Mediation paves the way for capitulation
I see that the bankruptcy judge dealing with the Hostess case decided not to allow the company to close down the business. Instead, the judge intends to hold mediation sessions today (Tuesday) between the two sides, the Hostess bosses and the Bakery, Confectionery, Tobacco Workers and Grain Millers International Union (phew!), more commonly known as the Bakers Union. The judge wants to see if he can "Broker a new contract" according to the Wall Street Journal.
The company has been claiming that the strike by the members of the Bakers' Union has crippled the firm to such an extent that it cannot recover and is unable to continue producing Twinkies and Ho- Hos. (Is there something wrong with me that I have never eaten foods with names like these?). Hostess bosses claim that the company doesn't "Have the wherewithal to continue operations amid the work stoppage" the WSJ reports. The judge, being the kindhearted person that he is stated that "My desire to do this is prompted primarily by the potential loss of 18,000 jobs".
That said, the Union leadership and their lawyers agreed to place the lives and living standards (not theirs though) of the dues paying members in the hands of a former lawyer turned judge. The proceedings will be confidential which will no doubt mean that the members of the Union won't know what is going on behind closed doors until the deal is presented to them. The Hostess bosses are happy with that, "We need all the help we can get" said Hostess CEO Gregory Rayburn and the Union's lawyer, Jeffrey Freund made it clear that the "union" was respectful of the judges decision. Aren't we all such gentlemen here?
The interesting part of this is that the coupon clippers that own Hostess asked for permission form the bankruptcy court to impose a concessionary contract on the workers in October. The Union, for whatever reason refused to participate in that process and the court acceded to the company's request. The imposed five year contract included an 8% pay cut along with "pension modifications" which usually mean increased costs or reduced benefits for workers.
Not long after this, the Union called a strike and the workers' walked off the job. As I commented earlier, the Teamsters accepted the concessionary deal. The judge said that he was a little perplexed as to why the Union never fought the imposed concessions through the courts. As someone who is not privy to all the details of these proceedings, it would seem that the Union made the right decision, relying on the power of the strike, of withdrawing labor as opposed to relying on the courts where money and the bosses' rule. Perhaps the leadership of the bakers' Union thought the Teamsters would join them in a much stronger show of force, it's hard to say. But my view is it is more likely that the leadership, like most of them simply had no clue what they were doing.
At very least, one would think the Union, in conjunction with strike action, would have used the courts as well as a secondary front of attack. It appears that we are at a point where the bosses have used the scare tactic threatening to shut down operations and eliminate the jobs altogether so the judge steps in to negotiate a concessionary contract that the Union officialdom can sell to their members. When the choice is no job or a paycheck that you can scrape by on, the choice is an obvious one. In fact, this is often the choice that Union officials offer to their members, layoffs or wage and benefit reductions. Then when their members choose the latter, the leadership can blame them for refusing to fight.
As this process unfolds, vulture capitalists are circling the dying carcass. Flower Foods, a Georgia corporation is "hoping to get iconic brands on the cheap" the Wall Street Journal reports. And private equity ( a coupon clippers club) firm Sun Capital is hoping that they can buy up the remnants of the dying firm at bargain basement prices and hopefully negotiate a concessionary deal with the Union leaders so the workers can keep their jobs at half the wages.
It all depends on whether the judge can "Get Hostess to tweak its labor contract proposal in a way the union can accept."
It is most likely the good judge can although not its not guaranteed. The Hostess bosses, like all employers are feeling very confident. They know that the Union officials understand their point of view and that a battle to make the bosses pay is not on the Union leaderships agenda. The workers once more remain passive observers as two sides, both hostile to their interests determine their futures.
But the situation in the US is so dire, the crisis so acute and the mood so volatile, we can never be quite sure when the bursting of the logjam may occur.
For more on this dispute see: