In the last issue of INK we posed the question no one else at the time was asking – Will Unions Kill the Twinkie? Since then LRI President Phil Wilson appeared on Fox Business to explain not only how unions are killing the company, but how union concessions in the bankruptcy process are critical to saving it. The company’s bankruptcy filings make clear what we at LRI first suspected – financially Hostess is sinking for its dozens of union contracts that chain the company to massive “too big to fail” multi-employer union pension funds. Court documents show the company is in debt to the Bakery & Confection Union & Industry Pension Fund alone for a jaw-dropping $944M, far and away its largest debt owed. (That works out to about $2 per Twinkie sold per year.) And of the company’s thirteen unsecured debts over $1M all but four are owed to various union pension funds including close to $12M to the notoriously underfunded Teamsters Central States Fund. The company has repeatedly asked for and been denied concessions that would allow Hostess to secure its pension obligations to past and present employees through a single self-administered fund, rather than a patchwork of sorely underfunded multi-employer union plans. (The Bakery & Confection Union & Industry Pension Fund is 62% funded and ranked “endangered” by Moody’s) Meanwhile, the unions are also refusing to give ground on arcane work rules that, for example, do not allow Wonder products and Hostess products to be delivered by the same truck. Teamsters also cannot be required to both drive a truck and unload a truck so all company deliveries must be made by two Teamsters. To quote Phil Wilson on Fox Business, “They (Hostess) need to be a more innovative company and with all of the restrictions and all of the inefficiencies that are built into their system because of their labor union problems it’s impossible for them to innovate.”
