November 17, 2012

  • Twinkies? Ho Hum.....

    The news was all over .....the news.

     

    The iconic yellow cake with white icky icing inside was being discontinued.  The Twinkie, that confection which allegedly would last forever (due to the preservatives and packaging) was coming to an end.  It was economics that killed the Twinkie.

    People were raiding the stores.  Man on the street interviews indicated that these little cakes were the dirty little secret of millions.  Trucks stood empty of their wares. 

    Actually, Twinkies and Hostess Wonder Bread (a fake nutrient filled white bread) will both be discontinued.  Hostess fell victim to a raiding company of venture capitalists (you know, buy the company, load it with debt, etc...) and was facing a strike by the Bakers Union (yes, flour covered bakers are unionized).

    And so, Hostess is closing. On a website, Hostess stated that negotiations have broken down because the company could not reach an agreement.  A website for the company stated the following:

    Hostess Brands is unprofitable under its current cost structure, much of which is determined by union wages and pension costs. The offer to the BCTGM included wage, benefit and work rule concessions but also gave Hostess Brands’ 12 unions a 25 percent ownership stake in the company, representation on its Board of Directors and $100 million in reorganized Hostess Brands’ debt.

    Do take note of this part of the statement: "25 percent ownership stake in the company, representation on its Board of Directors and $100 million in reorganized Hostess Brands' debt.

    In other words, Hostess wanted to make the workers pay for the debt that the venture capitalists piled onto the company in the takeover bid.  Along with wage concessions and paying more for their health-care.

    So what happens now?  Well, the workers are out of jobs and possibly unemployment benefits, although the company website says that those who work during the "wind down activities" will still get benefits, since they were on strike when the company folded.  The venture capitalists will walk away with their fees, which will have to be paid from whatever monies have been generated by the sale of the buildings, equipment, trucks, etc.  The company shirts will get their severance pay.  And the public will not have their Twinkies.

    Welcome to the free market economy.

    Herlaine Olen writing as Forbeswoman in Forbes Magazine described the following:

    More than a few observers say they know who to blame for the demise of the iconic company: the Bakery, Confectionary, Tobacco Workers and Grain Millers International union, which represents thousands of striking Hostess Brand workers who have refused to accept a new contract that would do everything from slash their salaries to their retirement benefits.

    Time for a reality check.

    Hostess has been sold at least three times since the 1980s, racking up debt and shedding profitable assets along the way with each successive merger. The company filed for bankruptcy in 2004, and again in 2011. Little thought was given to the line of products, which, frankly, began to seem a bit dated in the age of the gourmet cupcake.

    As if all this were not enough, Hostess Brands’ management gave themselves several raises, all the while complaining that the workers who actually produced the products that made the firm what money it did earn were grossly overpaid relative to the company’s increasingly dismal financial position.

     So now an estimated 18,500 workers will join the nation’s unemployment rolls. But while Hostess Brands might soon become a forgotten name from the past, it’s unlikely such a fate awaits such signature products as Twinkies. Company executives have already asked for bankruptcy court permission to begin the process of selling off their famed product lines to other companies.

    So, apparently, while Hostess may go away, Twinkies may be the product of another acquisition.  I just hope the workers can "acquire" another job soon.

     

     

     
     
     
     

     

     
     

     

     

     

     

                                       

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