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This article from the New Yorker asserts that Unions are being made the scapegoat, it was management and its failure to adapt:

http://www.newyorker.com/online/blogs/newsdesk/2012/11/who-killed-the-twinkie.html

EXCERPT:

Management, of course, blames the company’s demise on the greedy, unreasonable unions. But, while the strike may well have sent Hostess over the edge, the hard truth is that it probably should have gone out of business a long time ago. The company has been steadily losing money, and market share, for years. And its core problem has not been excessively high compensation costs or pension contributions. Its core problem has been that the market for its products changed, but it did not. Twinkies and Ding Dongs obviously aren’t anyone’s idea of the perfect twenty-first-century snack food. More important, the theoretical flagship of Hostess’s product line, Wonder Bread, has gone from being a key part of the archetypical American diet to a tired also-ran.

Hostess’s management certainly bears some of the blame for its failure to successfully adapt, though the company made numerous (and failed) attempts to introduce healthier products. But the simple truth is that this kind of failure is endemic to the system—there are always going to be companies that are unable to change in response to the marketplace. And those companies are supposed to go out of business. Not to be too clichéd about it, but this is what creative destruction is all about.

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To a point, the New Yorker article is correct, however, they failed to take into account that management WAS adapting by lowering costs, attempting to diversify methods of delivery, etc. But the unions prevented lowering of costs to a profitable level, or of adapting the distribution channel to handle products from other bakeries, or stepping away from the Teamsters controlled union delivery all together.

Unions are the core fault in this sad tale of a company struggling to adapt to a market which wasn't as interested in their product any more. Companies can only print money like Hostess did for a short time, and in that time, they need to use that money to invest in new profitable products, not squander it away by overpaying their employees and driving themselves out of the market when it inevitably takes a dip.

What became clear, in times of trouble, is that the unions didn't really add anything to the actual process of production. They didn't recruit workers, train them, build the factories in which they worked or the machines they operated. They didn't provide working capital or marketing skills or strategic advice. Their whole function was simply to find an enterprise that was already a going concern and to squeeze money out of it. This is no surprise, because unions are built on a Marxist economic theory.

Says it all....