
Twinkies Maker to Liquidate, Lay Off 18,500 - codegeek
http://www.cnbc.com/id/49852161
======
SwellJoe
I wish this was simply because demand for food-like substances had disappeared
and the market was punishing those companies that make predominantly food-like
substances, and instead choosing actual food made with recognizable
ingredients.

But, it's not. It's mismanagement. I suspect the bankruptcy is simply a method
of ending all of the union contracts and moving to factories in right-to-work
states in cities without strong unions. It's been done more than a few times
in the past few decades by major corporations. That's not to say the unions
are all right, just that based on my reading of the situation, they're being
used as a convenient scapegoat in a situation caused by long-term
mismanagement and incompetence.

~~~
frankc
That is not the case here. In fact, they are already in bankruptcy. The judge
had imposed a new contract on the union that didn't accept, so they went on
strike. The company claims they cannot whether the strike and instead are
completely liquidating all assets of the company. They are closing down, not
reorganizing.

~~~
SwellJoe
I'd bet dollars to donuts (or Twinkies) that there will be a new team, made up
of a few members of former management at Hostess, who will raise funds and
purchase the most valuable assets of Hostess. That team probably already
exists, and the private equity company already has the contracts written.

They will then be starting with a clean slate, with only the really valuable
assets (the brands, mostly), and none of the baggage of old contracts and
agreements.

Of course, another company might buy up those assets, since bankruptcy sales
have outside oversight (to some degree), and thwart those plans. But, I'm
confident those plans are underway, and would be surprised if it doesn't turn
out with some of old management heading up the new company that begins
producing Twinkies again.

~~~
gwright
There is a good chance you are right and this would be evidence that the union
was holding out for terms that the _market_ had determined were unsustainable.

If you can start from scratch and lease/purchase/hire what you need under new
terms then it is an existence proof that the union had priced itself out of
the market (i.e. there were other workers completely willing to accept the new
terms). This is true whether the new management is truely a new group of
people or simply a new legal entity for the old group of people.

~~~
SwellJoe
That's a simplistic interpretation (as is mine). Without studying the numbers,
the compensation of executives at various levels, the terms of employees, etc.
it's impossible to say this business couldn't have continued to run and
honored old contracts and satisfied new demands.

It's true that there's often a disconnect in how much unions demand and how
much the rest of the labor market demands, and it can lead to businesses
preferring to hire in non-union areas (making areas with strong unions suffer
economically). I'm not entirely convinced that's the best outcome for everyone
(everyone in the city, state, country, world), since it leads to employers
holding a disproportionate amount of the power (the corporation becomes the
only organized, powerful, force in the negotiation), and employee compensation
consistently being pushed downward, while executive compensation often
skyrockets. I'm pretty libertarian, so I like market forces, but I think we're
seeing evidence that not having some kind of force that opposes corporations
having disproportionate power leads to stagnant wages (not keeping pace with
inflation), more reliance on government services (when an employer doesn't pay
for any benefits, the employees end up relying on various government services
for those necessities like healthcare), and a bigger disparity in power.
Corporations and states end up having all the power, while individuals (those
not lucky enough to have money and influence) end up getting pushed around.

If executives are receiving massive pay increases (which is what happened at
Hostess; 300% pay raise, apparently), while the ship is sinking, I'd say
there's a lot more than mere market forces at work. I think greed plays a
role, too. In a company with some folks making millions, while others are
asking for a $1/hour raise, I'm not sure I'm willing to call it merely market
forces at work.

~~~
gwright
The 'disproportionate amount of power' argument comes out a lot in these
discussions about unions. It sounds like a good argument but I think it
ignores the fact that the labor market itself is a pretty powerful force that
works against corporate interests.

Intertwining employment with health insurance has been a big mistake in my
mind. Not only does it distort the insurance market in many ways, but it also
radically affects job mobility as it artificially binds employment and heath
care decisions creating constraints that wouldn't otherwise exist.

------
fragsworth
> Union President Frank Hurt said on Thursday that the crisis at the company
> was the "result of nearly a decade of financial and operational
> mismanagement"

It's surprising that the union would actually let the company fall apart. Was
there some lapse in communication? Did the unions think the company was
bluffing when they said "we're going to go bankrupt"?

Also, their downfall probably had more to do with a change in social
perception that they couldn't do anything about. Everyone knows that Twinkies
are "bad for you". It's almost stereotypical for a fat person to be eating
Twinkies, and this makes everyone want to avoid them.

