Labor

Were Those Reasonable Teamsters Really the Bad Guys in Hostess Fight?

Distribution rules a significant financial problem

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"No pension. No work." Well, that's true enough.

Here's an interesting Hostess liquidation counter-narrative: Though the Teamsters appeared to be trying to be the voice of reason in this union battle with the snack manufacturer, is it because the truckers had a nice little protection racket the bakers union was paying the price for?

Holman W. Jenkins at the Wall Street Journal wrote a column suggesting that the minority union was paying the price not just for bad management and pension underfunding, but for Teamster-friendly expensive distribution regulations:

Union-imposed work rules stopped drivers from helping to load their trucks. A separate worker, arriving at the store in a separate vehicle, had to be employed to shift goods from a storage area to a retailer's shelf. Wonder Bread and Twinkies couldn't ride on the same truck.

Hostess has spent eight of the past 11 years in bankruptcy. As the company explained to its latest judge, the Hostess brands "have not been able to profit from many of their existing delivery stops and have been unable to enter potentially profitable markets, such as dollar stores, vending services and movie theaters."

None of this had much to do with the bakers union:

Under pressure on Monday from Judge Robert Drain to back down from their strike aimed at forcing the company to liquidate, the bakers themselves pointed to "what everyone in the baking industry knew: Hostess's production costs were neither excessive nor out of line with the market but its distribution costs were—to the tune of between $80 million and $130 million annually."

One could always ask about the wisdom of a labor-law structure that causes companies like Hostess to drag on for decades without adapting to their marketplaces. One might question whether the bakers are acting in true and brotherly solidarity. But given the circumstances that actually exist, the bakers might well prefer to hold back further concessions, let the company liquidate, and try their luck with a new owner or owners who might materialize for its bakery operations.

(Hat tip to James Peron of the Moorfield Storey Institute)