Is Hostess Management or Union Getting Just Desserts?

By Phil Rosenthal, Chicago Tribune

21 November 12

ith all the sugar-frosted eulogies for Twinkies, Ho Hos, Wonder Bread and other foodstuffs from Hostess Brands, one might forget that about 18,000 jobs hung on the fate of the bankrupt company.

Sorry, Mom. Guess we're still filling up on snacks and bread rather than focusing on the meat of the matter, which is real people with real families looking at real potential hardships.

The company said Tuesday evening that court-ordered confidential mediation failed between Hostess management and the Bakery, Confectionery, Tobacco Workers and Grain Millers International Union, whose strike precipitated the move to unwind the company. A spokesman said Hostess will return to court in New York on Wednesday to proceed with a motion to liquidate.

Even if the court were to intervene, Hostess' endangered workers surely would face a far more tenuous future than the beloved product lines that have been swept off store shelves by consumers in fits of nostalgia in recent days.

Hostess Ding Dongs, Dolly Madison Zingers, Drake's Devil Dogs, Butternut bread and the other goodies that filled your childhood lunch box will survive. They're prime Hostess assets. Someone, some company, will snap them up and continue marketing them.

The empty-calorie hand-wringing at the expense of what's truly vital in this corporate collapse is emblematic of a misplaced concern in America.

It's the refusal to see any merit whatsoever in opposing viewpoints, the failure to compromise, the demonizing of those who don't agree and the focus on differences rather than the common ground that may be crumbling beneath. We've seen it in politics as government factions wrestle for the steering wheel while Thelma-and-Louise-ing it toward the "fiscal cliff." We're seeing it in business, too.

"Incivility in the business world stems from things getting tight," said Al Gini, chair of the management department at Loyola University Chicago's School of Business Administration. "Then everyone goes to extreme measures and everyone holds on to their own extreme position.

"There are polarized positions. No one is listening to each other. Maybe they all have a case and all may be excessive in their demands and no one is willing to compromise. Obama's right. Compromise hurts."

Some argue the Hostess situation is 100 percent the fault of the unions, who greedily insisted on contract terms the business could no longer support. Others put the blame solely on venture capitalists, exploiting a vulnerable enterprise's struggle as an opportunity to squeeze its workforce while ensuring their pockets are lined, whether their restructuring is successful or not.

Elements of both stances are valid. If anything, the calcification of each side has stoked the other, encouraging short-sighted me-first-ism on both sides. Should-be allies seeking to salvage their mutual investments became combatants.

Hostess has been a badly run company in an industry where new efficiencies have made traditional ways of doing business unnecessarily expensive. Employees have had to agree to concessions before, only to see top executives cash out. The current management team has had its own strategies it hasn't been able to implement while the bickering continued. About all the two sides agreed on is that they are at the breaking point.

Painting unions as intractable grants a license for draconian measures and battle pay for the trouble. Coloring management as greedy marauders out to pillage a company emboldens and ennobles a refusal to compromise that can only end in a war with casualties.

"If they don't want to take the pay cut, they can leave and work somewhere else, but they don't have to strike and ruin 18,500 jobs in the process," Hostess Chief Executive Gregory Rayburn told me a few weeks back.

Rayburn cited the fact that the proposal rejected by the bakers union but accepted by other unions, including the Teamsters, and nonunion workers called for across-the-board givebacks, even extending to the lawyers working on the company's Chapter 11 case.

But the U.S. Trustee, an agent of the U.S. Department of Justice who oversees bankruptcy cases, has objected in court documents to bonuses company insiders are in line to receive in the wind-down plan Hostess has proposed, deeming them overly generous, and seemingly fueling the union case.

"What you have here is the confluence of separate issues," said Gini, a professor of business ethics. "But they are myopically only looking at their own (concerns) rather than taking the stakeholder approach, which (is to consider) what's at stake here, who's got a stake in this and how do we save this rather than destroy it.

"Just as it's Republicans against Democrats because they have two different views about how capitalism should work, it's owners against employees, rather than this notion of stakeholders and how we handle everyone who's got a stake in this equation."

Jose Garcia, 48, a baker and union representative for the bakers union Local 1, told Chicago Tribune reporter Peter Frost outside the Hostess bakery in Schiller Park on Tuesday he has nothing left to give after many concessions on pay, benefits and worker rights after 10 years at the plant, including a previous trip through bankruptcy that was resolved three years ago.

"Listen, I've got a family, we've all got mortgage payments to make, it's the holidays," he said. "We want to get back to work. But enough is enough."

Garcia asked: "Is it best to die slowly? Is it best to let this go for another 12 to 18 months and get in the same situation?"

Regardless, worry not for the precious Twinkies, born 82 years ago here in the Chicago area. They will continue to be made by someone … somewhere.

Devotees may complain they aren't the same as they used to be.

Nothing is.