November 24, 2012

Our View: Hostess workers victims of management failure

What went wrong at the iconic company started long before the bakers went on strike.

There has been too much sentimental talk about the demise of the Twinkie, which could disappear from the shelves along with Wonder Bread and other Hostess Brands Inc. products.

click image to enlarge

Striking workers picket outside a Hostess Brand plant in Biddeford on Nov. 19.

2012 file photo/The Associated Press/Robert F. Bukaty

The company was given permission to liquidate by a bankruptcy judge after failing to come to terms with a striking union unwilling to accept wage and benefit cuts proposed by management.

The real loss is not the Twinkie, however, but the 18,500 jobs nationally, including 500 in Maine, that disappeared with a stroke of the judge's pen the day before Thanksgiving.

An easy target for blame is the bakers' union, which would not agree to the company's terms, but the Hostess employees are much more victims than villains in a story that goes back long before Tuesday's failed mediation session.

The problem is that the company, like many in America, has been run by financial experts who know nothing about the product they make.

Hostess has been controlled by private equity investors, management consultants and managers from other industries who employees say haven't made the kind of strategic decisions that would enable the company to compete in a changing marketplace.

It has had six CEOs in the past eight years -- none, according to the union, with any commercial baking experience. While the company received significant financial concessions from its employees, it failed to develop new brands or compete effectively on price. The managers and their consultants received generous pay while the company became further saddled with debt.

When the company filed for bankruptcy in January -- just three years after emerging from its last bankruptcy -- it stopped contributing to the employees' pension plan and then asked for more wage concessions, It's easy to see why the workers chose not to play along. When workers vote to cut their own pay, they are, in effect, investing in their company's success. These workers looked at this management group and decided they didn't want to buy in.

No one should mourn the Twinkie. If there still is a market for it or any of the Hostess product line, the brands and recipes will be bought at auction by another company. And Hostess' facilities and equipment may also wind up in new hands and resume baking products, providing jobs to some of the workers who lost theirs.

But firing 18,000 workers the week of Thanksgiving should bother everyone. It is the sad end to an all-too-familiar story in American business, and one that started long before talks broke down last week.

 

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