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What Saved Hostess And Twinkies: Automation And Firing 95% Of The Union Workforce

Scorpio

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#1
What Saved Hostess And Twinkies: Automation And Firing 95% Of The Union Workforce

Tim Worstall ,

Contributor

I have opinions about economics, finance and public policy.

Opinions expressed by Forbes Contributors are their own.


Boxes of Hostess Twinkies in August 2004. (Photographer: Tina Fineberg/Bloomberg News)

Unions fight for the working man and act as a counterbalance to the power of the capitalists. And there’s no reason why someone should not be able to avail themselves of such union protections–the right of association is as important a freedom as the right to free speech is. However, it’s also true that unions, just like any other form of human organization, can become stultified. They can become the problem rather than the solution to anything.




That was the case at Hostess, the producers of Twinkies. They went bust, twice, as a result of heinously bad union arrangements:

Where the company just five years ago had 8,000 employees — 75 percent of whom were represented by unions — the company now says in filings that it has a “streamlined employee base” of roughly 1,170 workers. That workforce is the shadow of a once-vast empire, which shortly before its troubles totaled 22,000 workers across more than 40 bakeries.

It wasn’t just one union that was part of the problem:

Tuesday’s announcement is the latest chapter in the snack maker’s tumultuous century-old history. Hostess says it traces its beginnings to 1919, and it grew by absorbing competitors. In the process, it ended up with 372 separate bargaining contracts for workers, 5,500 delivery routes and a vast production system.

The most recent investors who bought it out of bankruptcy did not in fact buy “the company.” They bought just some of the assets. This meant they could dump that entire union-based labor negotiation system:

By buying the Hostess assets out of bankruptcy, Apollo and Metropoulos took them on free of employee benefits and other labor obligations that had weighed down the company.

They then rationalized the production system. This is pretty much the same as stating that they automated it–or at least used different technology which amounts to the same thing. And yes, we should consider a method of organizing things to be a technology.

They went from local bakeries and delivery routes to a much more concentrated production system and delivery into warehouses. The cakes would then be delivered to retail outlets by the logistics system which delivered other products. This was aided by product changes to extend the shelf life–meaning there was extra time to use the warehousing system.

Apollo and Metropoulos rode to the rescue the following year, paying about $410 million for the brand. The new management has slashed jobs and transportation costs and and boosted distribution since taking over.

Slashing jobs is what has been important. As we must keep reminding ourselves, jobs are a cost of doing something, not a benefit. And we need to recall this when we talk about the minimum wage. We will be raising the cost to people of getting things done. Businesses will either therefore do less or they will employ fewer people to do them. In this case, Hostess decided to change the technology to rely less upon human labor.

It is a good thing that Hostess and Twinkies survived (and vaguely interesting that they will float upon the stock market again), but the important point of the story is the decimation of the labor force.

Employing people is a cost. And when that cost rises, fewer people are going to be employed.

http://www.forbes.com/sites/timwors...iring-95-of-the-union-workforce/#5de720766ddb
 

searcher

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#2

viking

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#3
"This was aided by product changes to extend the shelf life–meaning there was extra time to use the warehousing system."


Mmmm, yum.
 

RealJack

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#4
"This was aided by product changes to extend the shelf life."

5000 years from now human-like creatures may be mining the earth for Twinkies instead of gold.
 

latemetal

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#5
"little Debbie" cloud cakes rock....screw hostess. Dumping an underfunded pension fund on the taxpayers didn't hurt the bottom line did it?
 

Ishkabibble

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#6
It is a good thing that Hostess and Twinkies survived
The author is a liar. How can we trust his other content when he's content to see this poison on the streets. I weep for mankind.

It can all be set right. Just dig a pit under Monsanto and push 'em in. :p
 

arminius

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#7
Dang, I'm so eager for some of that lovely sugar dream, yeah it may change you a Littli...

whose knows...


Da woild shure has changed...

hasn't it...

no matter what, know you survive...

whatever...

even twinkies.
 

gringott

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#8
I thought the half life of a Twinkie was already decades before Hostess went bust, how much longer did they extend the shelf life?
If you judge the system by my local "grocery", they stay on the shelf until sold - time is not a factor.
 

nickndfl

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#9
I went into a Hostess bakery in Pittsburgh back in the 1960s. I saw the production line through a window and my grandfather bought a box of Twinkies and Ho-hos wrapped in foil. They were probably not more than $1.39 each box. That's when they were good without so many artificial ingredients and emulsifiers.
 

CrimsonGuardJay

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#10
I went into a Hostess bakery in Pittsburgh back in the 1960s. I saw the production line through a window and my grandfather bought a box of Twinkies and Ho-hos wrapped in foil. They were probably not more than $1.39 each box. That's when they were good without so many artificial ingredients and emulsifiers.
$1.39 back then was a fucking fortune. I think you mean MAYBE 39 cents.

Hell, they barely cost $1.39-1.99 a box NOW....
 

Mr Paradise

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#12
Never cared for twinkles or ding dongs as a kid. I did like their fruit pies though especially blueberry and cherry.
 

CrimsonGuardJay

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#13
Never cared for twinkles or ding dongs as a kid. I did like their fruit pies though especially blueberry and cherry.
I like those too, but those have the highest fat, highest calorie and highest sugar content out of literally everything they make, I think its some preposterous amount like 60 grams of sugar and like 400 calories in one of those bombs.