~~~
at-fates-hands
>>>> their downfall probably had more to do with a change in social perception
that they couldn't do anything about.

Agreed. When I was growing up, I ate a LOT of these snack foods and regularly
had twinkies in my bag lunch I brought to school.

Nowadays, there's a much better emphasis on nutrition and making sure kids
avoid getting obese.

Back in 2005, the same thing happened to Krispy Kreme. They flooded our city
with stores, but within a few years, they were all gone. There were a victim
of the health food craze taking off.

As much as I hate to see them go, it's a good sign.

~~~
dkl
The Krispy Kreme situation is quite different. They had an accounting scandal
that actually caused them to contract, in addition to the health craze reasons
that many people assume.

<http://www.nytimes.com/2005/08/11/business/11place.html?_r=0>

~~~
enraged_camel
This is off-topic, but I really hate the term "health craze." People caring
about something does not make it a "craze." When people put on their seat-
belt, we don't say they have a "safety craze." For the same reason, we should
stop using the term "health craze."

~~~
dkl
Donuts in moderation are fine. Seat-belts in moderation are not a good idea.

That's why your analogy doesn't really work.

I said "craze" because the anti-carb mood is somewhat of a fad, so I think the
word "craze" is perfectly suited.

------
muraiki
There's a lot more detail on what went on behind the scenes in this article:
[http://www.zerohedge.com/news/2012-11-16/hostess-
liquidation...](http://www.zerohedge.com/news/2012-11-16/hostess-liquidation-
curious-cast-characters-twinkie-tumbles)

(I'm not endorsing any particular political viewpoint expressed in it, but
merely posting it because it has a lot of info)

~~~
tptacek
It looks like that entire article is blogspammed from this (good) CNNMoney
article: [http://management.fortune.cnn.com/2012/07/26/hostess-
twinkie...](http://management.fortune.cnn.com/2012/07/26/hostess-twinkies-
bankrupt/)

~~~
ChuckMcM
Wow. So much of Hostess' crisis, and the state of California and its cities
hinge on pension obligations. It makes me wonder if it is even possible to
create a pension plan that isn't eventually toxic.

~~~
tptacek
Well, at least a private company can eventually just go bankrupt. Nobody knows
what's going to happen in CA and IL.

~~~
ChuckMcM
Good point. San Jose discharged a lot of its future pension debt with
negotiation. But my question wasn't how people get out from under the debt,
rather it was how such a program could be designed so that it wouldn't have
this issue.

For example, could you say

"You pay 10% of your salary and we'll match that, into an investment account
that buys inflation protected treasuries, then when you reach the age of 55
you have the choice of getting 20%, 50% or 100% of your salary paid out
annually until the total of the amount paid in + appreciation over that time
reaches zero."

Basically once the company/state had matched the 10% they have no further
obligation. And if you're genetics were great and you lived to 115 perhaps
your 'salary' would run out at 75 long before you died. But what I don't know
is how practical this is, it was so much easier when people actually died
around 72 than it is now.

------
charonn0
Twinkies + Liquidation = Best. Milkshake. Ever.

------
gte910h
The brand will be bought by yet another company, and the snack cakes will be
produced again. This is the umpteenth time they've been sold.

------
IanDrake
I'm going to buy a few boxes then give them out as Christmas gifts in 10
years.

~~~
forgotAgain
At which time they'll probably still be "fresh".

