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Dr. Price writes about stocks, options and the market every weekday on Real Money Pro, a subscription site onTheStreet.com. Paul has been a speaker at the International Traders Expo in New York City and the Options and Forex Expo in Las Vegas. He also gives investment seminars for subscribers of... More
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  • Hostess: Union Rules Were Harder To Digest Than Twinkies 9 comments
    Nov 21, 2012 6:05 PM

    Union workers have now completed their mission. 18,500 jobs are gone forever.

    The national labor bosses stood firm. Labor leaders are proud they stood up to those nasty 'suits' [see Entourage for definition] who refused to run a money-losing business simply to continue paying salaries and benefits.

    Hostess posted a $341 million loss in 2011 on revenues of about $2.5 billion. Contributing to those 2011 losses:

    · (click to enlarge)

    (click to enlarge)

    Unaccounted for in the above numbers were the outrageous union-imposed rules that made for a too-high-to-bear cost of sales:

    (click to enlarge)

    America has come to this. The only defense against insane union demands is the willingness to walk away and close shop.

    With General Motors and Chrysler we found that even that remedy would not work.

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Comments (9)
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  • raykrv6a
    , contributor
    Comments (3195) | Send Message
     
    This is the second go around for Hostess and they union workers wages were cut the first go around and would be again.

     

    For example, dispatcher pay was 54k and cut to 35k, and now they wanted to cut it to 25k area.

     

    Also, the salaries were raised and bonuses were given to upper management which added fuel to the fire.

     

    I'm usually anti-union, but I guess I'll go with the union guys on this one. There was only two choices, accept poverty wages from management, or stay out so the company goes under and can collect unemployment and get retraining.
    21 Nov 2012, 06:14 PM Reply Like
  • Paul Price
    , contributor
    Comments (1516) | Send Message
     
    Author’s reply » You gave no mention of all those union rules which escalated costs for no reason other than to further union jobs.

     

    $25,000 jobs, if that figure is accurate, are a lot better than 18,500 pink slips.
    21 Nov 2012, 06:44 PM Reply Like
  • nmelendez
    , contributor
    Comments (1622) | Send Message
     
    Depends, personally, equal or better. If not count me out. Either we all rise or we all hang.
    25 Nov 2012, 10:44 PM Reply Like
  • raykrv6a
    , contributor
    Comments (3195) | Send Message
     
    The work rules were probably already in place and IMO should have been negociated. Company could have just locked them out and hired whoever wanted to work. Crystal Sugar did that and was successful.

     

    My dad managed a machine shop for a large steel company and was on the management side of the table. I never liked unions.

     

    I also worked for SVU in IT and when the unions struck, I had to go to the distribution center and load trucks, pick product to ship. Lot's of fun.

     

    I don't know if 25k jobs are better then pink slips if you are going to lose your house. Maybe the sale of the product to another company is the best deal here. Some companies were inquiring about hiring those laid off.

     

    Maybe I'm not hungry enough.
    21 Nov 2012, 07:00 PM Reply Like
  • Chumpmenudo
    , contributor
    Comments (664) | Send Message
     
    Nice post Paul, thanks. I've worked in a bunch of companies in and around unions. (was even a Teamster while in college, ha). I believe today they are simply destroying our country. In the private sector, your hostess example can be seen at many firms. And Ray, the reason they need the pay concessions is due to all of the insane rules and inefficiencies Paul points out. If the unions would use common sense, they might work with management to change their stupid classification rules, consolidate the unions covering the workers, consolidate the pension plans, etc. All the cost savings would create a healthier company, profits, profit sharing, and better wages.

     

    The more damaging example not mentioned are public unions, especially in education. Have you ever asked yourself, from whom do public unions need protection? Taxpayers? Public employee salaries are paid by taxes, so when they unionize and strike for higher wages, who gives the concessions? Taxpayers. This is insane, and has lead to an incredible deterioration in education.

     

    Sorry for the diversion fellas.

     

    Chump
    21 Nov 2012, 07:43 PM Reply Like
  • raykrv6a
    , contributor
    Comments (3195) | Send Message
     
    Unfortunately, I know about contracts and unions. I'm not a union booster.

     

    I will say, pensions need to go. No one can afford them anymore.
    21 Nov 2012, 08:38 PM Reply Like
  • joe kelly
    , contributor
    Comments (1799) | Send Message
     
    Your problem is with weak negotians from management over the years Mr. price.

     

    I negotiated against some weaklings. It boggled my mind how they came into management positions.

     

    I negotiated against a couple that knew what they were doing. The company was far better off after those contracts and the union as well because the employer was successful. That meant job security.
    And realistically, strong work rules agreed upon in the contract helped the good workers by weeding out the dead weight. We were all better off.

     

    I could go on but I don;t want to hijack your comment section. Success to you sir.
    21 Nov 2012, 08:44 PM Reply Like
  • Paul Price
    , contributor
    Comments (1516) | Send Message
     
    Author’s reply » Joe,

     

    Good teamwork is important for long term success.

     

    The union rules I mentioned were all designed to create more employees at the expense of making the company less able to turn a profit.

     

    No profits, no jobs for the long term. That's what happened here. Nobody can suffer $341 million a year losses for too long without pulling the plug.
    21 Nov 2012, 09:32 PM Reply Like
  • joe kelly
    , contributor
    Comments (1799) | Send Message
     
    And the company agreed to these rules.

     

    For what it's worth, the first contract I negotiated it was me who submitted plans for more job duties and stopping the limiting of jobs to a particular position. Attrition did cost the bargaining unit a few jobs over the years but the we were abke to negotiate for better wages and these were b=never layoffs or even the threat.

     

    I have my problems with union management as their salaries in at least the case of my union, Machinists, rested on how big a raise they got for their bargaining units. The last contract which did not involve me as I had been promoted and was no longer a member showed a raise but actually cost members money as the employer was given rights to assign unpaid furlough days. Three of them a year and there went the raise. But the union's business agent got his raise. Not my problem anymore thank God.
    22 Nov 2012, 09:26 AM Reply Like
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