Another case of not seeing the big picture (company BK because of pension)

[Texas Proud]

OK, I put this in the political forum since it will likely be batted around a bit before Porky comes....

But, I do not see why a union can not see the writing on the wall and try and get the best deal they can... when NOBODY wants to buy a company, there has to be something terribly wrong with it...

(then again, maybe this is what they wanted so they go under the gvmt run fund... who knows for sure)..

Hostess returns to bankruptcy over pensions - Yahoo! News

 

[spirit]

Who ordered this story and what is the slant?

On the surface this looks like a story to pit greedy workers against a hard working company.
(Reporting by Kavyanjali Kaushik and Tanya Agrawal in Bangalore; Editing by Greg Mahlich and Gopakumar Warrier)
Can someone explain why 2 reporters from India were writing a story concerning North America? Or were they just churning out copy that was presented to them. This is not reporting but news manipulation. I have never noticed if news stories are being outsources but will pay attention in the future.

 

[NYEXPAT]

I miss my "deep firied" twinkies!

 

[ziggy29]

Part of the problem is that in the U.S., pensions and health insurance tend to be overwhelmingly the responsibility of employers rather than governments and/or individuals. So it's not just unions per se, IMO, but the fact that unions in the U.S. have to fight for things like health insurance and pensions that put them at a disadvantage to even union shops in other countries where the employer isn't expected to directly pay the overwhelming majority of the costs of health and retirement benefits. In countries with "nationalized" health and pension plans, the employer doesn't pay these spiraling costs directly -- so unions there don't have to demand them from the employer to the same extent as in the U.S. As these have tended to be the most out-of-control portion of U.S. labor costs, it's not that hard to see how it puts U.S. business at a disadvantage in general.

Having said that, usually private sector unions have been more willing to renegotiate down than public sector unions, because the former have competitive pressures that the latter largely do not (historically; that may change). Just the same, I don't think the race to the bottom for American labor helps anyone, and I think our expectation of pensions and health care as "fringe benefits" that are the responsibility of employers -- not individuals, not governments -- is a significant part of what makes business uncompetitive here.

Our "relentless pursuit of the lowest price" does have its disadvantages. It has its advantages as well, but whether they outweigh the social disadvantages is a matter of perspective and, yes, of politics too.

 

[pb4uski]

While unions once held the high road in curbing abusive employers and advocating fair wages for employees, in many cases today they have gone too far, resulting in employers being uncompetitive in today's global marketplace and the loss of US union jobs. Too bad.

Pigs get fat, hogs get slaughtered.

 

[ziggy29]

...in many cases today they have gone too far, resulting in employers being uncompetitive in today's global marketplace and the loss of US union jobs.

I'd simply reiterate what I wrote above -- I think the problem is that they "go too far" because they have to demand health care and pensions that are almost exclusively employer-funded -- something that many other nations, even heavily unionized ones, don't face. When one lives in an economy where health and retirement security -- the two fastest rising (and seemingly uncontrollable) labor costs to U.S. business and governments -- come from elsewhere, unions outside the U.S. don't have to demand that their employers cover it all. So their employers don't have these two 800-pound gorillas (and growing much heavier year after year) on their shoulders compared to U.S. union shops. Which will be more competitive globally?

If U.S. union workers want the same health and retirement security as those in other industrialized nations, they have to demand the employer pay it -- while union labor from other nations don't have to, at least not to the same degree.

So to that end I don't think it's simply a matter of "unions bad" or "unions unaffordable" -- it's at least partially a product of our flawed economic model which puts the expectation of health and retirement security on employers. That makes us uncompetitive even when compared to union labor in nations which don't have that broken assumption in place.

As far as having "gone too far," even where I would agree with you historically in some cases I'd argue that the pendulum is starting to "go too far" in the other direction with respect to middle/working class U.S. labor getting the shaft.

 

[pb4uski]

While I get your point, I think the problem is more pervasive than just who pays. In other countries, employers also pay for health care but it is a part of taxes (VAT, profits, or whatever) rather than directly like in the US.

The bigger issue and problem is that our health care cost as a % of GDP is much higher than many other countries. Part of that is accounted for by more advanced medicine and part is likely due to the inherent inefficiency of the disjointed way health care is delivered in the US.

But at the end of the day, the unions need to be cognizant of employer's competitiveness in making their demands - they haven't done a good job of doing that and it will result in the loss of jobs. The autoworker unions made very significant concessions as the automakers went through their travails which rightsized the automakers labor costs so that they can be more competitive and preserved jobs (compared to the jobs that would have been lost absent the concessions).

 

[ziggy29]

But at the end of the day, the unions need to be cognizant of employer's competitiveness in making their demands - they haven't done a good job of doing that and it will result in the loss of jobs. The autoworker unions made very significant concessions as the automakers went through their travails which rightsized the automakers labor costs so that they can be more competitive and preserved jobs (compared to the jobs that would have been lost absent the concessions).