------
politician
It takes 18,500 people to make Twinkies?!

~~~
sageikosa
And "Ho-Ho"s, but since they are baked goods with a shelf-life measured in
days/weeks (not years as is commonly assumed), having them produced close to
their markets reduces shipping time, but demands more facilities and therefore
more employees.

------
Arjuna
What's in a Twinkie?

[http://www.thedailybeast.com/newsweek/2012/05/05/what-s-
in-a...](http://www.thedailybeast.com/newsweek/2012/05/05/what-s-in-a-
twinkie.html)

~~~
grecy
Hopefully in 200 years people will look back in shock that we actually used to
eat that stuff.

~~~
kip_
In 200 years, they can open up a pack of Twinkies from today and still
experience them as we do now.

~~~
grecy
Hopefully people will be smart enough not to.

------
binxbolling
Blaming this bankruptcy on strikes is so utterly, transparently horseshit. I
hope pundits call them out on this.

~~~
tptacek
Nobody is blaming the bankruptcy on strikes; they were in bankruptcy long
before this strike. What's happened as a result of the strike is that their
Chapter 11 (restructuring) has changed to Chapter 7 (liquidation), because
they are not capable of generating revenue if they can't reliably produce
products, and their operational overhead is huge.

~~~
binxbolling
I think "nobody" is a bit inaccurate:

Seattle PI (AP): "The Irving, Texas, company said a nationwide strike crippled
its ability to make and deliver its products, which also include Ding Dongs,
Ho Ho's and Home Pride bread."

[http://www.seattlepi.com/news/texas/article/Twinkie-maker-
Ho...](http://www.seattlepi.com/news/texas/article/Twinkie-maker-Hostess-
reaches-the-end-of-the-line-4043395.php#ixzz2CPcWHJoE)

MSN (Reuters): "Nearly 18,500 workers will lose their jobs as the company
succumbs to the crippling effects of a nationwide union strike."

[http://money.msn.com/top-
stocks/post.aspx?post=6d7b095e-e558...](http://money.msn.com/top-
stocks/post.aspx?post=6d7b095e-e558-4dc4-83e9-1859d177e676&ocid=ansmony11)

Read other articles this morning (sorry I don't have them on-hand) that are
also pinning this on strikes, mostly because AFAIK Hostess is trying to pin it
on the strikes.

~~~
tptacek
The strike _is_ crippling them. But the strikes themselves aren't the systemic
cause of Hostess Brands bankruptcy, which started long before this round of
strikes. Demand for Hostess offerings is down, and Hostess' overhead is
atypically high for its industry.

~~~
binxbolling
Right, so we agree then.

------
bediger4000
Surely a fresher word than "iconic" exists to describe Twinkies. I'd suggest
"Beloved", but that sounds only a little better than "iconic" when it's said
out loud.

"Iconic" is the "robust" of the 2010s, doomed to look and sound dated, like
the music and fashion of the 1980s.

~~~
ygmelnikova
'Fresher' & 'Twinkies' is an oxymoron.

------
codegeek
I shared this link earlier and had the word "iconic" in it. Simply because
growing up in the US, everyone knows what Twinkies are. Whether you like it or
not.

------
JimmaDaRustla
Anyone else think, Bad Luck Brian's first union job!?

------
TheAmazingIdiot
(I posted this in the other article about hostess that got buried)

I will remind people here the following: Indiana is a right-to-work state.
This was passed last year. Right to work lowers employer burden why someone is
laid off/fired. Along with that, makes it a felony to require union dues to
work at a company. However, the union is still required to represent you upon
its charter.

Hostess also lost a sizable chunk of money with the lawsuit concerning Sachs
donuts. Because of things I do not understand, Hostess had to kill all lines
of yeast donuts and all "packaged fresh" yeast donuts. And from talking to
employees of Hostess in Columbus,IN, those machines were scrapped.

A good reason why the union was giving hell was Hostess wanted to cut wages by
almost 20%: the union already agreed to a 10% cut and reduction of benefits.
Hostess wanted 9% more, and threw a tantrum here locally.

Who was in the right? I have no idea. But it looks the the nuclear option was
used: blow it to the ground.

