Ding Dong the Twinkies Dead
Hostess maker of the good old fashioned Ding Dong and Twinkies is being liquidated after 80 years. Let the finger pointing again. Predictably, the right wing is pointing fingers at the unions and the left is pointing fingers at executive pay and as usual both are wrong. Yes, the union pension plans were ridiculous but they were also significantly underfunded and don't explain for Hostess bleeding over $120 million for several years and a staggering $340 million in 2011. If the company was paying what they were supposed to into the plans then maybe they could blame the union, but since they weren't and were losing so much money anyway the point is moot. Same thing with the executive pay. The few million that has gone to executives makes virtually no difference to the bottom line, especially considering that for executives of a company that has a couple billion in revenue the executives were not very well paid.
The fundamental problem that Hostess has suffered from before their last bankruptcy is that their sales have steadily dropped and Hostess responded by trying to cut their price. Last year it was to the point where they were selling their goods for less than their costs, it doesn't take a rocket scientist to realize that business model isn't going to last long. The company simply failed to offer a product that people wanted at a profitable price. When the company started to rack up debt it never came up with a comprehensive plan to pay it off. They kept kicking the can down the road using wage cuts and selling off brands to keep going in the vain hope that somehow their sales were going to magically increase. They didn't, and the only people to blame for that is management.
Now almost a $1 billion in debt, Hostess is going to liquidate and sell off its major brands. All of the workers will be laid off and those who were counting on the pension plan are going to be SOL because the money doesn't exist. What the workers (and the unions if they actually cared about their workers, which I don't think they do) can learn from this is NEVER, EVER accept significant deferred compensation- ESPECIALLY from a company that is deep in debt and is making promises that my dog could figure out are impossible to keep.
It is very easy for companies to make these promises that don't have to be paid for several years and the executives who make the promises generally don't plan on being around when the bill is due. It is too easy for them to solve immediate financial problems by borrowing from money that should be set aside for their future obligations. When negotiating your contract, get all of your money paid now, take responsibility for setting aside extra money for your own retirement and even if your employer has promised some kind of pension or to pay for your health insurance after retirement, don't count on it. If they actually do it is just a bonus. Because 18,000+ employees at Hostess are not going to get their pensions and there isn't anything they can do about it and they are not the first and won't be the last.
Most companies no longer promise pensions because they are virtually impossible to fund and most of those who do only do so because unions demand it. Don't put your retirement at the mercy of someone keeping a promise for 20 years. Tell someone who suggests you should tell them to fuck off and demand your money up front as soon as you earn it. IMO, it is extremely irresponsible and negligent of the unions to continue to push for these large pension deals in lieu of smaller amounts of money up front or a sane retirement plan like a 401k where the worker keeps partial benefits even if the company goes bankrupt. I wonder if the employees could sue the unions for being negligent in their representation? Probably not. But perhaps they should because the bosses of these international unions keep their juicy pay and benefits even as the workers they supposedly represent are screwed by the contracts their representatives got for them. It is better to know up front that you have no pension and plan accordingly than it is to find out 10, 15 years down the road that all this money you thought you had disappeared. If unions care about their members they should demand higher pay up front and less or even no deferred compensation to protect them from exactly this kind of event.
(I would also include social security in not trusting someone to keep their promise to pay you later. If your brilliant retirement plan is to rely on social security, you really ought to rethink that because in 30 years the benefits are not going to exist at least not at the promised amounts.)
"It is easy to be conspicuously 'compassionate' if others are being forced to pay the cost." - Murray Rothbard
"I was all for Obamacare until I found out I was paying for it"- California resident http://www.washingtontimes.com/news/2013/oct/28/californian-i-was-all-obamacare-until-i-got-bill/