Twinkies Maker to Liquidate, Lay Off 18,500
cnbc.com
cnbc.com
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.
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.
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.
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.
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.
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.
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.
This is what is supposed to happen when a company can not perform efficiently with the resources it has. I realize the strike killed this company, but it was severely wounded and bleeding already. No guarantee it would have survived much longer, strike or no strike.
In these situations, it is good for the company to fold. Sell off it's assets and let another business that can make better use of these resources do so.
If a company is squandering resources, that is a drag on the economy. Much better to let someone new withe better ideas and better execution come into play. Bankruptcy and Liquidation lets this happen. It's a good thing.
If a company can pick up these resources and use them more efficiently, they will hire people. And maybe all the things that Hostess fell short on with the union contract will not be a problem for a company that can execute efficiently.
While that is certainly not the only possible outcome, I think it is a likely one.
http://www.nytimes.com/2005/08/11/business/11place.html?_r=0
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.
(Twinkies are gross.)
My anecdotal experience says otherwise ;)
http://jamespanderson.tumblr.com/post/35851757029/people-are...
I believe the strike was "the straw that broke the camel's back", although a strike carries more weight than the proverbial straw, it certainly is not the sole thing to blame.
But it is a factor, and a helluva big one. If the company you work for is in dire straits, and you want to recover and for you to keep your job, striking is probably not a wise choice.
The name brands may well survive, like the pets.com dog did, but it will be at other companies.
EDIT: as child comments point out, they were in re-org and have now collapsed into liquidation
This sounds to me like a game of brinksmanship in which neither side blinked.
(I'm not endorsing any particular political viewpoint expressed in it, but merely posting it because it has a lot of info)
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.
http://www.thedailybeast.com/newsweek/2012/05/05/what-s-in-a...
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...
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...
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.
"Iconic" is the "robust" of the 2010s, doomed to look and sound dated, like the music and fashion of the 1980s.
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.