Clearing the air on who is to blame in the Hostess Bakery worker’s strike

The Public Needs to Know The Truth: A Statement from St. Louis Labor Council President Robert Soutier

(SAINT LOUIS) The failure of the mediation process imposed by the bankruptcy judge is no surprise. What is surprising is the on-going effort to try and blame the Bakery, Confectionery, Tobacco and Grain Millers (BCTGM) Union members for the problem. It’s important that the public have the facts:

In two successive bankruptcies (2009 and 2012) the company’s officers and hedge fund owners:

(1) Plundered the company: the then CEO took a 300 percent raise (from $750,000 to $2,550,000) and nine other top execs received massive pay raises: one went from $500,000 to $900,000, another $375,000 to $656,256. That was on top of the millions siphoned off for “consultants” and returns to the hedge fund owners.

(2) Despite Hostess promises after the first bankruptcy, plant machinery was not replaced, new technology was ignored, and new product development never occurred.

(3) The Company’s debt continued to grow, and its sales and revenue decreased.

In the first bankruptcy, the workers gave up $110 million in concessions, taking cuts from 27-32%! Instead of making the investments it committed to do, the company immediately closed 21 plants and cuts its workforce from 35,000 to 18,000. In addition to these cuts, the workers watched as Hostess pulled $50 million from their pension plans in the first five months after the first restructure. And what do they want now?

• An immediate 8% wage reduction;

• The shift of at least 20% more health care costs onto its employees,

• Elimination of the employees’ W-1 (retiree medigap insurance) and P-Plan (a pension supplement used to pay health and funeral costs);

• Closure of additional plants (10-12), refusing to tell the union which plants are profitable, which plants will be closed, why, etc.

• Elimination of the eight-hour work day.

The Bakery Workers simply said, “enough is enough.” The union warned in the first bankruptcy that the company was so heavily in debt, it would be back in bankruptcy in 12-16 months. It turned out to be an accurate prophecy. Studies made by the union in the current bankruptcy showed that even with the additional severe cuts being asked by the workers, the company would not survive because so much would be siphoned off by hedge funds that liquidation was inevitable.

Let’s make it clear: the real culprit there is bad management! Despite earning PROFITS of more than $2.5 BILLION in 2011, it ended the year with a $341 million loss!
Adding insult to injury, in the current bankruptcy, Hostess is asking the judge to allow them to pay senior management bonuses of up to 75% of their annual pay, as much at $1.75 million! The media is quick to use the workers – Bakers, Teamsters, Retail Clerks – as the convenient whipping boy for the company’s failure.

An excerpt from a recent editorial in the New York Daily News says it all:

“Despite this being the firm’s second trip through bankruptcy, there was clearly money to be made in the business if management had been smart enough. Didn’t happen. What did happen was that bosses wrested concessions out of the bakers and Teamsters and came back for more.”

The simple truth is the workers from all the unions employed by Hostess made incredible sacrifices to save this company. Bad company management squandered those sacrifices. The public needs to understand the truth.