Perhaps so. But there is a dynamic in the U.S. marketplace that is almost unique among industrialized nations -- not only that unions are "uncompetitive" relative to non-U.S. unions because of the need to include health insurance and pensions as entirely employer-paid perks, but also because of non-union competition taking advantage of (a) shareholder demands for higher profits and (b) consumer demand for "cheaper".

As an aside here, as long as we as a consumer nation are determined to always buy from the lowest-cost provider, we shouldn't be surprised or outraged when good jobs move overseas or when jobs with good pay and benefits are lost to competitors offering half the pay, weak (if any) health insurance and no pension. And the worst thing is that the more labor gets squeezed -- reduced benefits, shrinking real pay, a "personal inflation rate" that leaves the CPI in the dust -- the more it NEEDS to look for the lowest price even if it would rather pay a little more and buy form a retailer or manufacturer that provides good American jobs with good pay and benefits. Lather, rinse, repeat.

We have seen the enemy, and it is us. At this point I don't know how we break out of this downward spiral for American labor.

 

[pb4uski]

I totally agree, it is a dilemma.

Individuals tend to do what is in their individual best interest so if there are two comparable products and one costs 10% less than the other the consumer will likely chose the lower cost product. I don't see that changing.

In the past, US labor has preserved competitiveness in some sectors by being more productive than foreign labor so while the cost per hour of US labor was much higher, the cost per unit has been competitive, especially considering quality.

The only solution that I see for US labor to remain competitive is to continue increasing productivity (continually improve units per labor hour) and moderate wage growth.

 

[Chuckanut]

I do not know what happened at Hostess in regards to its pension system, but after reading the book Retirement Heist, I do know that many companies had well funded pension plans, drained off funds for other uses, and then cried that the plans were underfunded and no longer feasible to continue. We need the COMPLETE movie not just today's snapshot to get a clear and accurate picture of what is going on.

Unions can certainly be greedy and self defeating. Nobody argues that. But, like a marriage that goes bad, there is usually blame on both sides of the relationship. Let us also remember there were days, (fortunately, before most of us had to work), when we had things like company stores, 6 1/2 day work weeks, child labor, and very unsafe working conditions. There was a reason unions gathered so much power and it was not because Megacorps were benign, nice guys who loved to treat their workers well.

 

[Chuckanut]

One other point, does anybody really expect management to say "Our company is going into bankruptcy again. The reason is our incompetence and inability to compete well in today's market. Despite the fact that our products are well known household names, we just can't seem to get our act together and take advantage of that fact. "

 

[Chuckanut]

The bigger issue and problem is that our health care cost as a % of GDP is much higher than many other countries.

Very true. As I have mentioned in the past, friends in Europe point out that they spend about 1/2 of the GNP we do on health care and yet live about 3 - 4 years longer than we do. They spend more time getting advice from pharmacists not doctors, don't have many single rooms in hospitals, and, I imagine, don't have some guy playing a grand piano near the entrance to the medical center (like the MegaMedicalCenter near me does!!).

 

[check6]

The autoworker unions made very significant concessions as the automakers went through their travails which rightsized the automakers labor costs so that they can be more competitive and preserved jobs (compared to the jobs that would have been lost absent the concessions).

I believe it was miniscule compared to what the airline workers have given up.

 

[ERD50]

One other point, does anybody really expect management to say "Our company is going into bankruptcy again. The reason is our incompetence and inability to compete well in today's market. Despite the fact that our products are well known household names, we just can't seem to get our act together and take advantage of that fact. "

From that yahoo article:

To reorganize itself, the company must withdraw from multiemployer pension plans, address legacy health and welfare costs and secure new capital to modernize its production and distribution operations, Irving, Texas-based Hostess said.

Sounds like they are admitting that they let these systems get outdated. So your characterization that they are just using the union as a scapegoat doesn't seem to hold.

I don't expect them to come out and talk themselves down anymore than I expect the unions to say, "Yep, we bargained w/o any concern for the future of the company ", either.

RE: Ziggy's comments on US Unions fighting for benefits that are provided by Govt in other countries:

While I get your point, I think the problem is more pervasive than just who pays. In other countries, employers also pay for health care but it is a part of taxes (VAT, profits, or whatever) rather than directly like in the US.

+1 It still has to get paid and is a drag on the economy regardless who pays. As pb4uski went on, the efficiency and level of those benefit systems is the key to remaining competitive.

As an aside here, as long as we as a consumer nation are determined to always buy from the lowest-cost provider, we shouldn't be surprised or outraged when good jobs move overseas or when jobs with good pay and benefits are lost to competitors offering half the pay, weak (if any) health insurance and no pension. And the worst thing is that the more labor gets squeezed -- reduced benefits, shrinking real pay, a "personal inflation rate" that leaves the CPI in the dust -- the more it NEEDS to look for the lowest price even if it would rather pay a little more and buy form a retailer or manufacturer that provides good American jobs with good pay and benefits. Lather, rinse, repeat.

