AMERICAN CONSERVATISM IN 2008 AND BEYOND

What possible reason could I have for responding to a request like that? Are you still smarting from past exchanges?

Are you suggesting that you only give your attention to news channels that agree with your point of view?

Fair enough. Regrettably, my computer time stamina is limited. I hope you know me well enough to not challenge me too vociferously.
As a private company, Hostess is not subject to as rigorous reporting standards as public ones, but we have audited sales numbers: 2010 - $2.59BN; 2011 - $2.48BN; 2012 - $2.47BN. Not a precipitous decline but reason for some concern. And we only have those 3 years.

I don't know their profit history - they may have been losing money for several years. A 6% drop in revenue in FY 11 isn't huge, but coupled with typical 4% annual increases in costs, it could well have been enough to wipe out their profits. Clearly they were trying to get some productivity improvements from the unions, but were unable to get agreement. If the Board can't find a either a way to get profitablke or a buyer willing to fairly compensate the shareholders, then its duty is to liquidate the company.

It is very interesting to note that the number of union members in the private sector economy has dropped precipitously during the last four decades. That isn't the result of new state right to work laws or union collapses. Instead it is the result of the death of most of the unionized industries and companies. Do you have any theories with which to explain this?

I think you are changing the subject, George.
So Hostess had stagnant sales for at least 3 years, yes? They go on to mention intense competition (read new entrants to the field), declining performance (read lack on new product introduction by Hostess), aging infrastructure, strained liquidity and excessive debt. Are you saying that labor - not the highly paid executives - was responsible for all of the those problems?

With regards to the ridiculous work rules that labor demanded, it would be more accurate to say that management wanted workers to give up things that management had previously - perhaps over a span of years - agreed to.
Why did management ever agree to those things in the first place?

My point, George, is that management has made decisions based on short term results, because their compensation is based on those measures. Eventually the chickens come home to roost and PR guys come out in force to find someone else to blame.
The situation is not unlike pols who kick the can down the road.

RL...in a sense, George is correct. If stupid, lazy Americans were willing to work 50 - 60 hour weeks for 75 cents an hour...we'd have no unemployment problem. Instead, they want to join unions and attempt to actually be paid enough to live for their work. That, as George points out, prevents the people who own those businesses from maximizing their profits.

Why can't you see that?

It's amazing, ci.

Don't get me wrong...I see the value of capitalism and of free enterprise. But to warp it the way some want to is beyond comprehension.

George seems to be an intelligent individual. I cannot understand why he wants to put the maximization of profit in such an elevated position...that laborers/workers trying to get their fair share become the object of scorn and derision.

I hope he comes back to explain himself a bit more.

It isn't accurate to say their sales were stagnant. The data you posted showed a sharp 6% drop in revenues between 2010 ansd 2011, followed by continued, though much smaller, declines thereafter. Given the average 4% annual increase in pay & benefit costs and most of the services (building space, materials, insurance, etc), and the very high rises in basic food commodity prices during the period, and current forecasts for inflation, all that could very easily wiped out all their profits. This, for a company that hasn't had high growth rates and whose brand focuses on high sugar products with a generally declining appeal, could well wipe out all their profits.

I'm not suggesting that the management of Hostess was very agile, creative or had adapted well to evolving tastes in food products. Quite the contrary. Thgy were in a declining market and had not adapted to changing consumer tastes. The fact is that very few companies last as long as has did Hostess. It takes the ability to adapt to new market conditions; alter your processes to take advantage of new technological innovations; motivate your employees; a good deal of financial acumen; and more than a little good luck to survive that long in a competitice, ever-changing market. Labor Unions are generally a very large drag on all of these vital factors. They resist change; insist on productivity-killing and often stupid work rules; foster a hostile attitude towards the company; and refuse to be accountable for the effect their actions have on the whole companyy. Unfortunately a company and its employees are like a lifeboat: when it sinks everyone gets wet.

That's a fairly accurate description of how unions operate, and it is very likely that, as you wrote, the company wanted to change work rules that they had "accepted" (possibly under threat of strike) earlier. Does it suprise you that occasionally new methods and processes are required to adapt to changed operating conditions or the need to meet the challenges posed by competitors or markets? It's an interesting sort of ratchet game the union plays. .... a low but very steady accumulation of individual small restrictions that add up to paralysis and the inability of the organization to adapt to new conditions.

In my experience (and I have managed three corporations with large nimbers of union employees (Steelworkers; Laborers, and Building Trades) and negotiated four CBAs the Union starts with the apparently perfectly reasonable demand (they never ask, they "demand") for specific job classifications specifying what each category of worker does, often in great detail. Later, as conditions and manufacturing or work processes change, they stoutly resist any modification to existing categories and demand the creation of new job classifications, while resiting either reclasssification or layoffs of existing employees, leaving only the option of hiring additional needed staff while retaining unneeded employees who often are quite able to do the new or modified work. Union bosses call this revenue growth (their revenue that is).

