Deutsch;842008422 said:
Great discussion. This being an area of expertise for me I can say both lines of thought expressed in this thread have merit. There are no winners when companies in threatened or dying industries (whatever the brand strength is or was) are in their death throes. Often in my experience, management has been poor over a long period of time leading up to the headline stuff. And this means management at all levels -- not just the so called 'fat cats'. It's a threadbare progressive tactic to take aim at 'executives' without the intellectual honesty to examine the whole organization and its history. Poor strategic decisions having nothing to do with greed (sorry libs, it's true) can lead down the path to bankruptcy (such as poorly considered and over generous pension contribution commitments). And then, as noted in some of the better posts above, the obvious way to generate cash is cutting wages and benefits, which in many cases did in fact grow beyond what could be afforded in a dying industry. The ugly human side of this is that people, union and non-union, have built lives on a standard of living which they believed would never decline. It's very hard to accept that what one is so good at doing is now worth 'less'. Even harder if I am a union leader to go tell my constituency that their good efforts are now worth less than they used to be -- when the reasons have to do with poor decision making by management, industry conditions and our (union) disproportionate strength and success in past negotiations now coming back to haunt us as unsustainable. Fault lies everywhere and often little can be done to fix it. I would like to think that there are wise enough turn around specialists out there to come in with deft strategies to effect 'happy ever after' solutions. Sometimes though, (Eastern Air Lines, Pan Am) the business case is too far gone and there is really nothing left but bones to be picked over. Yes, the recriminations will flow forth, as they have in the posts above, and these are very real tragedies each time they happen -- but the solution is not guaranteed wages or making political hay by excoriating 'fat cats'. The solutions rather are better managers being produced at Haas and other schools who will have the wisdom, fortitude and business sense, in combination with empathy for employees at all levels, to forge business plans which are sustainable and durable in the face of political and economic climate change. Haas folks, are you up to it?
+1
I noted that one of the articles I read when learning about the liquidation of Hostess noted that one of the largest liabilities was pensions for former employees.
They also noted old work-rules which added inefficiencies to the system. They had been agreed on by management at one time, but now contributed to he decline.
All of this isn't a huge surprise. Wha most people don't ealize is that too many management decisions now are based on short-term thinking that's imposed on companies by a combination of government regulation, arcane tax laws originally set up to punish "the rich" and old business practices from 50+ years ago that made sense back then, but now punish companies.
It's easy to blame "unions" or "executives", but the truth is that its a mix of issues. Back after WW2, many companies found that labor represented 20% or less of the cost of making their products, and with no international competition they could afford to be extremely generous to the unions. The pension deals also originate during this time. But companies figured that this was only a minor cost since the pensions were supposedly only for the last 3-5 years of a person's life.
Of course, time passed, people now can live 20+ years after retiring, and with international competition and lowered raw material costs, labor now often represents 50% or more of the cost of making a product. Worse, few companies now have pricing power where they can set a price and not see people jump to lower priced alternatives.
Management hasn't quite figured out how to handle the change, and makes bad decisions.
Unions appear to refuse to accept that there have been changes, which only hurts the companies more.
There is no simple answer, both sides are at fault, and the solution will take all sides working together.
