What Hostess was proposing was a cut in absolute compensation of some 8%, but roughly a one third reduction in added money that was being committed to future pensions. How this money was managed, I don’t know. Was it put into an escrow account, or was it simply promised? Or were they diverting the compensation of current employees in order to pay retired employees? That seems the most likely case, which means that the actual cuts would have been to the retirees on pension. That is how Social Security, on a much larger scale, works today.
Now, you had two groups: retirees who were not union members, whose pensions were paid by Hostess, presumably in part out of operating revenues; and you had union members, who were presumably paid more, and part of whose wages went to fund the unions own pension plans.
As I understand it, roughly one third of the 18,000 workers were unionized, and the rest were not.
What seems to have happened is that the Bakers Union was concerned that with the cuts in pension funding they would not be able to afford not just the payments to their Hostess retirees, but to ALL their retirees. For example, I think they work with Sara Lee also. Their own pension would have been bankrupted, since they were paying as they went also.
What the union seems to want and expect is that following liquidation the union plants will be picked up by some venture capital firm or competitor, and reopened to keep the Twinkie and other brands. Part of this process, they think, will involve a renegotiation of the pension contributions that will be better than what Hostess was offering, and which will enable their solvency across all the companies they cover.
What they did not CARE ABOUT is that the likelihood is that everyone who was depending on a Hostess pension–as opposed to a union pension–will stop getting it. Not only did 18,000 CURRENT employees lose their jobs, but the overwhelming likelihood is that after all the real assets are liquidated, nothing will remain for those 60-70-80 somethings who worked there for 30 years, and were getting a check every month. In effect, to help–maybe–some 6,000 workers (the number may be higher or lower, but the princple is the same) they knowingly cost some 12,000 people their jobs and pensions PERMANENTLY.
This is the most awful cynicism, and far worse than ANYTHING Hostess management is accused of.
So the damage is actually likely even larger than it appears, and is the result of selfish calculations–based on greed and the profit motive–by paid Union operatives who themselves risked nothing in the negotiations.
I see people demonize corporations as greedy and money grubbing, and in large measure that is true: you can’t stay in business without making money, as Hostess found out. But in reality, ALL corporations make the most money when they have the most employees, provided they can keep those people productively occupied. They WANT to employ people.
Knowing nothing else, who would you assume makes more money: the person with no employees, or the person with a thousand employees?
Ethically, businesses have first to create something people want at a price they are willing to pay, then it becomes a process of negotiating for labor. Unions say it is unethical to pay less than they can, to give bonuses to idiots, but the simple fact is that the company is providing a service that NO union can provide, which is creating a demand for labor. Unions exist solely to siphon off more wealth from entities someone else created.
The need for corporations is vastly prior to the need for Unions. We could and did built wealth without extensive unionization. We cannot and will not build wealth with all unions and no employers.
The reality is that the economic downturn Obamaism is going to cause will hurt workers the most. It will hurt the working poor, the wage workers, and even the unionized, who will see more layoffs due to less work.