Add to that typical (union) seniority rules for replacement of employees who retire or leave (I've seen cases in which the departure of one worker initiated a sequence in which 35 workers changed jobs), and persistent demands for ever more "shop stewards" (paid employees with no job who work for the union) , and it is very easy to see the sclerosis that creeps into a company that is infested with a lobor union. It is of course customary for the union to later blame the sclerosis it has created on the management. They like to imagine they can live and work in an environment that never changes and never requires inconvenient adjustments of methods and output just to survive. The world isn't like that.

I now run a smaller (600 employees) company with mostly professionsl staff and no unions. We have a very transparent operation; pay our employees fairly; and treat everyone as a valuable person. At the same time we damand good work, ethical behavior and personal responsibility. We support (and often pay for) the professional growth and advancement of our employees, and, when staff requirements change, think first of retraining and redirtecting existing staff. However, I can assure you that if confronted with its infestation with any labor union, I and the other investors would quickly liquidate the company.

Given that your statement has no basis in reality, how can you make any arguments about Hostess.
In 2009 unions gave concessions that resulted in $110 million savings per year to Hostess.
http://management.fortune.cnn.com/2012/07/26/hostess-twinkies-bankrupt/

It doesn't take a rocket scientist to see what's been happening to CEO's and Officer's pay and benefits during the past three decades; it grew in multiples to the average worker pay and benefits.

Greed knows no bound; they want more and more, and don't even want to pay more taxes. All this after US worker productivity continued to increase - their pay and benefits remained stagnant.

Republicans continue to advocate for lower taxes for the wealthy - even if they don't ask for it.

Now, they wonder why they should pay more in taxes.

Their reality about economics doesn't exist. It's the middle class that keeps our economy healthy.

Here's the bottom line from the very link you pasted above, idiot. You do like to pick and choose from your "sources" to find the tidbits that support your nitpicking. Unfortunately you have, so far at least, been unable to demonstrate anything but dog in the manger barking and nit picking: no balanced thoughts or observations and co constructive commentary. What it like in your little hole?



Excessive debt is very often fatal to companies. In other cases high levels of debt can be very favorable - it reduces the average cost of capital under favorable external economic conditions for companies in growing markets. Hostess, of course was neither. I don't know (and am not interested in ) Hostess' long-term financial history, but it is possible the debt was acquired in better times.

Unions reduce the ability of companies to adapt to changing mnarket conditions. They aren't always fatal, but they never help. Boeing is still struggling with its over-unionized workforce in Seattle. The most obstinate of them are the Machinists and the Professional Engineers Unions. Interesting to observe where Boeing is building its new assembly plants and that it is exporting more and more of its aircraft design functions overseas.

I see you won't admit that your claim of 4% increase in pay and benefits was wrong. Oh well. Keep thinking you know everything. The rest of us know better.

I cited those numbers as typical of the wage and benefit inflation that occurs in our economy in these times. and noted that, together with the sharp 6% drop in Hostess revenues in 2011 and smaller drops afterwards (realjohnboy's data), they could well have wiped out the profits of a typical company in that industry. There's nothing defective in that observation.

For your part, you have offerent no substantial contrary argument. You merely pick a single bit of unquantified data, unaccompanied by no contextual information and no evident understanding of the matter, imagining you have said something significant.

Back in your hole.

Really? So when unions gave $110 million per year in concessions that still means wages went up 4%? I guess it must be that Republican math again.

Hostess is reported to Have 18,500 employees and revenues of 2.5 billion, but decreasing by about 2.5%/year for the past two years after a sharp 6% drop in 2010. The $100million in union "concessions" consisted of some simplification of work rules (enabling productivity increases) , reductions in employment, and reductiuons in scheduled wage increases amounting to about $2,400/employee. The company reports that it has lost money for the past several years - that is before the union "concessions" and some of the continuing revenue reductions, it was already losing money. I don't think that either of us knows what the recent trajectory of its labor costs has been, but it remains true that the normal annual growth of labor & benefit costs has been 3.5-4.0 %/year for the past few years. Moreover, few companies in that industry make a profit of more than about 8% of gross revenue/year, so it should be obvious to any intelligent observer that, given the revenue reductions they were experiencing, costs had to be quickly cut if the company was to survive. In this case the company was already highy leveraged due to a previous bout of bankrupcy. It's a safe bet the unions helped that one along as well.

You are fairly good at looking up factoids that favor your prejudices, but not very competent in thinking about what it might nean relative to other salient facts.

What do you consider a "fair wage" for the men doing the work and physical labor?

"Fair wage" is too subjective. It should be based on how the company performs economically at the present time and for the future. Yes, the future. It's necessary for companies to understand that demand for products and services changes with the generations. That's the reason why car models change, and communication products continue to offer more bells and whistles with every new generation of products.

It requires forward-looking management; staying with one product forever will not work, because competition will overtake whatever one product is being produced and sold by another company with cheaper labor cost and better quality by another company.

Successful companies are able to offer the best wages and benefits, and they are also the ones who will attract the best qualified workers.

Here in Silicon Valley, here's the latest report on mobil app developers pay.