehicles without a job, now will they? Walk or ride a bike will be more like it.
  • martydotcom
    !
    @Zoe2012 watch.....bankruptcy will negate labor pension, but Exec's already cashed out. A strategic bankruptcy = good exec decision they keep doing it Every few years
  • PNWest
    !
    I don't know if the white house freezer is full of those treats but the GOP platform and slate of candidates this year certainly had an abundance of Ding Dongs. Come to think of it so does the DA's office in central NY.
  • Fishbone345
    !
    This is a no-brainer. Of course the current trend for CEO's is to blame anyone, themselves.
    Sad that this is now what it means to be "American". Blame others, not thyself.
    Disgusting.
  • FFX_VA
    !
    If i worked at a company where the CEO & 9 top managers got 300% raises while in CH 11, I'm looking for my next job the same day. It's over.
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