We have seen the enemy, and it is us. At this point I don't know how we break out of this downward spiral for American labor.

And IMO, it is our un-competitiveness that has made us (ourselves) the enemy. I don't think protectionism (buying our own un-competitively produced goods) is an answer. As I've said many times when you bring up this 'race to the bottom' comment - we are not racing each other to the bottom, we are (trying to) compete with a world with a lower standard of living than us. If we expect to compete with them, and have a higher Standard of Living, we need to find ways to boost our productivity above what can be achieved in those countries.

Otherwise, we are taking food out the family of some 2nd/3rd world family who depends on their 'bread winners' low-paying factory job making cheap stuff for the rest of the world. Just so we can buy another flat screen TV?

I don't think it's so tough to figure out why we can't expect high wages here when people with those sorts of motivations are willing to work for less.

So one thing we need to gain some advantage is lower cost, better health care. Not to derail the thread, but I think it's fair to say that even most of those who support the HC bill that was passed will admit it does little/nothing to contain costs (despite the title of the bill).

-ERD50

 

[RetireBy90]

I should just move on to the other posts, but I can't resist a couple comments.

1) If we in the US don't buy a US made product, there is a price to be paid down the road in loss of jobs, more govt programs to retrain, and other govt intervention. Pay me now or pay me later. Some truth in there somewhere.

2) The article I read talked about work rules required one person to load, one to drive the truck, one to unload and sometimes another to place on the shelves. One bad tick union.

3) When they were buying all these other companies, why didn't they consolidate the number of unions? Bad tick for executives.

4) Unions share the blame for loosing jobs along with the companies.

 

[Midpack]

No matter what the reasons, haven't private sector unions already lost the battle? Less than 7% would seem almost irrelevant. If will be interesting to see how public unions fare in the years ahead.

And while I agree separating health care from employment would be a good step, I can't help but remember how employers got that responsibility to begin with. Ironic?
http://healthfreedoms.org/2009/08/23/how-did-we-actually-get-into-the-current-healthcare-mess/

 

[Chuckanut]

Medical care will be drag on our competitiveness until we can get it down to a percent of GNP that is about the same as other countries. Whether the medical costs are paid by taxes, employers, individuals, or anybody else is a minor factor. My 2 cents.

 

[haha]

The bigger issue and problem is that our health care cost as a % of GDP is much higher than many other countries. Part of that is accounted for by more advanced medicine and part is likely due to the inherent inefficiency of the disjointed way health care is delivered in the US.

If our medicine is more advanced, why aren't our mortality statistics at least equal to those other "less advanced" countries?

Ha

 

[Hamlet]

I don't see anything indicating that the unions are neccessarily being unreasonable.

This company has high costs, large debts, and declining sales.

The unions will probably fare better in bankruptcy than they would making massive concessions outside of it. If they make massive concessions outside of bankruptcy, the company will still carry all their debts, and may still have to declare bankruptcy down the road.

The unions will still get a haircut in bankruptcy, but so will the other creditors. Management may get changed as well. I suspect that the unions don't want to be the only stakeholder making sacrifices.

I found this like that has some interesting info on some of the history--

Why bankruptcy isn't a brand killer. - NewsFeed Researcher - hostess, company, problems, twinkies, bankruptcy, twinkie, brands, brand, bread, year, breads

Hostess grew by acquisition, so they have a dozen different unions in some 40 multi-employer pension plans. Frankly, it sounds like management didn't think these acquisitions through very well originally.

It talks about some goofy issues with multi-employer pension plans--

" Hostess pays about $100 million a year to a multi-employer pension plan. Multi-employer plans, thanks to a law Congress enacted in 1980, require each company paying into them to be liable for all plan participants even those that never worked for other companies covered by the plan. Hostess wants to rescind its obligations to the multi-employer plan and start paying into a pension that covers only its workers. Of course, since the company is also hoping to reduce labor costs through the bankruptcy, it's a safe bet that it's not planning on maintaining the existing benefits for its own employees. Congress has made some efforts to address the problems with multi-employer plans in recent years, in part because they tend to place a disproportionate burden on smaller companies. The whole idea behind multi-employer plans was that small companies could offer retirement benefits that they couldn't otherwise. [13] With each bakery it bought came pension obligations and a series of different labor contracts it has had trouble reconciling. Hostess, for instance, pays about $100 million annually to some 40 multiemployer pension plans that cover workers at a wide array of companies other than its own, said people familiar with the matter. Hostess wants to switch to a so-called single employer plan that covers only its own workers. "

OK, I put this in the political forum since it will likely be batted around a bit before Porky comes....

But, I do not see why a union can not see the writing on the wall and try and get the best deal they can... when NOBODY wants to buy a company, there has to be something terribly wrong with it...

(then again, maybe this is what they wanted so they go under the gvmt run fund... who knows for sure)..

Hostess returns to bankruptcy over pensions - Yahoo! News